Strict Local Martingales with Jumps

Philip Protter

Papers from arXiv.org

Abstract: A strict local martingale is a local martingale which is not a martingale. There are few explicit examples of "naturally occurring" strict local martingales with jumps available in the literature. The purpose of this paper is to provide such examples, and to illustrate how they might arise via filtration shrinkage, a phenomenon we would contend is common in applications such as filtering, control, and especially in mathematical finance. We give a method for constructing such examples and analyze one particular method in detail.

Date: 2013-07, Revised 2014-03
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1307.2436

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