Optional projection under equivalent local martingale measures

Francesca Biagini, Andrea Mazzon and Ari-Pekka Perkki\"o

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Abstract: Motivation for this paper is to understand the impact of information on asset price bubbles and perceived arbitrage opportunities. This boils down to study optional projections of $\mathbb{G}$-adapted strict local martingales into a smaller filtration $\mathbb{F}$ under equivalent martingale measures. We give some general results as well as analyze in details two specific examples given by the inverse three dimensional Bessel process and a class of stochastic volatility models.

Date: 2020-03
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2003.09940

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