On Existence of Local Martingale Measures for Insiders who Can Stop at Honest Times

Volume 55 / 2007

Jakub Zwierz Bulletin Polish Acad. Sci. Math. 55 (2007), 183-192 MSC: Primary 60H30; Secondary 60G44. DOI: 10.4064/ba55-2-9

Abstract

We consider a market with two types of agents with different levels of information. In addition to a regular agent, there is an insider whose additional knowledge consists of being able to stop at an honest time $\mit\Lambda$. We show, using the multiplicative decomposition of the Azéma supermartingale, that if the martingale part of the price process has the predictable representation property and $\mit\Lambda$ satisfies some mild assumptions, then there is no equivalent local martingale measure for the insider. This extends the results obtained by Imkeller to the continuous semimartingale setting and general honest times

Authors

  • Jakub ZwierzMathematical Institute
    Wroc/law University
    Pl. Grunwaldzki 2/4
    50-384 Wroc/law, Poland
    e-mail

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