Stochastic integrals and conditional full support

Abstract

We present conditions that imply the conditional full support (CFS) property, introduced by Guasoni, Rásonyi, and Schachermayer [Ann. Appl. Probab., 18 (2008), pp. 491--520], for processes Z := H + K \cdot W, where W is a Brownian motion, H is a continuous process, and processes H and K are either progressive or independent of W. Moreover, in the latter case under an additional assumption that K is of finite variation, we present conditions under which Z has CFS also when W is replaced with a general continuous process with CFS. As applications of these results, we show that several stochastic volatility models and the solutions of certain stochastic differential equations have CFS.

19 pages, v3: almost entirely rewritten, new results

References in corpus (2)

• Consistent price systems and face-lifting pricing under transaction costs
• Brownian moving averages have conditional full support

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