On stochastic calculus related to financial assets without semimartingales

DOI10.1016/J.BULSCI.2011.06.008zbMATH Open1233.91337arXiv1102.2050OpenAlexW1968906272MaRDI QIDQ645948FDOQ645948

Authors: Rosanna Coviello, Cristina Di Girolami, Francesco Russo 

Publication date: 11 November 2011

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

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.

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

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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)

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Cited In (11)

• A Feynman-Kac result via Markov BSDEs with generalised drivers
• Generalized covariation and extended Fukushima decomposition for Banach space-valued processes: applications to windows of Dirichlet processes
• Financial economics without probabilistic prior assumptions
• Pricing by hedging and no-arbitrage beyond semimartingales
• Forward integration, convergence and non-adapted pointwise multipliers
• Generalized covariation for Banach space valued processes, Itō formula and applications
• Pathwise stochastic integrals for model free finance
• The covariation for Banach space valued processes and applications
• Rough paths and symmetric-Stratonovich integrals driven by singular covariance Gaussian processes
• Itô calculus without probability in idealized financial markets
• Stochastic systems with memory and jumps

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