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ANALYSIS
Giuseppe Da Prato
June 22, 2009
Contents
1 Gaussian measures in Hilbert spaces 3
1.1 Some concepts of Probability . . . . . . . . . . . . . . . . . . 3
1.1.1 Random variables . . . . . . . . . . . . . . . . . . . . . 3
1.1.2 Product measures . . . . . . . . . . . . . . . . . . . . . 5
1.2 Probability measures in Hilbert spaces . . . . . . . . . . . . . 5
1.2.1 Mean and covariance . . . . . . . . . . . . . . . . . . . 5
1.2.2 Finite dimensional projections of measures . . . . . . . 7
1.3 Gaussian probability measures . . . . . . . . . . . . . . . . . . 9
1.3.1 Gaussian probability measures in R . . . . . . . . . . . 9
1.3.2 Gaussian probability measures in R
n
. . . . . . . . . . 10
1.3.3 Gaussian probability measures in H . . . . . . . . . . . 11
1.3.4 Computation of some Gaussian integrals . . . . . . . . 11
1.3.5 The Cameron–Martin space . . . . . . . . . . . . . . . 13
2 Gaussian random variables 17
2.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2 Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2.1 Independent real variables . . . . . . . . . . . . . . . . 18
2.2.2 Independent Gaussian random variables . . . . . . . . 21
2.3 Gaussian random variables deﬁned in a Hilbert space . . . . . 21
2.3.1 Aﬃne changes of variables . . . . . . . . . . . . . . . . 22
2.4 The white noise function . . . . . . . . . . . . . . . . . . . . . 23
2.4.1 Equivalence classes of random variables . . . . . . . . . 23
2.4.2 Deﬁnition of the white noise function . . . . . . . . . . 25
3 Brownian Motion 27
3.1 Stochastic Processes . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Brownian motion . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2.1 Construction of a Brownian motion . . . . . . . . . . . 29
3.2.2 Some properties of a Brownian motion . . . . . . . . . 29
3.3 Wiener integral . . . . . . . . . . . . . . . . . . . . . . . . . . 31
i
ii
3.4 Continuity of Brownian motion . . . . . . . . . . . . . . . . . 35
3.5 The standard Brownian motion . . . . . . . . . . . . . . . . . 36
3.5.1 Some properties of C
0
. . . . . . . . . . . . . . . . . . 37
3.5.2 The Wiener measure and the standard Brownian motion 37
3.6 Quadratic variation of the Brownian motion . . . . . . . . . . 39
3.7 Multidimensional Brownian motions . . . . . . . . . . . . . . . 41
4 Markov property of the Brownian motion 43
4.1 Filtration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.1.1 F
t
measurable random variables . . . . . . . . . . . . . 44
4.2 Stopping times . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.3 The Brownian motion W(t + τ) −W(τ) . . . . . . . . . . . . 49
4.4 Transition semigroup . . . . . . . . . . . . . . . . . . . . . . . 50
4.5 Markov property . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.5.1 Strong Markov property . . . . . . . . . . . . . . . . . 52
4.6 Some consequences of the strong Markov property . . . . . . . 53
4.7 Application to partial diﬀerential equations . . . . . . . . . . . 56
4.7.1 The Dirichlet problem in the halfline . . . . . . . . . . 57
4.7.2 The Neumann problem . . . . . . . . . . . . . . . . . . 58
4.7.3 The Ventzell problem . . . . . . . . . . . . . . . . . . . 59
5 The Itˆo integral 61
5.1 Deﬁnition of Itˆo’s integral . . . . . . . . . . . . . . . . . . . . 61
5.1.1 Itˆo’s integral for elementary processes . . . . . . . . . . 61
5.1.2 General deﬁnition of Itˆo’s integral . . . . . . . . . . . . 63
5.2 Itˆ o integral for mean square continuous processes . . . . . . . 66
5.3 The Itˆo integral as a stochastic process . . . . . . . . . . . . . 67
5.4 Itˆ o integral with stopping times . . . . . . . . . . . . . . . . . 70
5.4.1 Stopping times . . . . . . . . . . . . . . . . . . . . . . 70
5.4.2 Itˆo’s integral with stopping times . . . . . . . . . . . . 71
5.5 Multidimensional Itˆ o integrals . . . . . . . . . . . . . . . . . . 72
6 The Itˆo formula 75
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.1.1 The Itˆ o formula for unbounded functions . . . . . . . . 82
6.2 Itˆ o’ formula for a vector valued process . . . . . . . . . . . . . 84
7 Stochastic evolution equations 89
7.1 Existence and uniqueness . . . . . . . . . . . . . . . . . . . . . 90
7.1.1 Solution of the stochastic diﬀerential equation in the
space C
B
([s, T]; L
2m
(Ω; R
d
)). . . . . . . . . . . . . . . 94
1
7.1.2 Examples . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.1.3 Diﬀerential stochastic equations with random coeﬃcients 96
7.2 Continuous dependence on data . . . . . . . . . . . . . . . . . 97
7.2.1 Continuous dependence on mean square . . . . . . . . 97
7.3 Almost sure continuity and h¨olderianity of trajectories . . . . 100
7.4 Diﬀerentiability of X(t, s, x) with respect to x . . . . . . . . . 101
7.4.1 Existence of X
x
(t, s, x) . . . . . . . . . . . . . . . . . . 101
7.4.2 Existence of X
xx
(t, s, x) . . . . . . . . . . . . . . . . . 102
7.5 Itˆ o Diﬀerentiability of X(t, s, x) with respect to s. . . . . . . . 105
7.5.1 The deterministic case . . . . . . . . . . . . . . . . . . 105
7.5.2 The stochastic case . . . . . . . . . . . . . . . . . . . . 106
7.5.3 Backward Itˆo’s formula . . . . . . . . . . . . . . . . . . 107
8 Kolmogorov equations 111
8.1 The deterministic case . . . . . . . . . . . . . . . . . . . . . . 111
8.1.1 The autonomous case . . . . . . . . . . . . . . . . . . . 113
8.2 Stochastic case . . . . . . . . . . . . . . . . . . . . . . . . . . 114
8.3 Basic properties of transition operators . . . . . . . . . . . . . 115
8.4 Parabolic equations . . . . . . . . . . . . . . . . . . . . . . . . 116
8.4.1 Autonomous case . . . . . . . . . . . . . . . . . . . . . 117
8.5 Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
A λsystems and πsystems 121
B Conditional expectation 123
B.1 Deﬁnition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
B.2 Basic properties . . . . . . . . . . . . . . . . . . . . . . . . . . 124
C Martingales 127
C.1 Deﬁnitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
C.2 The basic inequality for martingales . . . . . . . . . . . . . . . 128
C.3 Square integrable martingales . . . . . . . . . . . . . . . . . . 129
D Fixed points depending on parameters 133
D.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
D.2 Gˆ ateaux diﬀerentiable mappings . . . . . . . . . . . . . . . . . 134
D.3 The main result . . . . . . . . . . . . . . . . . . . . . . . . . . 135
E Fractional Sobolev spaces and regularity of processes 137
E.1 Fractional Sobolev spaces on [0, 1] . . . . . . . . . . . . . . . . 137
E.2 Processes belonging to W
,2m
(0, T) . . . . . . . . . . . . . . . 138
2
E.3 Multi dimensional Sobolev spaces and regularity of random
ﬁelds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Chapter 1
Gaussian measures in Hilbert
spaces
We shall denote by H a real separable Hilbert space (with inner product
¸, ) and norm [ [), and by L(H) the Banach algebra of all linear bounded
operators T : H → H, endowed with the norm
T = sup
x∈H, x=1
[Tx[.
We recall that T ∈ L(H) is said to be symmetric if ¸Tx, y) = ¸x, Ty) for all
x, y ∈ H, positive if ¸Tx, x) ≥ 0 for all x ∈ H. The set of all symmetric and
positive elements of L(H) will be denoted by L
+
(H).
Finally, we shall denote by C
b
(H) the space of all functions ϕ: H → R
which are continuous and bounded. C
b
(H), endowed with the norm
ϕ
0
: = sup
x∈H
[ϕ(x)[,
is a Banach space.
Next section is devoted to some basic facts from Measure Theory and
Probability needed in what follows.
1.1 Some concepts of Probability
1.1.1 Random variables
Let (Ω, F, P) be a probabilty space and let E be a Polish (complete separable
metric) space; we shall denote by B(E) the σ–algebra generated by all closed
(or equivalently open) subsets of E. The elements of B(E) are called Borel
sets.
3
4 Chapter 1
By an Evalued random variable in (Ω, F) we mean a mapping
X: Ω → E, ω → X(ω),
such that
I ∈ B(E) ⇒ X
−1
(I) ∈ F.
The law (or image measure or pushforward measure) of X is the probability
measure X
#
P on (E, B(E)) deﬁned as
(X
#
P)(I) = P(X
−1
(I)), ∀ I ∈ B(E).
Sometimes we shall use the notation X
#
P = P
X
.
Let us prove the following basic change of variables formula.
Theorem 1.1 Let X be an Evalued random variable in (Ω, F, P). Let
moreover ϕ: E →R be a nonnegative Borel function. Then we have
_
Ω
ϕ(X(ω))P(dω) =
_
E
ϕ(x)(X
#
P)(dx). (1.1)
Proof. Let ﬁrst ϕ = 1l
I
with I ∈ B(E)
(1)
. In this case we have
ϕ(X(ω)) = 1l
X
−1
(I)
(ω), ∀ ω ∈ Ω.
So,
_
Ω
ϕ(X(ω))P(dω) = P(X
−1
(I)) = X
#
P(I) =
_
E
ϕ(x)X
#
P(dx).
Consequently, (1.1) holds for all simple functions ϕ of the form
ϕ =
n
i=1
c
i
1l
I
i
,
with n ∈ N, c
1
, ..., c
n
≥ 0 and I
1
, ..., I
n
∈ B(E). Since any positive Borel
functions is the limit of an increasing sequence of positive simple functions,
the conclusion follows from the monotone convergence theorem.
(1)
1l
I
(ω) is the characteristic function of I; it is equal to 1 if ω ∈ I to 0 if ω / ∈ I.
Gaussian measures 5
1.1.2 Product measures
Let (Ω
i
, F
i
, P
i
), i = 1, ..., n, be probability spaces. Set Ω =
n
i=1
Ω
i
. A mea
surable rectangle of Ω is, by deﬁnition, a set of the form R =
n
i=1
A
i
where
A
i
∈ F
i
, i = 1, 2, ..., n. The σalgebra generated by all measurable rectangles
is called the product σalgebra of F
i
, ..., F
n
; it is denoted by
n
i=1
F
i
.
