Article ID Journal Published Year Pages File Type
1151381 Statistics & Probability Letters 2015 6 Pages PDF
Abstract

Two probability measures admit a martingale transition if and only if they are ordered in the convex order (Kellerer, 1972). We show that the commonly used quantization method, L2L2-quantization, does not have the property of preserving the convex order. We introduce an alternative quantization method and demonstrate that it preserves the convex order. This result has implications concerning the choice of quantization methods for the numerical construction of martingales with specified marginals.

Related Topics
Physical Sciences and Engineering Mathematics Statistics and Probability
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