HW4 MA5161. Due February 24

Exercise. Let (\Omega, (\mathcal{F}_t)_{t \ge 0},\mathcal{F},\mathbb{P}) be a filtered probability space that satisfies the usual conditions. We denote

\mathcal{F}_{\infty}=\sigma \left( \mathcal{F}_t , t \ge 0 \right)

and for t\ge 0, \mathbb{P}_{/\mathcal{F}_t} is the restriction of \mathbb{P} to \mathcal{F}_t. Let \mathbb{Q} be a probability measure on \mathcal{F}_{\infty} such that for every t \ge 0,

\mathbb{Q}_{/\mathcal{F}_t} \ll \mathbb{P}_{/\mathcal{F}_t}.

  • Show that there exists a right continuous and left limited martingale (D_t)_{t \ge 0} such that for every t \ge 0,D_t=\frac{d\mathbb{Q}_{/\mathcal{F}_t}}{d\mathbb{P}_{/\mathcal{F}_t}},\text{ }\mathbb{P}-a.s.
  • Show that the following properties are equivalent:
    1) \mathbb{Q}_{/\mathcal{F}_\infty} \ll \mathbb{P}_{/\mathcal{F}_\infty};
    2) The martingale (D_t)_{t \ge 0} is uniformly integrable;
    3) (D_t)_{t \ge 0} converges in L^1;
    4) (D_t)_{t \ge 0} almost surely converges to an integrable and \mathcal{F}_\infty measurable random variable D such that D_t =\mathbb{E}(D\mid \mathcal{F}_t), \quad t \ge 0.


This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s