For any R =
n
i=1
A
i
we deﬁne
P(R) :=
n
i=1
P
i
(A
i
).
One can show that P can be uniquely extended to a probability measure on
(Ω, F) which is called the product probability of P
1
, P
2
, ..., P
n
.
1.2 Probability measures in Hilbert spaces
1.2.1 Mean and covariance
Let µ be a probability measure on (H, B(H)). Assume that µ has ﬁnite ﬁrst
momentum,
_
H
[x[µ(dx) < +∞.
Then the linear functional F : H →R deﬁned as
F(h) =
_
H
¸x, h)µ(dx), ∀ h ∈ H,
is continuous since
[F(h)[ ≤
_
H
[x[µ(dx) [h[, ∀ h ∈ H.
By the Riesz representation theorem there exists m ∈ H such that
¸m, h) =
_
H
¸x, h)µ(dx), ∀ h ∈ H.
m is called the mean of µ. We shall write
m =
_
H
xµ(dx).
Assume now that the second moment of µ is ﬁnite,
_
H
[x[
2
µ(dx) < +∞,
6 Chapter 1
(so that the ﬁrst one is ﬁnite as well). Let us consider the bilinear form
G : H H →R deﬁned as
G(h, k) =
_
H
¸h, x −m)¸k, x −m)µ(dx), ∀ h, k ∈ H.
G is continuous since
[G(h, k)[ ≤
_
H
[x −m[
2
µ(dx) [h[ [k[, ∀ h, k ∈ H.
Therefore there is a unique linear bounded operator Q ∈ L(H) such that
¸Qh, k) =
_
H
¸h, x −m)¸k, x −m)µ(dx), ∀ h, k ∈ H.
Q is called the covariance of µ.
In order to state the next result we need the concept of trace class op
erator. A symmetric and positive operator Q ∈ L(H) is said to be of trace
class if
Tr Q: =
∞
k=1
¸Qe
k
, e
k
) < +∞
for one (and consequently for any) complete orthonormal system (e
k
). One
can show that any trace class operator Q is compact and that Tr Q is the
sum of its eigenvalues repeated according to their multiplicity, see e. g. N.
Dunford and J.T. Schwartz, Linear Operators. Part II, Interscience, 1964.
(2)
Proposition 1.2 The covariance operator Q of µ is symmetric, positive and
of trace class.
Proof. Symmetry and positivity of Q are clear. To prove that Q is of trace
class choose a complete orthonormal system (e
k
) in H. Then we have
¸Qe
k
, e
k
) =
_
H
[¸x −m, e
k
)[
2
µ(dx), k ∈ N.
Therefore, by the monotone convergence theorem and the Parseval identity,
we ﬁnd that
Tr Q =
∞
k=1
_
H
[¸x −m, e
k
)[
2
µ(dx) =
_
H
[x −m[
2
µ(dx) < +∞.
(2)
It is also possible to deﬁne traceclass operators which are not symmetric, but we shall
not need in what follows.
Gaussian measures 7
We shall denote by L
+
1
(H) the set of all positive, symmetric operators in
H of trace class.
We ﬁnally deﬁne the Fourier transform ´ µ of a probability measure µ
setting
´ µ(h) =
_
H
e
ix,h
µ(dx), ∀ h ∈ H. (1.2)
One checks easily that ´ µ : H →C is continuous.
1.2.2 Finite dimensional projections of measures
We are given a probability measure µ ∈ P(H). Let (e
k
) be a complete or
thonormal system in H. For any n ∈ N we consider the projection P
n
: H →
P
n
(H) deﬁned as
P
n
x =
n
k=1
¸x, e
k
)e
k
, x ∈ H. (1.3)
We have lim
n→∞
P
n
x = x for all x ∈ H.
For any n ∈ N we consider the measure µ
n
:= (P
n
)
#
µ deﬁned by
_
H
ϕ(P
n
x)µ(dx) =
_
H
n
ϕ(y)µ
n
(dy),
for all ϕ ∈ C
b
(R).
Thus µ
n
is a probability measure on (P
n
(H), B(P
n
(H)), µ
n
). We shall
also consider µ
n
as a probability measure on (H, B(H), µ), setting
µ
n
(I) = µ
n
(I ∩ P
n
(H)), ∀I ∈ B(H).
We want now to show that µ is determined by the sequence (µ
n
). For this
we ﬁrst need the following result.
Proposition 1.3 Let µ, ν ∈ P(H) be such that
_
H
ϕ(x)µ(dx) =
_
H
ϕ(x)ν(dx), ∀ ϕ ∈ C
b
(H). (1.4)
Then µ = ν.
Proof. Let C ⊂ H be closed and let (ϕ
n
) ⊂ C
b
(H) be such that
(i) lim
n→∞
ϕ
n
(x) = 1l
C
(x) for all x ∈ H.
8 Chapter 1
(ii) ϕ
n

0
≤ 1 for all ∈ N.
A sequence (ϕ
n
) ⊂ C
b
(H) fulﬁlling (i) and (ii) is provided by,
ϕ
n
(x) =
_
_
_
1 if x ∈ C,
1 −n d(x, C) if d(x, C) ≤
1
n
0 if d(x, C) ≥
1
n
.
Now, by the dominate convergence theorem it follows that
lim
n→∞
_
H
ϕ
n
dµ = lim
n→∞
_
H
ϕ
n
dν = µ(C) = ν(C).
Since closed sets generate the Borel σ–algebra of H this implies that µ = ν.
We can now prove the announced result.
Proposition 1.4 Let µ, ν ∈ P(H). If (P
n
)
#
µ = (P
n
)
#
ν for any n ∈ N we
have µ = ν.
Proof. Let ϕ ∈ C
b
(H). Then, using the dominated convergence theorem and
the change of variables formula, we have
_
H
ϕ(x)µ(dx) = lim
n→∞
_
H
ϕ(P
n
x)µ(dx) = lim
n→∞
_
P
n
(H)
ϕ(ξ)((P
n
)
#
µ)(dξ)
and
_
H
ϕ(x)ν(dx) = lim
n→∞
_
H
ϕ(P
n
x)ν(dx) = lim
n→∞
_
P
n
(H)
ϕ(ξ)((P
n
)
#
ν)(dξ).
Since (P
n
)
#
µ = (P
n
)
#
ν by assumption, we conclude that
_
H
ϕ(x)µ(dx) =
_
H
ϕ(x)ν(dx)
for all ϕ ∈ C
b
(H). Therefore, in view of Proposition 1.3 we have µ = ν.
As an application of Proposition 1.4 we prove that the Fourier transform
of µ determines µ.
Proposition 1.5 Let µ, ν ∈ P(H) be such that ´ µ(h) = ´ ν(h) for all h ∈ H.
Then µ = ν.
Gaussian measures 9
Proof. We assume as granted the result when H is ﬁnitedimensional
(3)
. In
the general case we have by (1.1) for any h ∈ H and n ∈ N,
´ µ(P
n
h) =
_
H
e
ix,P
n
h
µ(dx) =
_
P
n
(H)
e
iP
n
ξ,P
n
h
(P
n
)
#
µ(dξ) =
(P
n
)
#
µ(P
n
h)
and
´ ν(P
n
h) =
_
H
e
ix,P
n
h
ν(dx) =
_
P
n
(H)
e
iP
n
ξ,P
n
h
(P
n
)
#
ν(dξ) =
(P
n
)
#
ν(P
n
h).
Therefore measures (P
n
)
#
µ and (P
n
)
#
ν have the same Fourier tranforms and
so they coincide. The conclusion follows from Proposition 1.4.
1.3 Gaussian probability measures
We ﬁrst recall the deﬁnition of Gaussian measure on (R, B(R)), then we go
to the general case.
1.3.1 Gaussian probability measures in R
For any pair of real numbers (m, q) with m ∈ R and q ≥ 0 we deﬁne a
probability measure N
m,q
on (R, B(R)) as follows. If q = 0 we set
N
m,0
= δ
m
,
where δ
m
is the Dirac measure at m, deﬁned for all B ∈ B(R) by
δ
m
(B) =
_
_
_
1 if m ∈ B,
0 if m / ∈ B.
If q > 0 we set
N
m,q
(B) =
1
√
2πq
_
B
e
−
(x−m)
2
2q
dx, for all B ∈ B(R).
N
m,q
is a probability measure since
N
m,q
(R) =
1
√
2πq
_
+∞
−∞
e
−
(x−m)
2
2q
dx =
1
√
2π
_
+∞
−∞
e
−
x
2
2
dx = 1.
(3)
See e.g. M. M´etivier, Notions fondamentales de la th´eorie des probabilit´ees, Dunod
Universit´e, 1968.
10 Chapter 1
If q > 0, N
m,q
is absolutely continuous with respect to the Lebesgue measure
1
(dx) = dx in (R, B(R) and
N
m,q
(dx) =
1
√
2πq
e
−
(x−m)
2
2q
dx.
When m = 0 we shall write for short N
q
instead N
0,q
.
It is easy to see that m is the mean and q the covariance of N
m,q
. Moreover,
its Fourier transform is given by
N
m,q
(h) :=
_
R
e
ihx
N
m,q
(dx) = e
imh−
1
2
qh
2
, h ∈ R. (1.5)
1.3.2 Gaussian probability measures in R
n
We are going to deﬁne a Gaussian measure N
m,Q
for any m = (m
1
, ..., m
n
) ∈
R
n
and any Q ∈ L
+
(R
n
).
Let Q ∈ L
+
(R
n
) and let (e
1
, ..., e
n
) be an orthonormal basis on R
n
such
that Qe
k
= λ
k
e
k
, k = 1, ..., n, for some λ
k
≥ 0. Then we deﬁne a probability
measure N
a,Q
on (R
n
, B(R
n
)) by setting
N
m,Q
=
n
k=1
N
m
k
,λ
k
.
When m = 0 we shall write N
Q
instead of N
m,Q
for short.
The proof of the following proposition is easy; it is left to the reader.
Proposition 1.6 Let m ∈ R
n
, Q ∈ L
+
(R
n
) and µ = N
m,Q
. Then we have
_
R
n
xµ(dx) = m,
_
R
n
¸y, x −a)¸z, x −a)µ(dx) = ¸Qy, z), y, z ∈ R
n
.
Moreover the Fourier tranform of N
a,Q
is given by
¯
N
a,Q
(h) :=
_
R
n
e
ih,x
µ(dx) = e
ia,h−
1
2
Qh,h
, h ∈ R
n
.
