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Integrability of solutions of the Skorokhod embedding problem for diffusions. (English) Zbl 1328.60104
Summary: Suppose \(X\) is a time-homogeneous diffusion on an interval \(I^X \subseteq {\mathbb R}\) and let \(\mu\) be a probability measure on \(I^X\). Then \(\tau\) is a solution of the Skorokhod embedding problem (SEP) for \(\mu\) in \(X\) if \(\tau\) is a stopping time and \(X_\tau \sim \mu\).
There are well-known conditions which determine whether there exists a solution of the SEP for \(\mu\) in \(X\). We give necessary and sufficient conditions for the existence of an integrable solution. Further, if there exists a solution of the SEP then there exists a minimal solution. We show that every minimal solution of the SEP has the same first moment.
When \(X\) is Brownian motion, there exists an integrable embedding of \(\mu\) if and only if \(\mu\) is centered and in \(L^2\). Further, every integrable embedding is minimal. When \(X\) is a general time-homogeneous diffusion the situation is more subtle. The case with drift can be reduced to the local martingale case by a change of scale. If \(Y\) is a diffusion in natural scale, and if the target law is centered, then as in the Brownian case, there is an integrable embedding if the target law satisfies an integral condition. However, unlike in the Brownian case, there exist integrable embeddings of target laws which are not centered. Further, there exist integrable embeddings which are not minimal. Instead, if there exists an integrable embedding, then the set of minimal embeddings is the set of embeddings such that the mean equals a certain quantity, which we identify.

60G40 Stopping times; optimal stopping problems; gambling theory
60J60 Diffusion processes
60J65 Brownian motion
60G44 Martingales with continuous parameter
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