Change of measure up to a random time: details

DOI10.1016/J.SPA.2016.09.001zbMATH Open1373.60076arXiv1309.6141OpenAlexW2962742903MaRDI QIDQ529431FDOQ529431

Authors: Dörte Kreher 

Publication date: 18 May 2017

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: This paper extends results of Mortimer and Williams (1991) about changes of probability measure up to a random time under the assumptions that all martingales are continuous and that the random time avoids stopping times. We consider locally absolutely continuous measure changes up to a random time, changes of probability measure up to and after an honest time, and changes of probability measure up to a pseudo-stopping time. Moreover, we apply our results to construct a change of probability measure that is equivalent to the enlargement formula and to build for a certain class of pseudo-stopping times a class of measure changes that preserve the pseudo-stopping time property. Furthermore, we study for a price process modeled by a continuous semimartingale the stability of the No Free Lunch with Vanishing Risk (NFLVR) property up to a random time, that avoids stopping times, in the progressively enlarged filtration and provide sufficient conditions for this stability in terms of the Az'ema supermartingale.

Full work available at URL: https://arxiv.org/abs/1309.6141

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zbMATH Keywords

change of measureprogressive enlargement of filtrationsrandom timesNFLVR

Mathematics Subject Classification ID

Stopping times; optimal stopping problems; gambling theory (60G40) Martingales with continuous parameter (60G44) Continuity and singularity of induced measures (60G30)

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Cited In (3)

• Change of measure up to a random time: theory
• A new kind of augmentation of filtrations suitable for a change of probability measure by a strict local martingale
• Adapted statistical experiments with random change of time

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