Finally, if the determinant of Q is positive, N
a,Q
is absolutely continuous
with respect to the Lebesgue measure in R
n
and we have
N
a,Q
(dx) =
1
_
(2π)
d
det Q
e
−
1
2
Q
−1
(x−a),x−a
dx.
Therefore m is the mean and Q the covariance operator of N
a,Q
.
Gaussian measures 11
1.3.3 Gaussian probability measures in H
Let m ∈ H and Q ∈ L
+
1
(H). We denote by N
m,Q
the probability measure on
(H, B(H)) of mean m, covariance Q and Fourier transform given by
N
m,Q
(h) = e
im,h−
1
2
Qh,h
, h ∈ H. (1.6)
One can show that such a measure does exist
(4)
; it is unique thank’s to
Proposition 1.5.
1.3.4 Computation of some Gaussian integrals
To compute some integrals with respect to a Gaussian measure µ = N
m,Q
in
an inﬁnite dimensional Hilbert space H it is useful to reduce the computation
to integrals on a sequence (H
n
) of ﬁnite dimensional vector spaces convergent
to H and then to let n → ∞.
More precisely, given µ = N
m,Q
∈ P(H), we shall proceed as follows.
Since Q is compact there exists an orthonormal complete system (e
k
) in H
and a sequence of nonnegative numbers (λ
k
) such that
Qe
k
= λ
k
e
k
, ∀ k ∈ N.
For any n ∈ N we set m
n
:= ¸m, e
n
),
P
n
x =
n
k=1
¸x, e
k
)e
k
, ∀ x ∈ H
and identify P
n
(H) with R
n
through the isomorphism,
P
n
(H) →R
n
, x =
n
k=1
¸x, e
k
)e
k
→ (¸x, e
1
), ..., ¸x, e
n
)).
Exercise 1.7 Prove that
µ
n
= (P
n
)
#
µ =
n
i=1
N
m
k
,λ
k
.
Hint. Show that the Fourier transform of µ
n
is given by
´ µ
n
(h) = e
i
P
n
k=1
m
k
h
k
e
−
1
2
P
n
k=1
λ
k
h
2
k
.
(4)
see e.g. G. Da Prato, An introduction to inﬁnitedimensional analysis. Springer
Verlag, Berlin, 2006.
12 Chapter 1
We shall assume (which is always true after a rearrangement) that λ
1
≥
λ
2
≥ λ
n
≥ .
To formulate the next result notice that for any ε <
1
λ
1
, the linear operator
1 − εQ is invertible and (1 − εQ)
−1
is bounded. We have in fact, as easily
checked,
(1 −εQ)
−1
x =
∞
k=1
1
1 −ελ
k
¸x, e
k
)e
k
, x ∈ H.
In this case we can deﬁne the determinant of (1 −εQ) by setting
det(1 −εQ): = lim
n→∞
n
k=1
(1 −ελ
k
) :=
∞
k=1
(1 −ελ
k
).
Exercise 1.8 Prove that
∞
k=1
(1 −ελ
k
) > 0.
Hint. Write
log
_
∞
k=1
(1 −ελ
k
)
_
=
∞
k=1
log(1 −ελ
k
)
and show that the series is convergent since
∞
k=1
λ
k
< +∞.
Proposition 1.9 Let ε ∈ R. Then we have
_
H
e
ε
2
x
2
µ(dx) =
_
_
_
[det(1 −εQ)]
−1/2
e
ε
2
(1−εQ)
−1
m,m
, if ε <
1
λ
1
,
+∞, otherwise.
(1.7)
Proof. For any n ∈ N we have, taking into account Exercise 1.7
_
H
e
ε
2
P
n
x
2
µ(dx) =
_
P
n
(H)
e
ε
2
P
n
ξ
2
µ
n
(dξ) =
n
k=1
_
R
e
ε
2
ξ
2
k
N
m
k
,λ
k
(dξ
k
).
Since [P
n
x[
2
↑ [x[
2
as n → ∞ and, by an elementary computation,
_
R
e
ε
2
x
2
k
N
m
k
,λ
k
(dx
k
) =
1
√
1 −ελ
k
e
−
ε
2
m
2
k
1−ελ
k
,
the conclusion follows from the monotone convergence theorem.
Gaussian measures 13
Exercise 1.10 Prove that for all m ∈ N
J
m
:=
_
H
[x[
2m
µ(dx) < ∞
and compute J
m
.
Hint. Notice that J
m
= 2
m
F
(m)
(0), where
F(ε) =
_
H
e
ε
2
x
2
µ(dx), ε > 0.
Proposition 1.11 We have
_
H
e
h,x
µ(dx) = e
a,h
e
1
2
Qh,h
, h ∈ H. (1.8)
Proof. For any ε > 0 we have
e
h,x
≤ e
x h
≤ e
εx
2
e
1
ε
h
2
.
Choosing ε <
1
λ
1
, we have, by the dominated convergence theorem, that
_
H
e
h,x
µ(dx) = lim
n→∞
_
H
e
h,P
n
x
µ(dx) = lim
n→∞
_
P
n
(H)
e
h,P
n
ξ
µ
n
(dx)
= lim
n→∞
e
P
n
m,h
e
1
2
P
n
Qh,h
= e
m,h
e
1
2
Qh,h
.
1.3.5 The Cameron–Martin space
We are given a Gaussian measure µ = N
Q
, where Q ∈ L
+
1
(H). We say that
µ is non degenerate if Ker Q := ¦x ∈ H : Qx = 0¦ = ¦0¦. Thus, if H is
ﬁnitedimensional µ is non degenerate if and only if det Q > 0.
Assume now that H is inﬁnitedimensional and that µ is non degenerate.
We denote by (e
k
) a complete orthonormal system in H such that Qe
k
=
λ
k
e
k
, k ∈ N, where (λ
k
) are the eigenvalues of Q and we set x
k
= ¸x, e
k
), k ∈
N.
We notice that the inverse Q
−1
of Q (which is well deﬁned since Ker
Q = ¦0¦) is not continuous because,
Q
−1
e
k
=
1
λ
k
e
k
, k ∈ N
and λ
k
→ 0 as k → ∞. Consequently, recalling the closed graph theorem,
we see that the range Q(H) does not coincide with H. However, it is dense
in H as the following lemma shows.
14 Chapter 1
Lemma 1.12 Q(H) is a dense subspace of H.
Proof. In fact if x
0
is an element of H orthogonal to Q(H), we have
¸Qx, x
0
) = ¸x, Qx
0
) = 0, ∀ x ∈ H,
which yields Qx
0
= 0, and so x
0
= 0 because Ker(Q) = ¦0¦.
It is useful to introduce the operator Q
1/2
deﬁned as
Q
1/2
x =
∞
k=1
_
λ
k
¸x, e
k
)e
k
, x ∈ H.
Its range Q
1/2
(H) is called the Cameron–Martin space of the measure µ.
Arguing as before we see that Q
1/2
(H) is a subspace of H diﬀerent of H and
dense in H. Moreover it is clear that x ∈ Q
1/2
(H) if and only if,
∞
k=1
λ
−1
k
x
2
k
< +∞.
It is important to notice that the measure of the Cameron–Martin space
is zero.
Proposition 1.13 We have µ(Q
1/2
(H)) = 0.
Proof. For any n, k ∈ N set
U
n
=
_
y ∈ H :
∞
h=1
λ
−1
h
y
2
h
< n
2
_
= ¦y ∈ Q
1/2
(H) : [Q
−1/2
y[ < n¦,
and
U
n,k
=
_
y ∈ H :
2k
h=1
λ
−1
h
y
2
h
< n
2
_
.
Clearly U
n
↑ Q
1/2
(H) as n → ∞, and for any n ∈ N, U
n,k
↓ U
n
as k → ∞.
So, it is enough to show that
µ(U
n
) = lim
k→∞
µ(U
n,k
) = 0. (1.9)
We have in fact
µ(U
n,k
) =
_
¦
y∈H:
P
2k
h=1
λ
−1
h
y
2
h
<n
2
¦
2k
h=1
N
λ
k
(dy
k
),
Gaussian measures 15
which, setting z
h
= λ
−1/2
h
y
h
is equivalent to
µ(U
n,k
) =
_
¦
z∈R
2k
:z<n
¦
N
I
2k
(dz),
where I
2k
is the identity in R
2k
. Let us compute µ(U
n,k
). We have
µ(U
n,k
) =
µ(U
n,k
)
µ(H)
=
_
n
0
e
−
r
2
2
r
2k−1
dr
_
+∞
0
e
−
r
2
2
r
2k−1
dr
=
_
n
2
/2
0
e
−ρ
ρ
k−1
dρ
_
+∞
0
e
−ρ
ρ
k−1
dρ
.
Therefore
µ(U
n,k
) =
1
(k −1)!
_
n
2
/2
0
e
−ρ
ρ
k−1
dρ ≤
1
(k −1)!
_
n
2
/2
0
ρ
k−1
dρ =
1
k!
_
n
2
2
_
k
,
and (1.9) follows.
16 Chapter 1
Chapter 2
Gaussian random variables
2.1 Notations
Let (Ω, F, P) be a probability space, H a separable Hilbert space, X: Ω → H
a random variable such that
_
Ω
[X(ω)[
2
P(dω) < ∞.
We denote by X
#
P the law of X, by m(X) the mean of X
#
P and by Q(X)
the covariance of X
#
P.
By the change of variables formula it follows that the Fourier transform
of X
#
P is given by
X
#
P(h) =
_
Ω
e
iX(ω),h
P(dω), ∀ h ∈ H
and that
¸m(X), h) =
_
Ω
¸X(ω), h)P(dω), ∀ h ∈ H,
and
¸Q(X)h, k) =
_
Ω
¸X(ω) −m(X), h) ¸X(ω) −m(X), k)P(dω), ∀ h, k ∈ H.
Deﬁnition 2.1 We say that X
#
P is a Gaussian random variable if X
#
P is
a Gaussian measure, that is if
X
#
P(h) = e
im(X),h
e
−
1
2
Q(X)h,h
, ∀ h ∈ H.
In this case we call m(X) the mean and Q(X) the covariance of X.
17
18 Chapter 2
Example 2.2 Let n ∈ N, X
1
, ..., X
n
be real random variables on (Ω, F, P).
Then X = (X
1
, ..., X
n
) is a R
n
valued random variable. So, m(X) is a vector
of R
n
denoted by (m(X)
1
, ..., m(X)
n
) and Q(X) is a n n matrix denoted
Q(X)
i,j
, i, j = 1, ..., n.
