Optional decomposition and lagrange multipliers
AbstractLet Q be the set of equivalent martingale measures for a given process S, and let X be a process which is a local supermartingale with respect to any measure in Q. The optional decomposition theorem for X states that there exists a predictable integrand ф such that the difference X−ф•S is a decreasing process. In this paper we give a new proof which uses techniques from stochastic calculus rather than functional analysis, and which removes any boundedness assumption. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 1997,54.
Date of creation: 1997
Date of revision:
equivalent martingale measure; optional decomposition; semimartingale; Hellinger process; Lagrange multiplier;
Other versions of this item:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ernst Eberlein & Jean Jacod, 1997. "On the range of options prices (*)," Finance and Stochastics, Springer, vol. 1(2), pages 131-140.
- Kramkov, D.O., 1994. "Optional decomposition of supermartingales and hedging contingent claims in incomplete security markets," Discussion Paper Serie B 294, University of Bonn, Germany.
- Jun Sekine, 2012. "Long-term optimal portfolios with floor," Finance and Stochastics, Springer, vol. 16(3), pages 369-401, July.
- Bank, Peter & Riedel, Frank, 1999.
"Optimal consumption choice under uncertainty with intertemporal substitution,"
SFB 373 Discussion Papers
1999,71, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Peter Bank & Frank Riedel, 1999. "Optimal Consumption Choice under Uncertainty with Intertemporal Substitution," GE, Growth, Math methods 9908002, EconWPA.
- Matos, Joao Amaro de & Lacerda, Ana, 2004. "Dry Markets and Superreplication Bounds of American Derivatives," FEUNL Working Paper Series wp461, Universidade Nova de Lisboa, Faculdade de Economia.
- Filipovic, Damir & Kupper, Michael, 2007. "Monotone and cash-invariant convex functions and hulls," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 1-16, July.
- Mingxin Xu, 2006.
"Risk measure pricing and hedging in incomplete markets,"
Annals of Finance,
Springer, vol. 2(1), pages 51-71, January.
- Mingxin Xu, 2004. "Risk Measure Pricing and Hedging in Incomplete Markets," Finance 0406004, EconWPA, revised 06 Apr 2005.
- Föllmer, Hans & Kramkov, D. O., 1997. "Optional decompositions under constraints," SFB 373 Discussion Papers 1997,31, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Sabrina Mulinacci, 2011. "The efficient hedging problem for American options," Finance and Stochastics, Springer, vol. 15(2), pages 365-397, June.
- Frank Riedel, 2007. "Optimal stopping under ambiguity," Working Papers 390, Bielefeld University, Center for Mathematical Economics.
- Hans F\"ollmer & Alexander Schied, 2013. "Probabilistic aspects of finance," Papers 1309.7759, arXiv.org.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.