Single jump processes and strict local martingales

DOI10.1016/J.SPA.2015.09.003MaRDI QIDQ901294zbMATH OpenOpenAlexFDO

Authors Martin Herdegen, Sebastian Herrmann

Publication date 23 December 2015

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

Full work available at URL https://arxiv.org/abs/1510.03192

zbMATH Keywords

single jump processesstochastic integralsstrict local martingales

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Generalizations of martingales (60G48) Stochastic integrals (60H05)

Abstract: Many results in stochastic analysis and mathematical finance involve local martingales. However, specific examples of strict local martingales are rare and analytically often rather unhandy. We study local martingales that follow a given deterministic function up to a random time $gamma$ at which they jump and stay constant afterwards. The (local) martingale properties of these single jump local martingales are characterised in terms of conditions on the input parameters. This classification allows an easy construction of strict local martingales, uniformly integrable martingales that are not in $H^1$, etc. As an application, we provide a construction of a (uniformly integrable) martingale $M$ and a bounded (deterministic) integrand $H$ such that the stochastic integral $$ is a strict local martingale.

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Cited in

(13)

• Strict local martingales: examples
• Single jump filtrations and local martingales
• Strict local martingales with jumps
• Piecewise constant martingales and lazy clocks
• Simple examples of pure-jump strict local martingales
• A nonuniformly integrable martingale bubble with a crash
• Single jump filtrations: preservation of the local martingale property with respect to the filtration generated by the local martingale
• The joint law of a max-continuous local submartingale and its maximum
• On possible relations between an increasing process and its compensator in the non-integrable case
• Strict local martingales and optimal investment in a Black-Scholes model with a bubble
• Inefficient bubbles and efficient drawdowns in financial markets
• Optimal Novikov-type criteria for local martingales with jumps
• Analysis of continuous strict local martingales via \(h\)-transforms

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