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Title:A minimality property of the minimal martingale measure PDF Logo
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
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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