On local martingale and its supremum: harmonic functions and beyond

Conference item

We discuss certain facts involving a continuous local martingale $N$ and its supremum $\bar{N}$. A complete characterization of $(N,\bar{N})$-harmonic functions is proposed. This yields an important family of martingales, the usefulness of which is demonstrated, by means of examples involving the Skorokhod embedding problem, bounds on the law of the supremum, or the local time at 0, of a martingale with a fixed terminal distribution, or yet in some Brownian penalization problems. In particular we obtain new bounds on the law of the local time at 0, which involve the excess wealth order.

Authors: Obloj, J; Yor, M

• Publication status: Published
• Host title: From Stochastic Calculus to Mathematical Finance: The Shiryaev Festschrift
• Pages: 517-533
• Publication date: 2004-12-09
• DOI: 10.1007/978-3-540-30788-4_25
• ISBN: 3540307826
• Keywords: 60G44, 60G42, 60G40, 60E15; math.PR