On stochastic calculus related to financial assets without semimartingales

DOI10.1016/J.BULSCI.2011.06.008MaRDI QIDQ645948zbMATH OpenOpenAlexFDO

Authors Rosanna Coviello, Cristina Di Girolami, Francesco Russo

Publication date 11 November 2011

Published in Bulletin des Sciences Mathématiques (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1102.2050

zbMATH Keywords

utility maximizationhedgingviabilityno-arbitrage\(\mathcal{A}\)-martingaleadmissible portfoliocontingent claim of interestinsiderno-semimartingaleself-financing portfolioweak \(k\)-order Brownian motion

Mathematics Subject Classification ID

Stochastic calculus of variations and the Malliavin calculus (60H07) Generalizations of martingales (60G48) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stochastic integrals (60H05) Microeconomic theory (price theory and economic markets) (91B24) Financial applications of other theories (91G80)

Abstract: This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes. The non-arbitrage property is not excluded if the class $mathcalA$ of admissible strategies is restricted. The classical notion of martingale is replaced with the notion of $mathcalA$-martingale. A calculus related to $mathcalA$-martingales with some examples is developed. Some applications to no-arbitrage, viability, hedging and the maximization of the utility of an insider are expanded. We finally revisit some no arbitrage conditions of Bender-Sottinen-Valkeila type.

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Cited in

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• A Feynman-Kac result via Markov BSDEs with generalised drivers
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