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http://hdl.handle.net/10419/61305
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| Title: | | A minimality property of the minimal martingale measure  |
| Authors: | | Schweizer, Martin |
| Issue Date: | | 1998 |
| Series/Report no.: | | Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 1998,106 |
| Abstract: | | Let X be a continuous adapted process for which there exists an equivalent local martingale measure (ELMM). The minimal martingale measure P is the unique ELMM for X with the property that local P-martingales strongly orthogonal to the P-martingale part of X are also local P-martingales. We prove that if P exists, it minimizes the reverse relative entropy H(P) over all ELMMs Q for X. A counterexample shows that the assumption of continuity cannot be dropped. |
| Subjects: | | relative entropy minimal martingale measure equivalent martingale measures |
| JEL: | | G10 |
| Persistent Identifier of the first edition: | | urn:nbn:de:kobv:11-10060779 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Papers, SFB 373, HU Berlin
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