Application of Moore-Penrose inverse in deciding the minimal martingale measure

DOI10.1007/S10255-010-0030-1MaRDI QIDQ601957zbMATH OpenOpenAlexFDO

Authors Gang Yang, Xiangqun Yang, Luogen Yao

Publication date 29 October 2010

Published in Acta Mathematicae Applicatae Sinica. English Series (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s10255-010-0030-1

zbMATH Keywords

minimal martingale measureMoore-Penrose inversesemi-martingalesstructure condition

Mathematics Subject Classification ID

Stochastic integrals (60H05) Financial applications of other theories (91G80)

Review text

The authors prove that the Moore-Penrose inverse of any \(\mathbb R^{d\times n}\)-valued, predictable process is still predictable and then obtain an solution of auxiliary unsolved stochastic equation that appears when we one intends to derive the minimal martingale measure. The solution is obtained via the Moore-Penrose inverse method. Moreover, an accurate expression of the minimal martingale measure is obtained in a generalized Black-Scholes model.

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Cites work

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Cited in

(2)

• scientific article; zbMATH DE number 5734229 (Why is no real title available?)
• The Moore-Penrose inverse in portfolio selection of exchange rates

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