Past exam of the mathematics course of the University of Cambridge / 2010 / iii / Paper 28 / 1 / b / i / Solution

The Doob maximal inequality for a nonnegative submartingale states that, for a nonnegative submartingale $(M_j{)}_{0\le j\le N}$ and $u>0$,For completeness, partition the crossing event according to its first crossing time $j$. On that event $M_j\ge u$, while $\mathbb{E}[M_N\mid {\mathcal{F}}_j]\ge M_j$. Summing the corresponding expectations over $j$ proves $u\mathbb{P}(\max M_j\ge u)\le \mathbb{E}[M_N{1}_{\{\max M_j\ge u\}}]\le \mathbb{E}{M}_N$.

If $q>p$, the exponential $r^{S_j}$, with $r=q/p>1$, is increasing as a function of $S_j$. Apply the inequality to the martingale from part (a), with $u=r^k$:Letting $N\to \infty$ and using continuity of probability measures on increasing events givesThe same event is obtained if the supremum excludes time zero, since $k\ge 1$. If $p\ge q$, the right side is at least one and the bound is automatic; the nontrivial Doob maximal inequality argument is for $q>p$.