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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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
Keywords
- Stochastic optimization problem
- Stochastic maximum/minimum principle
- Relative entropy
- Radon–Nikodym density
- Lévy process
- Enlarged filtration
- Stochastic differential equation