Optional projection under equivalent local martingale measures

Biagini, Francesca ; Mazzon, Andrea and Perkkiö, Ari-Pekka (2023): Optional projection under equivalent local martingale measures. In: Finance and Stochastics, Vol. 27, No. 2: pp. 435-465

Abstract

We study optional projections of G-adapted strict local martingales on a smaller filtration F under changes of equivalent martingale measures. General results are provided as well as a detailed analysis of two specific examples given by the inverse Bessel process and a class of stochastic volatility models. This analysis contributes to clarify the absence of arbitrage opportunities of market models under restricted information.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0949-2984
• Language: English