Information, no-arbitrage and completeness for asset price models with a change point

DOI10.1016/J.SPA.2014.04.010MaRDI QIDQ740193zbMATHOpenAlexFDO

Authors Claudio Fontana, Zorana Grbac, Monique Jeanblanc, Q. H. Li

Publication date 2 September 2014

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

Full work available at URL https://arxiv.org/abs/1304.0923

zbMATH Keywords

regime switchingchange pointBrownian motionenlargement of filtrationmartingale representationarbitrage of the first kindrandom timecontinuous asset price models

Mathematics Subject Classification ID

Portfolio theory (91G10) Brownian motion (60J65) Stopping times; optimal stopping problems; gambling theory (60G40) Martingales with continuous parameter (60G44) Stochastic models in economics (91B70)

Abstract: We consider a general class of continuous asset price models where the drift and the volatility functions, as well as the driving Brownian motions, change at a random time $au$. Under minimal assumptions on the random time and on the driving Brownian motions, we study the behavior of the model in all the filtrations which naturally arise in this setting, establishing martingale representation results and characterizing the validity of the NA1 and NFLVR no-arbitrage conditions.

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Cited in

(6)

• No arbitrage in continuous financial markets
• Semiparametric method for detecting multiple change points model in financial time series
• Semiparametric test for multiple change-points based on empirical likelihood
• The martingale problem method revisited
• Utility maximization under risk constraints and incomplete information for a market with a change point
• Weak and strong no-arbitrage conditions for continuous financial markets

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