On the loss of the semimartingale property at the hitting time of a level

DOI10.1007/S10959-013-0527-7MaRDI QIDQ895896zbMATH OpenOpenAlexFDO

Authors Aleksandar Mijatović, Mikhail Urusov

Publication date 7 December 2015

Published in Journal of Theoretical Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1304.1377

stopping time local time additive functional one-dimensional diffusion continuous semimartingale

Diffusion processes (60J60) Generalizations of martingales (60G48) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stopping times; optimal stopping problems; gambling theory (60G40) Local time and additive functionals (60J55)

Abstract: This paper studies the loss of the semimartingale property of the process

g (Y)

at the time a one-dimensional diffusion

Y

hits a level, where

g

is a difference of two convex functions. We show that the process

g (Y)

can fail to be a semimartingale in two ways only, which leads to a natural definition of non-semimartingales of the extit{first} and extit{second kind}. We give a deterministic if and only if condition (in terms of

g

and the coefficients of

Y

) for

g (Y)

to fall into one of the two classes of processes, which yields a characterisation for the loss of the semimartingale property. A number of applications of the results in the theory of stochastic processes and real analysis are given: e.g. we construct an adapted diffusion

Y

on

[0, i n f t y)

and a emph{predictable} finite stopping time

z e t a

, such that

Y

is a semimartingale on the stochastic interval

[0, z e t a)

, continuous at

z e t a

and constant after

z e t a

, but is emph{not} a semimartingale on

[0, i n f t y)

.

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