BROWNIAN SEMISTATIONARY PROCESSES AND CONDITIONAL FULL SUPPORT

Mikko S. Pakkanen ()
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Mikko S. Pakkanen: Department of Mathematics and Statistics, University of Helsinki, P.O. Box 68, FI-00014 Helsingin yliopisto, Finland

International Journal of Theoretical and Applied Finance (IJTAF), 2011, vol. 14, issue 04, 579-586

Abstract: In this note, we study the infinite-dimensional conditional laws of Brownian semistationary processes. Motivated by the fact that these processes are typically not semimartingales, we present sufficient conditions ensuring that a Brownian semistationary process has conditional full support, a distributional property that has two important implications. It ensures, firstly, that the process admits no free lunches under proportional transaction costs, and secondly, that it can be approximated pathwise (in the sup norm) by semimartingales that admit equivalent martingale measures.

Keywords: Brownian semistationary process; conditional full support; non-semimartingale; transaction costs (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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DOI: 10.1142/S0219024911006747

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