In mathematics, a local martingale is a type of stochastic process, satisfying the localized version of the martingale property. Every martingale is a local martingale; every bounded local martingale is a martingale; however, in general a local martingale is not a martingale, because its expectation can be distorted by large values of small probability. In particular, a driftless diffusion process is a local martingale, but not necessarily a martingale.
Local martingales are essential in stochastic analysis, see Itō calculus, semimartingale, Girsanov theorem.
Read more about Local Martingale: Definition, Martingales Via Local Martingales
Famous quotes containing the word local:
“Savages cling to a local god of one tribe or town. The broad ethics of Jesus were quickly narrowed to village theologies, which preach an election or favoritism.”
—Ralph Waldo Emerson (1803–1882)