On the integrability of the supremum of stochastic volatility models and other martingales
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2024
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| _version_ | 1866914408967438336 |
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| author | Gerhold, Stefan Pachschwöll, Julian Ruf, Johannes |
| author_facet | Gerhold, Stefan Pachschwöll, Julian Ruf, Johannes |
| contents | We propose a method to bound the expectation of the supremum of the price process in stochastic volatility models. It can be applied, for example, to the rough Bergomi model, avoiding the need to discuss finiteness of higher moments. Our motivation stems from the theory of American option pricing, as an integrable supremum implies the existence of an optimal stopping time for any linearly bounded payoff. Moreover, we survey the literature on martingales with non-integrable supremum, and give a new construction that yields uniformly integrable martingales with this property. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2412_15746 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | On the integrability of the supremum of stochastic volatility models and other martingales Gerhold, Stefan Pachschwöll, Julian Ruf, Johannes Probability 60G44, 60G40, 60G46, 91G20 We propose a method to bound the expectation of the supremum of the price process in stochastic volatility models. It can be applied, for example, to the rough Bergomi model, avoiding the need to discuss finiteness of higher moments. Our motivation stems from the theory of American option pricing, as an integrable supremum implies the existence of an optimal stopping time for any linearly bounded payoff. Moreover, we survey the literature on martingales with non-integrable supremum, and give a new construction that yields uniformly integrable martingales with this property. |
| title | On the integrability of the supremum of stochastic volatility models and other martingales |
| topic | Probability 60G44, 60G40, 60G46, 91G20 |
| url | https://arxiv.org/abs/2412.15746 |