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Density of the set of probability measures with the martingale representation property

Abstract : Let $\psi$ be a multi-dimensional random variable. We show that the set of probability measures $\mathbb{Q}$ such that the $\mathbb{Q}$-martingale $S^{\mathbb{Q}}_t=\mathbb{E}^{\mathbb{Q}}\left[\psi\lvert\mathcal{F}_{t}\right]$ has the Martingale Representation Property (MRP) is either empty or dense in $\mathcal{L}_\infty$-norm. The proof is based on a related result involving analytic fields of terminal conditions $(\psi(x))_{x\in U}$ and probability measures $(\mathbb{Q}(x))_{x\in U}$ over an open set $U$. Namely, we show that the set of points $x\in U$ such that $S_t(x) = \mathbb{E}^{\mathbb{Q}(x)}\left[\psi(x)\lvert\mathcal{F}_{t}\right]$ does not have the MRP, either coincides with $U$ or has Lebesgue measure zero. Our study is motivated by the problem of endogenous completeness in financial economics.
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https://hal.archives-ouvertes.fr/hal-01598651
Contributor : Sergio Pulido <>
Submitted on : Friday, September 29, 2017 - 6:05:08 PM
Last modification on : Friday, February 28, 2020 - 3:01:13 PM
Long-term archiving on: : Saturday, December 30, 2017 - 3:57:22 PM

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  • HAL Id : hal-01598651, version 1
  • ARXIV : 1709.07329

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Dmitry Kramkov, Sergio Pulido. Density of the set of probability measures with the martingale representation property. 2017. ⟨hal-01598651v1⟩

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