More precisely, let (e
1
, ..., e
n
) be the canonical basis in R
n
. Then for any
k = 1, ..., n we have
m(X)
k
= ¸m(X), e
k
) =
_
Ω
X
k
(ω)P(dω) = m(X
k
)
and for any j, k = 1, ..., n we have
Q(X)
j,k
= ¸Q(X)e
j
, e
k
) =
_
Ω
(X
j
(ω) −m
j
(X
j
))(X
k
(ω) −m
k
(X
k
))P(dω).
In particular, if j = k we ﬁnd
Q(X)
k,k
= Q(X
k
), k = 1, ..., n.
Example 2.3 Assume that X = (X
1
, ..., X
n
) is a ndimensional Gaussian
random variable. Then X
1
, ..., X
n
are real Gaussian random variables. In
fact if k = 1, ..., n and a ∈ R we have
_
Ω
e
iaX
k
(ω)
P(dω) =
_
Ω
e
iae
k
,X(ω)
P(dω)
= e
iae
k
,m(X)
e
−
1
2
a
2
Q(X)e
k
,e
k
= e
iam(X
k
)
e
−
1
2
a
2
Q(X
k
)
.
Notice that, if conversely X
1
, ..., X
n
are real Gaussian random variables, then
X = (X
1
, ..., X
n
) is not necessarily Gaussian.
2.2 Independence
In this section we introduce the basic concept of independence.
2.2.1 Independent real variables
Deﬁnition 2.4 Let n ∈ N and let X
1
, ..., X
n
be real random variables in
(Ω, F, P). Consider the R
n
valued random variable
X(ω) = (X
1
(ω), ..., X
n
(ω)), ω ∈ Ω.
random variables 19
We say that X
1
, ..., X
n
are independent if
X
#
P =
n
j=1
(X
j
)
#
P.
Let (X
i
) be a sequence of real random variables. They are called independent
if X
i
1
, . . . , X
i
n
are independent for any choice of n and of positive integers
i
1
< i
2
< < i
n
.
A necessary and suﬃcient condition for the independence is provided by
the following proposition.
Proposition 2.5 Let X
1
, ..., X
n
, n ∈ N, be real independent random vari
ables in (Ω, F, P). Let moreover ϕ
1
, ..., ϕ
n
be Borel positive functions. Then
we have
_
Ω
ϕ
1
(X
1
(ω)) ϕ
n
(X
n
(ω))P(dω)
=
_
Ω
ϕ
1
(X
1
(ω))P(dω)
_
Ω
ϕ
n
(X
n
(ω))P(dω).
(2.1)
Conversely, if (2.1) holds for any choice of positive Borel functions ϕ
1
, ..., ϕ
n
,
then X
1
, ..., X
n
are independent.
Proof. Set X = (X
1
, ..., X
n
) and let ψ: R
n
→R be deﬁned as
ψ(ξ
1
, ..., ξ
n
) = ϕ
1
(ξ
1
) ϕ
k
(ξ
n
), (ξ
1
, ..., ξ
n
) ∈ R
n
.
Then by the change of variable formula we have, taking into account the
independence of X
1
, ..., X
n
,
_
Ω
ϕ
1
(X
1
(ω)) ϕ
n
(X
n
(ω))P(dω) =
_
Ω
ψ(X(ω))P(dω)
=
_
R
n
ψ(ξ)(X
#
P)(dξ) =
_
R
ϕ
1
(ξ
1
)((X
1
)
#
P)(dξ
1
)
_
R
ϕ
k
(ξ
n
)((X
n
)
#
P)(dξ
n
)
=
_
Ω
ϕ
1
(X
1
(ω))P(dω)
_
Ω
ϕ
n
(X
n
(ω))P(dω).
Assume conversely that (2.1) holds for any choice of functions ϕ
1
, ..., ϕ
n
positive Borel. To prove independence of X
1
, ..., X
n
it is enough to show that
(X
#
P)(I
1
I
n
) = ((X
1
)
#
P)(I
1
) ((X
n
)
#
P)(I
n
), ∀ I
1
, ..., I
n
∈ B(R).
But this follows immediately setting in (2.1)
ϕ
i
= 1l
I
i
, i = 1, ..., n.
20 Chapter 2
Exercise 2.6 Let X
1
, ..., X
n
be real independent random variables in (Ω, F, P).
Show that
_
Ω
X
1
X
n
dP =
_
Ω
X
1
dP
_
Ω
X
n
dP
and
V (X
1
+ + X
n
) = V (X
1
) + + V (X
n
).
The following useful result is left to the reader as an exercise.
Proposition 2.7 Let X
1
, ..., X
n
be real random variables in (Ω, F, P) and
let X = (X
1
, ..., X
n
). Then X
1
, ..., X
n
are independent if and only if
X
#
P(h) =
n
k=1
(X
k
)
#
P(h
k
), ∀ h = (h
1
, ..., h
n
) ∈ R
n
.
Deﬁnition 2.8 Let (Ω, F, P) be a probability space and A
1
, ..., A
n
∈ F.
We say that the sets A
1
, ..., A
n
are independent if the random variables
1l
A
1
, ..., 1l
A
n
are so.
Exercise 2.9 Show that sets A
1
, ..., A
n
are independent if and only if
P(A
j
1
∩ ∩ A
j
k
) = P(A
j
1
) P(A
j
k
),
for all k = 1, ..., n and k diﬀerent positive integer j
1
, ..., j
k
less or equal to n.
Proposition 2.10 Let X
1
, ..., X
n
be real independent random variables in
(Ω, F, P) and let X = (X
1
, ..., X
n
). Then the covariance matrix Q(X) is
diagonal.
Proof. We have in fact (by Exercise 2.6) for i, j = 1, ..., n
Q(X)
i,j
=
_
Ω
(X
i
(ω) −m
i
(X))(X
j
(ω) −m
j
(X))P(dω)
=
_
Ω
(X
i
(ω) −m
i
(X))P(dω)
_
Ω
(X
j
(ω) −m
j
(X))P(dω) = 0.
The converse of Proposition 2.10 does not hold in general.
random variables 21
2.2.2 Independent Gaussian random variables
Let X
1
, ..., X
n
be real random variables in (Ω, F, P) and let X = (X
1
, ..., X
n
).
Proposition 2.11 Assume that X
1
, ..., X
n
are independent Gaussian ran
dom variables. Then X = (X
1
, ..., X
n
) is Gaussian.
Proof. In fact, let h = (h
1
, ..., h
n
) ∈ R
n
. Then, taking into account the
independence of (X
1
, ..., X
n
),
X
#
P(h) =
_
Ω
e
i(X
1
(ω)h
1
+···+X
1
(ω)h
n
)
P(dω) =
n
k=1
_
Ω
e
iX
k
(ω)h
k
P(dω)
= e
i(m(X
1
)h
1
+···+m(X
n
)h
n
)
e
−
1
2
(Q(X
1
)h
2
1
+···+Q(X
n
)h
2
n
)
.
Proposition 2.12 Assume that X
1
, ..., X
n
are real random variables and
that X = (X
1
, ..., X
n
) is Gaussian. Then X
1
, ..., X
n
are independent if and
only if Q(X) is diagonal.
Proof. If X
1
, ..., X
n
are independent the conclusion follows from Proposition
2.11. Assume now that Q(X) is diagonal. By Proposition 2.7 it is enough to
show that
X
#
P(h) =
n
i=1
(X
k
)
#
P(h),
for each h = (h
1
, ..., h
n
) ∈ H.
We have in fact
X
#
P(h) = e
im(X),h
e
−
1
2
Q(X)h,h
= e
im(X),h
e
−
1
2
P
n
k=1
Q(X)
k,k
h
2
k
= e
im(X),h
e
−
1
2
P
n
k=1
Q(X
k
)h
2
k
=
n
i=1
(X
k
)
#
P(h).
2.3 Gaussian random variables deﬁned in a
Hilbert space
We now consider the case when (Ω, F, P) coincides with (H, B(H), µ), where
H is a separable Hilbert space and µ = N
m,Q
with m ∈ H and Q ∈ L
+
1
(H).
22 Chapter 2
2.3.1 Aﬃne changes of variables
Let b ∈ K and A ∈ L(H, K) where K is another separable Hilbert space.
Let us consider the aﬃne transformation
T(x) = Ax + b, x ∈ H.
Proposition 2.13 T is a Gaussian random variable and its law T
#
µ is given
by N
Aa+b,AQA
∗, where A
∗
is the transpose of A.
Proof. We have in fact
_
K
e
ik,y
T
#
µ(dy) =
_
H
e
ik,T(x)
µ(dx) =
_
H
e
ik,Ax+b
µ(dx)
= e
ik,b
_
H
e
iA
∗
k,x
µ(dx) = e
ik,Aa+b
e
−
1
2
AQA
∗
k,k
, k ∈ K.
Example 2.14 Let µ = N
m,Q
and n ∈ N, f
1
, ..., f
n
∈ H. Let F : H → R
n
be deﬁned as
F(x) := (¸x, f
1
), ..., ¸x, f
n
)), x ∈ H.
Then by Proposition 2.13 F is a Gaussian random variable with mean m(F)
and covariance Q(F) given by,
m(F) = F(m) = (¸m, f
1
), ..., ¸m, f
n
))
and
Q(F) = FQF
∗
.
On the other hand, the linear operator F
∗
: R
n
→ H is given by
F
∗
(ξ) =
n
k=1
f
k
ξ
k
, ∀ ξ = (ξ
1
, ..., ξ
n
) ∈ R
n
.
Therefore
QF
∗
(ξ) =
n
k=1
Qf
k
ξ
k
, ∀ ξ = (ξ
1
, ..., ξ
n
) ∈ R
n
and
FQF
∗
(ξ) =
__
n
k=1
Qf
k
ξ
k
, f
1
_
, ...,
_
n
k=1
Qf
k
ξ
k
, f
n
__
random variables 23
so that
Q(F)
h,k
= ¸Qf
h
, f
k
). (2.2)
Therefore, F
1
, ..., F
n
are independent if and only if
¸Qf
h
, f
k
) = 0, h, k = 1, ..., n,
if h ,= k.
2.4 The white noise function
In order to deﬁne the white noise function (which will play an important role
in what follows), we shall deal with equivalence class of random variables
(rather than random variables), which we brieﬂy discuss in the next sub
section.
2.4.1 Equivalence classes of random variables
Let (Ω, F, P) be a probability space and let H be a separable Hilbert space.
We denote by R(H) the set of all Hvalued random variables.
Deﬁnition 2.15 We say that X, Y ∈ R(H) are equivalent (and write X ∼
Y ) if
P(¦ω ∈ Ω : X(ω) = Y (ω)¦) = 1.
One can easily check that X ∼ Y, X, Y ∈ R(H) is an equivalence relation,
so that the set R(H) is disjoint union of equivalences classes.
