Sticky processes, local and true martingales

Mikl\'os R\'asonyi and Hasanjan Sayit

Papers from arXiv.org

Abstract: We prove that for a so-called sticky process $S$ there exists an equivalent probability $Q$ and a $Q$-martingale $\tilde{S}$ that is arbitrarily close to $S$ in $L^p(Q)$ norm. For continuous $S$, $\tilde{S}$ can be chosen arbitrarily close to $S$ in supremum norm. In the case where $S$ is a local martingale we may choose $Q$ arbitrarily close to the original probability in the total variation norm. We provide examples to illustrate the power of our results and present applications in mathematical finance.

Date: 2015-09, Revised 2017-03
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1509.08280

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