Invariance times
Computational Finance
2017-02-06 v1 Pricing of Securities
Abstract
On a probability space we consider two filtrations and a stopping time such that the predictable processes coincide with predictable processes on . In this setup it is well-known that, for any semimartingale , the process ( stopped "right before ") is a semimartingale.Given a positive constant , we call an invariance time if there exists a probability measure equivalent to on such that, for any local martingale , is a local martingale. We characterize invariance times in terms of the Az\'ema supermartingale of and we derive a mild and tractable invariance time sufficiency condition. We discuss invariance times in mathematical finance and BSDE applications.
Cite
@article{arxiv.1702.01045,
title = {Invariance times},
author = {Stéphane Crépey and Shiqi Song},
journal= {arXiv preprint arXiv:1702.01045},
year = {2017}
}