A direct proof of the Bichteler-Dellacherie theorem and connections to arbitrage

DOI10.1214/10-AOP602zbMATH Open1232.60028MaRDI QIDQ653308FDOQ653308

Authors: Mathias Beiglböck, Walter Schachermayer, Bezirgen Veliyev 

Publication date: 9 January 2012

Published in: The Annals of Probability (Search for Journal in Brave)

Abstract: We give an elementary proof of the celebrated Bichteler-Dellacherie Theorem which states that the class of stochastic processes $S$ allowing for a useful integration theory consists precisely of those processes which can be written in the form $S=M+A$, where $M$ is a local martingale and $A$ is a finite variation process. In other words, $S$ is a good integrator if and only if it is a semi-martingale. We obtain this decomposition rather directly from an elementary discrete-time Doob-Meyer decomposition. By passing to convex combinations we obtain a direct construction of the continuous time decomposition, which then yields the desired decomposition. As a by-product of our proof we obtain a characterization of semi-martingales in terms of a variant of emph{no free lunch}, thus extending a result from [DeSc94].

Full work available at URL: https://arxiv.org/abs/1004.5559

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zbMATH Keywords

Doob-Meyer decompositionarbitrageBichteler-Dellacherie theoremKomlós' lemma

Mathematics Subject Classification ID

Stochastic integrals (60H05) Financial applications of other theories (91G80) Foundations of stochastic processes (60G05)

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Cited In (13)

• A strong law of large numbers for positive random variables
• Generalised noncommutative subsequence principles
• Continuous-time trading and the emergence of probability
• Measurability of semimartingale characteristics with respect to the probability law
• Properly discounted asset prices are semimartingales
• Modeling capital gains taxes for trading strategies of infinite variation
• Riemann-integration and a new proof of the Bichteler-Dellacherie theorem
• Characterization of submartingales of a new class \((\Sigma^r)\)
• On the closure in the emery topology of semimartingale wealth-process sets
• Relative weak compactness in infinite-dimensional Fefferman-Meyer duality
• On infinitely divisible semimartingales
• Semimartingale price systems in models with transaction costs beyond efficient friction
• Limit theorems for \(\sigma\)-localized Émery convergence

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