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Optimal Equivalent Probability Measures under Enlarged Filtrations

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Abstract

In a general jump-diffusion Radon–Nikodym setup with stochastic Girsanov processes, we derive optimal equivalent probability measures. Optimality is measured in terms of minimum relative entropy and also by more general divergence concepts. We further provide an anticipative sufficient stochastic minimum principle and derive optimal equivalent probability measures under various enlarged filtration approaches.

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Authors and Affiliations

  1. Mathematics Department, Université Libre de Bruxelles, CP 210, Boulevard du Triomphe, 1050, Brussels, Belgium

    Markus Hess

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  1. Markus Hess
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Correspondence to Markus Hess.

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Communicated by Nizar Touzi.

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Hess, M. Optimal Equivalent Probability Measures under Enlarged Filtrations. J Optim Theory Appl 183, 813–839 (2019). https://doi.org/10.1007/s10957-019-01581-0

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  • DOI: https://doi.org/10.1007/s10957-019-01581-0

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