The Malliavin Derivative of Generalized Random Variables Fred Espen Benth* Department of Mathematical Sciences University of Aarhus, DK-8000 Aarhus C, Denmark Abstract We extend the Malliavin derivative to a space of generalized ran- dom variables which havea (formal) chaos expansion with keels from the space of tempered Sdiwartz distributions. ‘The extended derivative has to be interpreted in th of distributions. Many of the prop- erties of the standard Malliavin derivative are proved to hold for the extension as well. In addition, we derive a representation formula for the extended Malliavin derivative involving the Wick product. and a. centered Gaussian random variable, We apply our results tocalculate the Malliavin derivative of a class of stochastic differential equations, of Wick type. 1 Introduction ‘The object of this random variabl paper is to extend the Malliavin derivative to generalized on with regular kernel dered, where the generalized random variables have singular kernel functions in their (formal) chaos expansion. In fact, the kemels are tempered (Schwartz) distributions (see [AKS, KLS] and section 2 below), We define the Malliavin derivative for Kondratiev distributions. -1, [U], has extended the Malliavin derivative to the space of Me: Watanabe distributions. In this case the derivative is understood in a di tributional s Recently, Aase, @ksendal and Ubge, [AaQU] defined the *MaPhySto ~ Centre for Mathematical Physics and Stochastics, funded by a grant from, the Danish National Research Foundation, Fetal: fredbGmi.aau.dk 1Malliavin derivative to a slightly bigger space G* of generalized random vari- ables, where the elements admit square integrable kernels in their chaos ex- rohod integration and Malliavin differentiation (see (2.13) below). We use this duality relation to find a representation of the Lebesgue integral of the Malliavin derivative of a square integrable random variable F. Tt can be written as the difference of two random variables. The former variable in the difference is F times a centered Gaussian random variable, The latter being the Wick product of F with the same Gaussian variable. ‘The representar functions and Kondrat Hence, by our definition it is no longer a regular stochas the ease of square integrable random variables (se ND. However the f the paper. In secti = basic introduced. Section 3 defines the Mall vutions and prove that the extension co the standard Malliavin derivative for sqmare integrable random variables, veral bropert ies of the extended Mall derivative of a Skorohod integral. Finally in section 5 we apply our results to a class of stochastic differential equations of Widetype. Such equations are known to have solutions in the Kondratiev space (see eg. [BDP, V])- 2 Mathematical preliminaries We give the necessary background from White Noise Analysis. The interested reader is refered to [HIKPS] and [AKS, KS] for a complete account on the theory presented below. Let SCR®) denote the space of Schwartz functions on JR" and S!(UR") topolagical dual, the space of tempered (Schwartz) distributions. Introducethe norms Who =A flee on the space SUR"), where p € No and |+[z0 is a second order differential operator given by +2 isnomm of [2(R"). A Define the Hilbert spaces S,(JR") as the completion of SUR®) in the norm I+ by» S-p(R®) denotes its dual. It is well-known that the Schwartz space is ve limit of S(t) and the tempered ¢ inductive se the ing. For Fe SUR and J € SUM) ye shall also make use of the notation F(f) for the action of F on f. Introduce the probability space (S“UR),F,11) wh F is the omalgebra induced hy the weak topology. ‘The Gaussian probability measure jJ is defined by the Bochner-Minlos theorem by [ee p) ante) = er) b w + (of) with fe th variance [/. By as the pairing From this we observe that the coordinate proc SUR) and w € SUR) are centered Gaussian varial a limiting argument, one can define Brownian moti Bw) = (Up) SM