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

DOI10.1007/S10959-013-0527-7zbMATH Open1328.60114arXiv1304.1377OpenAlexW2056783347MaRDI QIDQ895896FDOQ895896

Authors: Aleksandar Mijatović, Mikhail Urusov 

Publication date: 7 December 2015

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

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 $[0,infty)$ and a emph{predictable} finite stopping time $zeta$, such that $Y$ is a semimartingale on the stochastic interval $[0,zeta)$, continuous at $zeta$ and constant after $zeta$, but is emph{not} a semimartingale on $[0,infty)$.

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

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zbMATH Keywords

stopping timelocal timeadditive functionalone-dimensional diffusioncontinuous semimartingale

Mathematics Subject Classification ID

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)

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Cited In (4)

• Trading strategies generated by Lyapunov functions
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• Title not available (Why is that?)

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