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Potentials of a Markov process are expected suprema

Published online by Cambridge University Press:  01 March 2007

Hans Föllmer  and
Thomas Knispel
Hans Föllmer
Affiliation:
Humboldt-Universität zu Berlin, Institut für Mathematik, Unter den Linden 6, 10099 Berlin, Germany; [email protected]; [email protected]
Thomas Knispel
Affiliation:
Humboldt-Universität zu Berlin, Institut für Mathematik, Unter den Linden 6, 10099 Berlin, Germany; [email protected]; [email protected]
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Abstract

Expected suprema of a function f observed along the paths of a nice Markov process define an excessive function, and in fact a potential if f vanishes at the boundary. Conversely, we show under mild regularity conditions that any potential admits a representation in terms of expected suprema. Moreover, we identify the maximal and the minimal representing function in terms of probabilistic potential theory. Our results are motivated by the work of El Karoui and Meziou (2006) on the max-plus decomposition of supermartingales, and they provide a singular analogue to the non-linear Riesz representation in El Karoui and Föllmer (2005).

Keywords

Markov processespotentialsoptimal stoppingmax-plus decomposition.
Type
Research Article
Information
ESAIM: Probability and Statistics , Volume 11: Special Issue: "Stochastic analysis and mathematical finance" in honor of Nicole El Karoui's 60th birthdaySpecial Issue: "Stochastic analysis and mathematical finance" in honor of Nicole El Karoui's 60th birthday , June 2007 , pp. 89 - 101
Copyright
© EDP Sciences, SMAI, 2007

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References

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