Optimal Equivalent Probability Measures under Enlarged Filtrations

Markus Hess ()
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Markus Hess: Université Libre de Bruxelles

Journal of Optimization Theory and Applications, 2019, vol. 183, issue 3, No 3, 813-839

Abstract: Abstract In a general jump-diffusion Radon–Nikodym setup with stochastic Girsanov processes, we derive optimal equivalent probability measures. Optimality is measured in terms of minimum relative entropy and also by more general divergence concepts. We further provide an anticipative sufficient stochastic minimum principle and derive optimal equivalent probability measures under various enlarged filtration approaches.

Keywords: Stochastic optimization problem; Stochastic maximum/minimum principle; Relative entropy; Radon–Nikodym density; Lévy process; Enlarged filtration; Stochastic differential equation; 93E20; 60H05; 60H10; 60G44 (search for similar items in EconPapers)
JEL-codes: C02 C61 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10957-019-01581-0

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