We notice that if X ∼ Y then the laws of X and Y coincide. In fact set
K = ¦ω ∈ Ω : X(ω) ,= Y (ω)¦,
so that P(K) = 0. Since for any I ∈ B(H) we have
X
−1
(I) ⊂ Y
−1
(I) ∪ K,
it follows that P(X
−1
(I)) ≤ P(Y
−1
(I)) and, exchanging X and Y we see that
P(X
−1
(I)) = P(Y
−1
(I)).
Consequently, all random variables belonging to a ﬁxed equivalence class
˜
X have the same law, which is called the law of
˜
X.
In the following we shall not distinguish between a random variable X
and the equivalence class
˜
X including X, except when needed.
24 Chapter 2
By L
p
(Ω, F, P; H), p ≥ 1, we mean the space of all equivalence class of
random variables X: Ω → H such that
_
Ω
[X(ω)[
p
P(dω) < +∞.
L
p
(Ω, F, P; H), endowed with the norm
X
L
p
(Ω,F,P;H)
=
__
Ω
[X(ω)[
p
P(dω)
_
1/p
,
is a Banach space. We shall write L
p
(Ω, F, P; H) = L
p
(Ω, P; H) for brevity.
We prove now that the limit of a convergent sequence in L
2
(Ω, P; H) of
Gaussian random variables is Gaussian.
Proposition 2.16 Let (X
n
) ⊂ L
2
(Ω, P; H) be a sequence of Gaussian ran
dom variables convergent to X in L
2
(Ω, P; H). Then X is a Gaussian random
variable and
¸m(X), h) = lim
n→∞
¸m(X
n
), h), h ∈ H,
and
¸Q(X)h, k) = lim
n→∞
¸Q(X
n
)h, k), h, k ∈ H.
Proof. Since X
n
→ X in L
2
(Ω, P; H) we have
lim
n→∞
¸m(X
n
), h) = lim
n→∞
_
Ω
¸X
n
(ω), h)P(dω) =
_
Ω
¸X(ω), h)P(dω) = ¸m(X), h)
and
lim
n→∞
¸Q(X
n
)h, k) = lim
n→∞
_
Ω
¸X
n
(ω) −m(X
n
), h) ¸X
n
(ω) −m(X
n
), k)P(dω)
=
_
Ω
¸X(ω) −m(X), h) ¸X(ω) −m(X), k)P(dω) = ¸Q(X)h, k).
Let us show now that X is a Gaussian random variable. We have in fact
_
H
e
ix,h
(X
#
µ)P(dy) =
_
Ω
e
iX(ω),h
P(dω) = lim
n→∞
_
Ω
e
iX
n
(ω),h
P(dω)
= lim
n→∞
e
im(X
n
),h
e
−
1
2
Q(X
n
)h,h
= e
im(X),k
e
−
1
2
Q(X)h,h
.
random variables 25
2.4.2 Deﬁnition of the white noise function
In this section we assume that the Hilbert space H is inﬁnite dimensional and
consider a non degenerate Gaussian measure µ = N
Q
in H (Ker (Q) = ¦0¦).
Since Q is compact there exists a complete orthonormal basis (e
k
) on H and
a sequence of positive numbers (λ
k
) such that
Qe
k
= λ
k
e
k
, k ∈ N.
Let us deﬁne a mapping
W : Q
1/2
(H) → C(H), z → W
z
where
W
z
(x) = ¸x, Q
−1/2
z), ∀ x ∈ H.
Here Q
1/2
(H) is the Cameron–Martin space and C(H) the space of all real
continuous functions on H.
Lemma 2.17 For all z
1
, z
2
∈ Q
1/2
(H) we have
_
H
W
z
1
(x)W
z
2
(x)µ(dx) = ¸z
1
, z
2
). (2.3)
Proof. We have in fact
_
H
W
z
1
(x)W
z
2
(x)µ(dx) =
_
H
¸x, Q
−1/2
z
1
)¸x, Q
−1/2
z
2
)µ(dx)
= ¸QQ
−1/2
z
1
, QQ
−1/2
z
2
) = ¸z
1
, z
2
).
Since Q
1/2
(H) is dense in H, the mapping W can be uniquely extended
as a mapping from H into L
2
(H, µ) which we denote still by W and call the
white noise function.
W
f
is linear in the sense that for all α, β ∈ R we have
W
f
(αx + βy) = αW
f
(x) + βW
f
(y), x, y µ a.e..
Remark 2.18 Given z ∈ H (not belonging to Q
1/2
(H)) it would be tempt
ing to deﬁne the random variable W
z
by setting,
W
z
(x) = ¸Q
−1/2
x, z), x ∈ Q
1/2
(H).
However this deﬁnition is meaningless because µ(Q
1/2
(H)) = 0, by Proposi
tion 1.13
26 Chapter 2
Proposition 2.19 Let z ∈ H. Then W
z
is a real Gaussian random variable
with mean 0 and covariance [z[
2
.
Proof. We have to show that
_
H
e
iηW
z
(x)
µ(dx) = e
−
1
2
η
2
z
2
, ∀ η ∈ R.
Let (z
n
) ⊂ Q
1/2
(H) be a sequence such that z
n
→ z in H. Then, by the
dominated convergence theorem, we have
_
H
e
iηW
z
(x)
µ(dx) = lim
n→∞
_
H
e
iηQ
−1/2
z
n
,x
µ(dx) = lim
n→∞
e
−
1
2
η
2
z
n

2
= e
−
1
2
η
2
z
2
.
So, the conclusion follows.
The following generalization of Proposition 2.19 is important.
Proposition 2.20 Let n ∈ N, z
1
, ..., z
n
∈ H. Then (W
z
1
, ..., W
z
n
) is an n
dimensional Gaussian random variable with mean 0 and covariance operator
Q
z
given by
(Q
z
)
h,k
= ¸z
h
, z
k
), h, k = 1, ..., n. (2.4)
The random variables W
z
1
, ..., W
z
n
are independent if and only if z
1
, ..., z
n
are
mutually orthogonal.
Proof. Let (z
1
j
), ..., (z
n
j
) be n sequences in Q
1/2
(H) convergent respectively to
z
1
, ..., z
n
in H. Then we have by the dominated convergence theorem, that
_
H
e
i(ξ
1
W
z
1
(x)+···+ξ
n
W
z
n
(x))
µ(dx) = lim
j→∞
_
H
e
i(ξ
1
Q
−1/2
z
j
1
,x+···+ξ
n
Q
−1/2
z
j
n
,x)
µ(dx)
= lim
j→∞
_
H
e
ix,Q
−1/2
(ξ
1
z
j
1
+···+ξ
n
z
j
n
)
µ(dx)
= lim
j→∞
e
−
1
2
ξ
1
z
j
1
+···+ξ
n
z
j
n

2
= e
−
1
2
ξ
1
z
1
+···+ξ
n
z
n

2
= e
−
1
2
P
n
j,k=1
z
j
,z
k
ξ
j
ξ
k
.
Chapter 3
Brownian Motion
3.1 Stochastic Processes
We are given a probability space (Ω, F, P). We denote by P
∗
the outer
measure of P. We recall that a null set of Ω is a set of outer measure zero.
For any integrable real random variable F we note
E(F) =
_
Ω
F(ω)P(dω).
So, in particular we have
F
#
P(I) = E(1l
I
(F)), ∀ I ∈ B(R).
We say that a property π concerning elements of Ω holds Pa.s. if the set
where π does not hold is a null set.
Deﬁnition 3.1 A family X = (X(t))
t≥0
of real random variables in (Ω, F, P)
is called a real stochastic process in [0, +∞). For any ω ∈ Ω, X(, ω) is called
a trajectory of X.
• X is Gaussian if for any n ∈ N and any 0 ≤ t
1
< < t
n
the n
dimensional random variable (X(t
1
), ..., X(t
n
)) is Gaussian.
• X is continuous if X(, ω) is continuous Pa.s.
• X is pmean continuous, p ≥ 1, if
(i) X(t) is pintegrable for any t ≥ 0.
(ii) We have
lim
t→t
0
E[[X(t) −X(t
0
)[
p
] = 0, ∀ t
0
≥ 0. (3.1)
27
28 Chapter 3
We notice that a pmean continuous process is not continuous in general.
We say that two stochastic processes X and Y are equivalent if for all
t ≥ 0 we have
X(t, ω) = Y (t, ω), Pa.s..
When X and Y are equivalent we also say that Y is a version of X (or that
X is a version of Y ).
3.2 Brownian motion
Deﬁnition 3.2 A real Brownian motion B = (B(t))
t≥0
on (Ω, F, P) is a
real stochastic process such that
(i) B(0) = 0 and if 0 ≤ s < t, B(t) − B(s) is a real Gaussian random
variable with law N
t−s
.
(ii) If 0 < t
1
< ... < t
n
, the random variables,
B(t
1
), B(t
2
) −B(t
1
), , B(t
n
) −B(t
n−1
)
are independent.
We express condition (ii) by saying that B is a process with independent
increments.
Lemma 3.3 Let t, s > 0. Then
E[B(t)(B(s)] = min¦t, s¦. (3.2)
Proof. Let for instance t > s. Then we have
E[B(t)B(s)] = E[(B(t) −B(s))B(s)] +E[B
2
(s)].
On the other hand, B(t) −B(s) is independent of B(s) so that
E[(B(t) −B(s))B(s)] = E[B(t) −B(s)]E[B(s)] = 0.
Since the law of B(s) is N
s
we conclude that E[B(t)B(s)] = s as required.
Brownian motion 29
3.2.1 Construction of a Brownian motion
Consider the probability space (H, B(H), µ), where H = L
2
(0, +∞) and
µ = N
Q
, Q being an arbitrary (but ﬁxed) non degenerate Gaussian measure
in H.
Deﬁne
B(t) = W
1l
[0,t]
, t ≥ 0, (3.3)
where
1l
[0,t]
(s) =
_
_
_
1 if s ∈ [0, t],
0 otherwise,
and W is the white noise function deﬁned in Chapter 2.
More precisely, for any t ≥ 0 we choose an arbitrary element in the
equivalence class of B(t) which we still denote by B(t).
Clearly, for any t ≥ 0, B(t) is a Gaussian random variable N
t
and for any
t > s ≥ 0, B(t) −B(s) = W
1l
(s,t]
is a Gaussian random variable N
t−s
. So, B
fulﬁlls Deﬁnition 3.2(i). Let us prove (ii). Since the system of elements of H,
(1l
[0,t
1
]
, 1l
(t
1
,t
2
]
, ..., 1l
(t
n−1
,t
n
]
),
is orthogonal, we have by Proposition 2.20 that the random variables
B(t
1
), B(t
2
) −B(t
1
), , B(t
n
) −B(t
n−1
)
are independent. Thus (ii) is proved as well.
