Strict Local Martingales via Filtration Enlargement
Probability
2016-08-24 v1
Abstract
A strict local martingale is a local martingale that is not a martingale. We investigate how such a process might arise from a true martingale as a result of an enlargement of the filtration. We study and implement a particular type of enlargement, initial expansion of filtration, for various stochastic differential equations and provide sufficient conditions in each of these cases such that initial expansion can create a strict local martingale under an equivalent probability measure. Such situations arise in the theory of Mathematical Finance.
Keywords
Cite
@article{arxiv.1608.06361,
title = {Strict Local Martingales via Filtration Enlargement},
author = {Aditi Dandapani and Philip Protter},
journal= {arXiv preprint arXiv:1608.06361},
year = {2016}
}