A Compactness Principle for Bounded Sequences of Martingales with Applications (1999)

For ℋ¹-bounded sequences of martingales, we introduce a technique, related to the Kadeč-Pełczyński decomposition for L¹ sequences, that allows us to prove compactness theorems. Roughly speaking, a bounded sequence in ℋ¹ can be split into two sequences, one of which is weakly compact, the other forms the singular part. If the martingales are continuous then the singular part tends to zero in the semi-martingale topology. In the general case the singular parts give rise to a process of bounded variation. The technique allows to give a new proof of the optional decomposition theorem in Mathematical Finance.