IACaD, 7 11)) The coordinate processes will (o,f). If ® € (£2), then it has a chaos o=S° KU) where f@) are symmetric elements of L2(JR") and I, the rfold Ili) = Bo S We define the Kondratiev test functions and distrib stitute our spaces of smooth and generalized random variabl Denote by (S)} the Hilbert space of random variables ¢ € (12) expansion ns, Which will con- ively:so that co lolB oa = DoE, a ‘The dual space is denoted (Sa. Define the space of Kondre test func tions to be the projective limit of (S)}.. Its dual is the inductive limit of and is denoted (S)"1. (S)~! is called the space of Kondratie where the elements have formal chaos expansions with kere as symmetric tempered distributions. Moreover, if © € (S)7}, then o=7A(/) & where the /€ are symmetric elements of SUR"). For a p € INoy Wl net = POR» & By ((+5-)) x tions and pall denote the dual pairing between the Kondratiev st functions. Moreover, if and @ are defined as above, 22) (0.9)) =DonKrO fO Note that we can define the product of a Kondratiev d . From [HKPS, AKS] thi on on (S)!, b+ 9,8)) = (4-2) ctation can be generalized to the Kondratiev d E[®] = ((@,1)) sider the S-transform on (S)-! defined by SO(8) = (,ex((-.6) — 1/20) where € € S(IR) with norms [flop < 1. The S-transform is a space of so-called Uéfunctionals (see eg. [HKPS, AKS, KLS} for more information on this). In the sequel we will use the following short-hand notation for the normalized exponential exp((-,€) — 1/2|éBo Exp((,6)) = exp((.) — 1/21) 4‘The Wick product o of two Kondrat Stransform: (2.6) DoW =S(SO-SW) ibutions ©, W is defined via the In terms of chaos expan: (7) DoW = Insm (FOE) om ons, we have where & =F 1,(F) and ¥ = > 1,(G). & stands for the symmetrized tensor products of tempered distributions. The following translation formula for Wiek products with ExplV/(f) is useful (see [B, prop. 13] for a proof). If (12) and f € SUR), (28) (2) o ExpWV(f(w) = w= f)-ExpWw(Pw) Integration of a time parametrized Kondratiev dis preted in the sense of Pettis, ie. « fe ®di,¢)) = I ((@.,0)) at whenever the right-hand side exi ized to Kondratiev distribut bution ®, is inter ‘The Skorohod integral can be general by the relation 29) [ O5 B= I 0 Wid R iB where W; = i(d:), d: is the DiracS function. W; is called the white noise, the time derivative of Brownian motion B,. It is well-known that W; € (8) ‘The Skorohod integral fact constants in the following way: (210) [eowsn=oo f vs We end this section recalling some notation and results for the Malliavin derivative of square integrable random variables (a nice and complete account can be found in Nualart, [N], or Ustunel, [U}). For X € (2), let D.X denote the Malliavin derivative of X. ‘The domain for the operator D is denoted by Diz where we have the following characterization of this subspace of (L?) (ee ex [ND @.11) X € Diz Donenll{ Bo <0with ¥ = 1,(/™). Moreover, if ¥ € Dy, the Malliavin derivative has chaos expansion 2.12) DX = Vahl) a ‘The duality relation between the Malliavin derivative and Skorohod integra tion can be stated as (2.13) no [vse = [ PI7.0-v,Jds whenever D® and fp V.5B, are well-defined and elements of (Li 3. The Malliavin derivative of generalized ran- dom variables We define the extended Malliavin derivative of a Kondratiev distribution: Definition 3.1. For ® € (S)" define the extended Malliavin derivative of ©, denoted Dd, to be Gul) Dod =0-W-ooW where ® - W— oW is the functional on the product space SUR) x (S)! (equipped with the product topology) given by (2) (@-W-oW)(f,9) = (®-W(f)- POW(S),2)) ‘The following proposition says that the Malliavin derivative of a Kon- dratiev distribution is a contimious linear fictional on SUR) x (S)!: Proposition 3.2. Let ® € (SJ. Then D® és a continuous linear func= tional on SUR) x (S)! (ive. isan element of the dual of this space). More o a) For any f € SUR) we have DO f)=0-W(f)-®o WN € (sy defined by ; ; ; (DO(/).9)) = (®- W()— #2 W(),@)) Jor every 6€ (S)}.