3.2.2 Some properties of a Brownian motion
Proposition 3.4 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F, P).
Then B is a Gaussian process. Moreover, if 0 < t
1
< ... < t
n
the law of
(B(t
1
), ..., B(t
n
)) is given by
P((B(t
1
), ..., B(t
n
)) ∈ I)
= (2π)
−n/2
(t
1
(t
2
−t
1
) (t
n
−t
n−1
))
−1/2
_
I
e
−
η
2
1
2t
1
−
(η
2
−η
1
)
2
2(t
2
−t
1
)
−·−
(η
n
−η
n−1
)
2
2(t
n
−t
n−1
)
dη,
(3.4)
for all I ∈ B(R
n
).
Proof. Let 0 < t
1
< ... < t
n
and set
X := (B(t
1
), B(t
2
) −B(t
1
), ..., B(t
n
) −B(t
n−1
))
Z := (B(t
1
), ..., B(t
n
)).
30 Chapter 3
Since random variables B(t
1
), B(t
2
) − B(t
1
), ..., B(t
n
) − B(t
n−1
) are inde
pendent, by Proposition 2.11 it follows that X is a ndimensional Gaussian
random variable with mean 0 and covariance operator
Q(X) = diag (t
1
, t
2
−t
1
, ..., t
n
−t
n−1
).
Now, consider the linear mapping T ∈ L(R
n
) deﬁned by,
T(x
1
, ..., x
n
) = (x
1
, x
1
+ x
2
, ..., x
1
+ + x
n
), ∀ (x
1
, ..., x
n
) ∈ R
n
.
It is clear that Z = T(X). Therefore by Proposition 2.13 Z is Gaussian with
mean 0 and covariance Q(Z) = TQ(X)T
∗
where T
∗
is the transpose of T.
It remain to show (3.4). If I ∈ B(R
n
) we have
P(Z ∈ I) = (2π)
−n/2
(det Q(Z))
−1/2
_
I
e
−
1
2
(Q(Z))
−1
η,η
dη.
Since det T = det T
∗
= 1, as easily checked, we have
det Q(Z) = det Q(X) = t
1
(t
2
−t
1
) (t
n
−t
n−1
).
Moreover, since
T
−1
η = (η
1
, η
2
−η
1
, ..., η
n
−η
n−1
),
we have
¸(Q(Z))
−1
η, η) = ¸Q
−1
T
−1
η, T
−1
η) =
η
2
1
t
1
−
(η
2
−η
1
)
2
(t
2
−t
1
)
− −
(η
n
−η
n−1
)
2
(t
n
−t
n−1
)
and so, the conclusion follows.
Proposition 3.5 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F, P).
Then B is pmean square continuous for all p ≥ 1.
Proof. It is enough to show the result for p = 2m, m ∈ N. Let t > t
0
≥ 0.
Since B(t) −B(t
0
) is a Gaussian random variable N
t−t
0
, we have
E([B(t) −B(t
0
)[
2m
) =
_
R
[ξ[
2m
N
t−t
0
(dξ) =
(2m)!
m!2
m
(t −t
0
)
m
.
Therefore
lim
t→0
E([B(t) −B(t
0
)[
2m
) = 0
and the conclusion follows.
Exercise 3.6 Let B(t) be a Brownian motion in a probability space (Ω, F, P).
Prove that the following are Brownian motions.
Brownian motion 31
(i) B
1
(t) = B(t + h) −B(h), t ≥ 0, where h > 0 is given.
(ii) B
2
(t) = αB(α
−2
t), t ≥ 0, where α > 0 is given.
(iii) B
3
(t) = tB(1/t), t > 0, B
3
(0) = 0.
(iv) B
4
(t) = −B(t), t ≥ 0.
3.3 Wiener integral
Let B(t), t ≥ 0, be a Brownian motion in (Ω, F, P) and let f ∈ L
2
(0, T)
with T > 0. We want to deﬁne the stochastic integral:
_
T
0
f(s)dB(s).
We start with step functions. Let 0 = t
0
< t
1
< < t
n
= T, f
0
, f
1
, ..., f
n−1
∈
R and set
f =
n
j=1
t
j−1
1l
(t
j
−t
j−1
]
.
Then deﬁne
_
T
0
f(s)dB(s) :=
n
j=1
f
t
j−1
(B(t
j
) −B(t
j−1
)).
Let us prove two basic identities.
Lemma 3.7 We have
E
__
T
0
f(s)dB(s)
_
= 0 (3.5)
and
E
_
__
T
0
f(s)dB(s)
_
2
_
=
n
j=1
[f(t
j−1
)[
2
(t
j
−t
j−1
) =
_
t
0
f
2
(s)ds. (3.6)
Proof. Identity (3.5) is obvious. Let us prove (3.6). We have
E([I
σ
(f)[
2
) = E
_
n
j=1
[f(t
j−1
)[
2
[B(t
j
) −B(t
j−1
)]
2
_
+2E
_
n
j<k
f(t
j−1
)f(t
k−1
)[B(t
j
) −B(t
j−1
)][B(t
k
) −B(t
k−1
)]
_
.
(3.7)
32 Chapter 3
Now the conclusion follows taking into account that B(t
j
) −B(t
j−1
) is a real
Gaussian random variable N
t
j−1
−t
j
and that B(t
j
) − B(t
j−1
) is independent
of B(t
k
) −B(t
k−1
) for k ,= j.
Denote by S(0, T) the linear space of all step functions. By (3.6) it follows
that the linear mapping I
S(0, T) ⊂ L
2
(0, T) → L
2
(Ω, F, P), f → I(f) =
_
T
0
f(s)dB(s),
is continuous. Since S(0, T) is dense in L
2
(0, T) it can be uniquely extended
to the whole L
2
(0, T). We still denote by I(f) =
_
T
0
f(s)dB(s) this estension.
It is clear that for any f ∈ L
2
(0, T) we have
E
__
T
0
f(s)dB(s)
_
= 0, (3.8)
and
E
_
__
T
0
f(s)dB(s)
_
2
_
=
_
t
0
f
2
(s)ds. (3.9)
The random variable (more precisely, the equivalence class of random
variables)
_
T
0
f(s)dB(s), which belongs to L
2
(Ω, F, P), is called the Wiener
integral of f in [0, T].
We deﬁne in an obvious way the Wiener integral
_
b
a
f(s)dB(s) for any
a, b ≥ 0. It is easy to see that if a, b, c ≥ 0 we have
_
b
a
f(s)dB(s) +
_
c
b
f(s)dB(s) =
_
c
a
f(s)dB(s).
Exercise 3.8 Let f, g ∈ L
2
(0, T). Show that
E
__
T
0
f(s)dB(s)
_
T
0
g(s)dB(s)
_
=
_
T
0
f(s)g(s)ds.
Proposition 3.9 Let f ∈ L
2
(0, T). Then I(f) =
_
T
0
f(s)dB(s) is a real
Gaussian random variable N
q
with q =
_
T
0
[f(s)[
2
ds.
Proof. It is enough to prove the result for f of the form
f =
n
i=1
f
t
i−1
(t
i
−t
i−1
),
Brownian motion 33
where n ∈ N, 0 = t
0
< t
1
< ... < t
n−1
= T, so that
I(f) =
n
i=1
f
t
i−1
(B(t
i
) −B(t
i−1
)).
Since random variables
B(t
1
), B(t
2
) −B(t
1
), , B(t
n
) −B(t
n−1
),
are independent, we have that I(f) is a real Gaussian random variable N
q
with
q =
n
i=1
f
2
(t
i−1
)(t
i
−t
i−1
).
We now show a relation between the white noise function and the Wiener
integral.
Example 3.10 We use here notations of Section 3.2.1. Let f ∈ L
2
(0, ∞).
Then we have
W
f
=
_
∞
0
f(s)dB(s). (3.10)
It is enough to show (3.10) when
f =
n
k=1
f
t
k−1
1l
(t
k−1
,t
k
]
,
where 0 ≤ t
0
< < t
n
. In this case we have in fact
_
∞
0
f(s)dB(s) =
n
k=1
f
t
k−1
W
1l
(t
k−1
,t
k
]
= W
P
n
k=1
f
t
k−1
1l
(t
k−1
,t
k
]
= W
f
.
Let f : [0, ∞) →R such that it is integrable in all interval [0, T], T0. Let
us introduce a stochastic process setting
F(t) =
_
t
0
f(s)ds, ∀ t ≥ 0.
Proposition 3.11 The process F(t), t ≥ 0 is pmean continuous for any
p ≥ 1.
34 Chapter 3
Proof. Let p = 2m, m ∈ N and t > t
0
≥ 0. Then by Proposition 3.9 we
have that
F(t) −F(t
0
) =
_
t
t
0
f(s)dB(s)
is a real Gaussian random variable with mean 0 and covariance
_
t
t
0
f
2
(s)ds.
Therefore
E[F(t) −F(t
0
)[
2m
=
(2m)!
m!2
m
__
t
t
0
f
2
(s)ds
_
q
,
so that
lim
t→t
0
E[F(t) −F(t
0
)[
2m
= 0.
We note ﬁnally, that if f ∈ C
1
([0, T]) then it is possible to express the
Wiener integral
_
T
0
f(s)dB(s) in terms of a Riemann integral as the following
integration by parts formula shows.
Proposition 3.12 If f ∈ C
1
([0, T]) we have
_
T
0
f(s)dB(s) = f(T)B(T) −
_
T
0
f
(s)B(s)ds, Pa.e. ω ∈ Ω. (3.11)
Proof. Let σ = ¦t
0
, t
1
, , t
n
¦ ∈ Σ. Then we have
I
σ
(f) =
n
k=1
f(t
k−1
)(B(t
k
) −B(t
k−1
))
=
n
k=1
(f(t
k
)B(t
k
) −f(t
k−1
)B(t
k−1
))
−
n
k=1
(f(t
k
) −f(t
k−1
))B(t
k
)
= f(T)B(T) −
n
k=1
(f(t
k
) −f(t
k−1
))B(t
k
)
= f(T)B(T) −
n
k=1
f
(α
k
)B(t
k
)(t
k
−t
k−1
),
where α
k
are suitable numbers in the interval [t
k−1
, t
k
], k = 1, ..., n. It follows
that
lim
σ→0
I
σ
(f) = f(T)B(T) −
_
T
0
f
(s)dB(s)ds, Pa.s..
