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Statistical causality and orthogonality of local martingales

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  • Valjarević, Dragana
  • Petrović, Ljiljana

Abstract

In this work we consider the concept of statistical causality between filtrations, and in particular a generalization of the causality relationship “G is a cause of J within H”. Then we apply this concept to strongly orthogonal martingales. We show the equivalence between the concepts of causality and orthogonality of local martingales. The orthogonality of martingales is a property which can be associated with the theory of option trading.

Suggested Citation

  • Valjarević, Dragana & Petrović, Ljiljana, 2012. "Statistical causality and orthogonality of local martingales," Statistics & Probability Letters, Elsevier, vol. 82(7), pages 1326-1330.
    • Handle: RePEc:eee:stapro:v:82:y:2012:i:7:p:1326-1330
    DOI: 10.1016/j.spl.2012.03.036
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    References listed on IDEAS

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    1. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    2. Medvegyev, Peter, 2007. "Stochastic Integration Theory," OUP Catalogue, Oxford University Press, number 9780199215256.
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