SFB 303 Discussion Paper No. B-284

Author: Schweizer, Martin

Title: On the Minimal Martingale Measure and the Föllmer-Schweizer Decomposition

Abstract: We provide three characterizations of the minimal martingale measure P associated to a given d-dimensional semimartingale X. In each case, P is shown to be the unique solution of an optimization problem where one minimizes a certain functional over a suitable class of signed local martingale measures for X. Furthermore, we extend a result of Ansel and Stricker on the Föllmer-Schweizer decomposition to the case where X is continuous, but multidimensional.

Keywords: minimal signed martingale measure, Foellmer-Schweizer decomposition, martingale densities, structure condition, semimartingales

JEL-Classification-Number: G10, C60

Creation-Date: June 1994
URL: ../1994/b/bonnsfb284.pdf

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