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On the Minimal Martingale Measure and the Foellmer- Schweizer Decomposition

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Author Info
Martin Schweizer
Abstract

We provide three characterizations of the minimal martingale measure P associated to a given d- dimensional semimartingale X. In each case, P is shown to be the unique solution of an optimization problem where one minimizes a certain functional over a suitable class of signed local martingale measures for X. Furthermore, we extend a result of Ansel and Stricker on the Foellmer-Schweizer decomposition to the case where X is continuous, but multidimensional.

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File URL: ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonsfb/bonsfb284.ps
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Publisher Info
Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 284.

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Length: 19 pages
Date of creation: Jun 1994
Date of revision:
Handle: RePEc:bon:bonsfb:284

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 9221
Web page: http://www.bgse.uni-bonn.de/index.php?id=517

For technical questions regarding this item, or to correct its listing, contact: (Daniel Park).

Related research
Keywords: minimal signed martingale measure; Foellmer-Schweizer decomposition; martingale densities; structure condition; semimartingales;

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
C60 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - General

References listed on IDEAS
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  1. N. Hofmann & E. Platen & M. Schweizer, 1992. "Option Pricing under Incompleteness and Stochastic Volatility," Discussion Paper Serie B 209, University of Bonn, Germany.
  2. Schweizer, Martin, 1992. "Martingale densities for general asset prices," Journal of Mathematical Economics, Elsevier, vol. 21(4), pages 363-378. [Downloadable!] (restricted)
  3. Schweizer, Martin, 1993. "Approximating Random Variables by Stochastic Integrals," Discussion Paper Serie B 262, University of Bonn, Germany.
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