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Consistent price systems for subfiltrations

Andrea GombaniStefan JaschkeWolfgang Runggaldier — 2007

ESAIM: Probability and Statistics

Asymmetric or partial information in financial markets may be represented by different filtrations. We consider the case of a larger filtration – the natural filtration of the “model world” – and a subfiltration ^ that represents the information available to an agent in the “real world”. Given a price system on the larger filtration that is represented by a martingale measure  and an associated numeraire , we show that there is a canonical and nontrivial numeraire Ŝ such that the price system...

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