Brownian motion 35
3.4 Continuity of Brownian motion
Let B(t), t ≥ 0, be a Brownian motion on a probability space (Ω, F, P). We
are going to show that B possesses a continuous version. To this purpose we
shall use a representation formula for B proved in the next proposition.
Proposition 3.13 For any α ∈ (0, 1/2) we have
B(t) =
sin πα
π
_
t
0
(t −σ)
α−1
Y
α
(σ)dσ, (3.12)
where
Y
α
(σ) =
_
σ
0
(σ −s)
−α
dB(s). (3.13)
Notice that the Wiener integral Y
α
is meaningful since α ∈ (0, 1/2).
Proof. We start from the following elementary identity which is valid for
any α ∈ (0, 1).
_
t
s
(t −σ)
α−1
(σ −s)
−α
dσ =
π
sin πα
, 0 ≤ s ≤ σ ≤ t, (3.14)
where α ∈ (0, 1). To check (3.14) it is enough to set σ = r(t −s) +s so that
(3.14) becomes
_
1
0
(1 −r)
α−1
r
−α
dr = β(α, 1 −α) =
π
sin πα
.
Now since, obviously, B(t) =
_
s
0
dB(s) we can write
B(t) =
sin πα
π
_
t
0
__
t
s
(t −σ)
α−1
(σ −s)
−α
dσ
_
dB(s).
Exchanging integrals
(1)
, yields
B(t) =
sin πα
π
_
t
0
dξ(t −σ)
α−1
__
σ
0
(σ −s)
−α
dB(s)
_
.
We can now prove the result.
Theorem 3.14 Let B(t), t ≥ 0, be a Brownian motion on a probability
space (Ω, F, P). Then B possesses a continuous version.
(1)
This requires a proof which is left to the reader.
36 Chapter 3
Proof. Choose a version Y
α
(, ω) of the stochastic process Y
α
which is 2m
integrable with 2m > 1/α. This is possible in view of Proposition 3.11. Now
set
B(t, ω) =
sin πα
π
_
t
0
(t −σ)
α−1
Y
α
(σ, ω)dσ, ∀ t ≥ 0.
Then B(, ω) is a continuous version of B thanks to the following analytic
lemma.
Lemma 3.15 Let α ∈ (0, 1/2), m ∈ N with 2m > 1/α and f ∈ L
2m
(0, T).
Set
F(t) =
_
t
0
(t −σ)
α−1
f(σ)dσ, t ∈ [0, T].
Then F ∈ C([0, T]; H).
Proof. By H¨ older’s inequality we have
[F(t)[ ≤
__
t
0
(t −σ)
(α−1)
2m
2m−1
dσ
_
2m−1
2m
[f[
L
2m
(0,T;H)
. (3.15)
(Notice that (α − 1)
2m
2m−1
> −1.) Therefore F ∈ L
∞
(0, T; H) and F is con
tinuous at 0. Let us prove that F is continuous on [
t
0
2
, T] for any t
0
∈ (0, T].
Let us set for ε <
t
0
2
,
F
ε
(t) =
_
t−ε
0
(t −σ)
α−1
f(σ)dσ, t ∈ [0, T].
F
ε
is obviously continuous on [
t
0
2
, 1]. Moreover, using again H¨ older’s inequal
ity, we ﬁnd
[F(t) −F
ε
(t)[ ≤ M
_
2m−1
2mα −1
_2m−1
2m
ε
α−
1
2m
[f[
L
2m
(0,T;H)
.
Thus lim
ε→0
F
ε
(t) = F(t), uniformly on [
t
0
2
, T], and F is continuous as re
quired.
Exercise 3.16 Prove that B possesses an H¨ older continuous version with
any exponent β < 1/2.
3.5 The standard Brownian motion
Let us consider a Brownian motion B(t), t ≥ 0, in a probability space
(Ω, F, P) such that B(, ω) is continuous for all ω ∈ Ω. We denote by B
the mapping
B : Ω → C
0
, ω → B(, ω),
where C
0
= ¦η ∈ C([0, +∞)) : η(0) = 0¦.
Brownian motion 37
3.5.1 Some properties of C
0
First we notice that, as easily checked, C
0
, endowed with the metric,
d(η
1
, η
2
) :=
∞
k=1
η
1
−η
2

k
2
k
(1 +η
1
−η
2

k
)
,
is a complete metric space. We have set for any k ∈ N,
η
k
= sup¦[η(t)[ : t ∈ [0, k]¦, ∀ η ∈ C
0
.
Let us now consider the σalgebra B(C
0
). It is important to notice that
B(C
0
) is generated by the cylindrical subsets of C
0
that we shall introduce
now.
For n ∈ N, 0 < t
1
< < t
n
and A ∈ B(R
n
) we deﬁne
C
t
1
,t
2
,...,t
n
;A
:= ¦η ∈ C
0
: (η(t
1
), ..., η(t
n
)) ∈ A¦ .
Note that
C
t
1
,t
2
,...,t
n
;A
= C
t
1
,t
2
,...,t
n
,t
n+1
,...,t
n+k
;A×R
k, k, n ∈ N.
Using this identity one can easily see that C is an algebra. Moreover, the
σalgebra generated by C coincides with B(C
0
) since any ball (with respect
to the metric of C
0
) is a countable intersection of cylindrical sets.
3.5.2 The Wiener measure and the standard Brownian
motion
We come back to the mapping B
B : Ω → C
0
, ω → B(, ω)
and we denote by Q its law (which is a probability measure on (C
0
, B(C
0
)).
Q is called the Wiener measure on (C
0
, B(C
0
)).
So, for any nonnegative Borel mapping
F : C
0
→R, η → F(η),
we have
E[F(B())] =
_
Ω
F(B(, ω))P(dω) =
_
C
0
F(η)Q(dη). (3.16)
Some examples of mappings F are the following.
38 Chapter 3
(i) F(η) = g(η(t
0
)), for all η ∈ C
0
, where g : R → R is nonnegative Borel
and t
0
> 0 is given.
(ii) F(η) = G(η(t
1
), ..., η(t
n
)), for all η ∈ C
0
, where G : R
n
→R is nonneg
ative Borel and t
1
, ..., t
n
> 0 are given.
(iii) F(η) = sup
t∈[0,1]
[η(t)[, for all η ∈ C
0
.
Now we deﬁne a stochastic process W(t), t ≥ 0, in (C
0
, B(C
0
), Q) setting
W(t)(η) = η(t), η ∈ C
0
, t ≥ 0.
Proposition 3.17 W is a Brownian motion in (C
0
, B(C
0
), Q), called the
standard Brownian motion.
Proof. The proof is straightforward. Let us show for instance that for
t > s ≥ 0, W(t) − W(s) is a Gaussian random variable N
t−s
. For this it is
enough to show that the Fourier transform of W(t) −W(s)
ψ(h) :=
_
C
0
e
i(η(t)−η(s))h
Q(dη), h ∈ R,
is given by e
−
1
2
(t−s)h
2
, h ∈ R.
In fact by (3.16) we have
_
C
0
e
i(η(t)−η(s))h
Q(dη) =
_
Ω
e
i(B(t,ω)−B(s,ω))h
P(dω)
= E[e
i(B(t)−B(s))
] = e
−
1
2
(t−s)h
2
, h ∈ R.
In an analogous way one can prove that W(t), t ≥ 0, has independent incre
ments.
Let us compute the Wiener measure of a cylindrical set.
Proposition 3.18 Let C
t
1
,t
2
,...,t
n
;A
be a cylindrical set. Then we have
Q(C
t
1
,t
2
,...,t
n
;A
)
=
1
_
(2π)
n
t
1
(t
2
−t
1
) (t
n
−t
n−1
)
_
A
e
−
ξ
2
1
2t
1
−
(ξ
2
−ξ
1
)
2
2(t
2
−t
1
)
−···−
(ξ
n
−ξ
n−1
)
2
2(t
n
−t
n−1
)
dξ.
Proof. We simply note that, thanks to (3.16), we have
Q(C
t
1
,t
2
,...,t
n
;A
) = P((B(t
1
), ..., B(t
n
)) ∈ A),
so that the conclusion follows from Proposition 3.4.
Brownian motion 39
3.6 Quadratic variation of the Brownian mo
tion
In this section we are given a real continuous Brownian motion B(t), t ≥ 0,
on a probability space (Ω, F, P). For any T > 0 we denote by Σ(0, T) the
set of all decompositions of [0, T]
σ = ¦0 = t
0
< t
1
< < t
n
= T¦.
Then for any σ = ¦0 = t
0
< t
1
< < t
n
= T¦ ∈ Σ(0, T) we set
[σ[ := min¦t
k
−t
k−1
: k = 1, ...n −1¦.
We introduce a partial ordering on Σ(0, T), setting
σ
1
≤ σ
2
if and only if [σ
1
[ ≤ [σ
2
[.
Let us now introduce the quadratic variation of Brownian motion B in
[0, T]. For any σ = ¦0 = t
0
< t
1
< < t
n
= T¦ ∈ Σ(0, T) we deﬁne
J
σ
:=
n
k=1
[B(t
k
) −B(t
k−1
)[
2
.
Then we prove
Theorem 3.19 We have
lim
σ→0
J
σ
= T in L
2
(Ω, F, P).
We say that T is the quadratic variation of B in [0, T].
Proof. Since B
t
k
−B
t
k−1
is a real Gaussian random variable with law N
t
k
−t
k−1
,
we have E(J
σ
) = T, and so,
E([J
σ
−T[
2
) = E(J
2
σ
) −2TE(J
σ
) + T
2
= E(J
2
σ
) −T
2
. (3.17)
Moreover
E[J
σ
[
2
= E
¸
¸
¸
¸
¸
n
k=1
[B(t
k
) −B(t
k−1
)[
2
¸
¸
¸
¸
¸
2
= E
n
k=1
[B(t
k
) −B(t
k−1
)[
4
+ 2
n
h<k=1
E[B(t
h
) −B(t
h−1
)[
2
[B(t
k
) −B(t
k−1
)[
2
.
40 Chapter 3
But we have
E
n
k=1
[B(t
k
) −B(t
k−1
)[
4
= 3
n
k=1
(t
k
−t
k−1
)
2
, (3.18)
and, since B(t
h
) −B(t
h−1
) and B(t
k
) −B(t
k−1
) are independent, we have
n
h<k=1
E[B(t
h
) −B(t
h−1
)[
2
[B(t
k
) −B(t
k−1
)[
2
=
n
h<k=1
(t
h
−t
h−1
)(t
k
−t
k−1
).
(3.19)
Therefore
E[J
σ
[
2
= 3
n
k=1
(t
k
−t
k−1
)
2
+ 2
n
h<k=1
(t
h
−t
h−1
)(t
k
−t
k−1
)
= 2
n
k=1
(t
k
−t
k−1
)
2
+
_
n
k=1
(t
k
−t
k−1
)
_
2
.
= 2
n
k=1
(t
k
−t
k−1
)
2
+ T
2
.
(3.20)
Now, substituting (3.20) on (3.17), we obtain
E
_
[J
σ
−T[
2
_
= 2
n
k=1
(t
k
−t
k−1
)
2
→ 0,
as [σ[ → 0.
An important consequence of Theorem 3.19 is that almost all trajectories
of the Brownian motion B have not bounded variation
(2)
. In other terms
the set
V
T
:= ¦ω ∈ Ω : B(, ω) ∈ BV (0, T)¦
has outer probability zero.
In fact the following result holds.
Proposition 3.20 We have P
∗
(V
T
) = 0.
(2)
Let f : [0, T] → R. Then for any σ = ¦0 = t
0
< t
1
< < ..., t
n
= T¦ ∈ Σ(0, T) we
set V
σ
(f) =
n
k=1
[f(t
k
) − f(t
k−1
)[ and deﬁne V (f) := sup
σ∈Σ
V
σ
(f), V (f) is called the
variation of f. BV (0, T) is the set of all functions f : [0, T] →R of ﬁnite variation.
Brownian motion 41
Proof. Set
Λ := ¦ω ∈ Ω : B(, ω) is continuous ¦,
so that P(Λ) = 1 because B is continuous.
Since lim
σ→0
J
σ
= T in L
2
(Ω, F, P) there exists a sequence (σ
n
) ⊂
Σ(0, T) such that [σ
n
[ → 0 and a set Λ
1
⊂ F such that
(i) P(Λ
1
) = 1.
(ii) lim
n→∞
J
σ
n
(ω) = T for all ω ∈ Λ
1
.
We claim that
V
T
∩ Λ ⊂ Λ
c
1
. (3.21)
By the claim the conclusion will follow since P(Λ
c
1
) = 0.
Let us prove the claim. Let ω ∈ V
T
∩ Λ. Since B(, ω) is uniformly
continuous in [0, T], for any ε > 0 there exists δ
ε
> 0 such that
t, s ∈ [0, T], [t −s[ < δ
ε
=⇒ [B(t, ω) −B(s, ω)[ < ε.
Consequently, if n is so large that [σ
n
[ < δ
ε
we have J
σ
n
(ω) ≤ εV (B(, ω)).
Since ε is arbitrary ω cannot belong to Λ
1
. The claim is proved.
3.7 Multidimensional Brownian motions
Deﬁnition 3.21 Let n ∈ N and let X
1
, ..., X
n
be stochastic processes on a
probability space (Ω, F, P). Then X(t) := (X
1
(t), ..., X
n
(t)), t ≥ 0, is called
an ndimensional stochastic process.
X
1
, ..., X
n
are said to be independent if for any t
1
, ..., t
n
∈ [0, +∞) the
random variables X
i
(t
i
) are independent.
A ndimensional Brownian motion is a ndimensional stochastic process
B(t) := (B
1
(t), ..., B
n
(t)), t ≥ 0, such that B
1
, ..., B
n
are independent Brow
nian motions.
Example 3.22 Let us construct an ndimensional Brownian motion. Let
(e
1
, ..., e
n
) be the canonical basis in R
n
and choose Ω = H = L
2
(0, +∞; R
n
),
F = B(H) and P = N
Q
, where Q is any operator in L
+
1
(H) such that Ker
Q = ¦0¦.
Then set
B
i
(t) = W
e
i
1l
[0,t]
, ∀ t ≥ 0, i = 1, ..., n.
Then one can check easily that B(t) = (B
1
(t), ..., B
n
(t)) is an ndimensional
Brownian motion.
42 Chapter 3
Let B be a Brownian motion in R
n
. Then the following properties are
easily checked.
(i) If t > s, B(t) −B(s) is a Gaussian random variable with law N
(t−s)I
n
,
t ≥ 0, where I
n
represents the identity in R
n
,
(ii) E[B
i
(t)B
j
(t)] = 0 if i ,= j.
(iii) We have
E
_
[B(t) −B(s)[
2
¸
= n(t −s). (3.22)
Let us check (iii). We have
E
_
[B(t) −B(s)[
2
¸
=
n
k=1
E
_
[B
k
(t) −B
k
(s)[
2
¸
= n(t −s).
Exercise 3.23 Prove that for 0 ≤ s < t we have
E
_
[B(t) −B(s)[
4
¸
= (2n + n
2
)(t −s)
2
. (3.23)
Exercise 3.24 Let A, C ∈ L(R
d
) and set
Z(t) = e
tA
x +
_
t
0
e
(t−s)A
CdB(s), t ≥ 0.
Prove that the law of Z(t) in R
d
is given by
N
e
tA
x,Q
t
, (3.24)
where
Q
t
=
_
t
0
e
sA
CC
∗
e
sA
∗
ds, (3.25)
where A
∗
and C
∗
are the adjoint of A and C respectively.
Chapter 4
Markov property of the
Brownian motion
Let us consider the probability space (C
0
, B(C
0
), Q) where C
0
is the complete
metric space of all continuous functions ω : [0, +∞) → R introduced in
Chapter 3 and Q is the Wiener measure. Moreover, let W(t), t ≥ 0, the
standard Brownian motion in (C
0
, B(C
0
), Q) deﬁned by
W(t)(ω) = ω(t), ∀ t ≥ 0, ω ∈ C
0
.
This chapter is devoted to some sharp properties of the Brownian motion,
in particular the Markov and strong Markov property and the reﬂexion prin
ciple. To this purpose we shall introduce some basic concepts as ﬁltration,
stopping time and transition semigroup.
4.1 Filtration
For any t > 0 we denote by C
t
the algebra of all cylindrical sets
C
t
1
,··· ,t
n
;A
= ¦ω ∈ C
0
: (ω(t
1
), ..., ω(t
n
)) ∈ A¦
= ¦ω ∈ C
0
: (W(t
1
), ..., W(t
n
)) ∈ A¦
where 0 ≤ t
1
< ... < t
n
, t
n
≤ t and A ∈ B(R
n
). Moreover, we denote by F
t
the σalgebra generated by C
t
. Obviously F
0
= ¦∅, Ω¦.
The family of σ–algebras (F
t
)
t≥0
is increasing; it is called the natural
ﬁltration of W. For any t > 0 we deﬁne
F
t
− = σ¦F
t−
: ∈ (0, t)¦
43
44 Chapter 4
where σ
_
∈(0,t)
F
t−
_
is the σalgebra generated by F
t−
for ∈ (0, t) and
F
t
+ : =
>0
F
t+
, t ≥ 0.
Proposition 4.1 For all t > 0 we have F
t
= F
t
−.
Due to Proposition 4.1 we say that the natural ﬁltration (F
t
)
t≥0
is left con
tinuous.
Proof. Let t > 0. It is clear that
F
t
⊃
_
∈(0,t)
F
t−
,
so that F
t
⊃ F
t
−. To prove the converse inclusion it is enough to show that
C
t
⊂ F
t
−.
Let in fact I = C
t
1
,··· ,t
n
;A
∈ C
t
so that t
n
≤ t. If t
n
< t then I belongs to F
t
−
whereas if t
n
= t we have
I = lim
k→∞
C
t
1
,··· ,t
t−
1
k
;A
∈ F
t
−,
so that I ∈ F
t
− as well.
Remark 4.2 The ﬁltration (F
t
)
t≥0
is not right continuous, that is F
t
+ ,= F
t
for all t ≥ 0. Let for instance t = 0 and consider the sets
A
n
= ¦ω ∈ Ω : [ω(1/n)[ ≤ 1/n¦, n ∈ N.
Then A
n
∈ F
1/n
and A =
n∈N
A
n
∈ F
0
+. Notice that
A = ¦ω ∈ Ω : [ω
(0)[ = 0¦,
so that F
0
+ ,= F
0
.
4.1.1 F
t
measurable random variables
We say that a real random variable X is F
t
measurable if
I ∈ B(R) ⇒ X
−1
(I) ∈ F
t
.
In this case we say also that X depends from the story of the Brownian
motion only up to t.
The following lemma will be frequently used.
Markov property 45
Lemma 4.3 Let s
2
> s
1
≥ t > 0, and let ϕ be a real random variable
F
t
–measurable. Then W(s
2
) −W(s
1
) and ϕ are independent.
Proof. It is enough to show that for any A ∈ F
t
, W(s
2
) −W(s
1
) and 1l
A
are
independent; in other words that F
t
coincides with the set D deﬁned below.
D = ¦A ∈ F
t
: 1l
A
is independent of W(s
2
) −W(s
1
)¦.
Since W is a process with independent increments, D contains the algebra
of all cylindrical set belonging to C
t
(which is a πsystem). Moreover, D
is a λsystem. In fact if A ∈ D it is obvious that A
c
∈ D. Moreover, if
(A
n
) is a sequence in D consisting of disjoint sets, one can show easily that
∞
n=1
A
n
∈ D. Now the claim follows from Dynkin’s theorem (Theorem A.1
in Appendix A).
Next result shows that F
0
+ contains only trivial sets.
Proposition 4.4 (onezero law) Assume that A ∈ F
0
+. Then either P(A) =
1 or P(A) = 0.
Proof. Let A ∈ F
0
+. Denote by G the σalgebra generated by all sets of
the form
D
t
1
,...,t
n
,h;I
= ¦ω ∈ Ω : (ω(t
1
+ h) −ω(h), ..., ω(t
n
+ h) −ω(h)) ∈ I¦,
where n ∈ N, 0 < t
1
< < t
n
, h > 0, I ∈ B(R
n
). It is clear that A is
independent of G, since it belongs to all F
t
, t > 0, and W has independent
increments. Then we have
P(A ∩ G) = P(A)P(G), ∀ G ∈ G. (4.1)
On the other hand, we claim that G = B(C
0
). To prove the claim it is
enough to show that any cylindrical set C
t
1
,...,t
n
,h;I
belongs to G; but this
follows from the identity
lim
j→∞
D
t
1
−
1
j
,...,t
n
−
1
j
,
1
j
;I
= lim
j→∞
¦ω ∈ Ω : (ω(t
1
) −ω(1/j), ..., ω(t
n
) −ω(1/j)) ∈ I¦ = C
t
1
,...,t
n
;I
.
Since G = B(C
0
) we can set in (4.1) G = A, so that P
2
(A) = P(A) which
yields P(A) equal to zero or one.
Remark 4.5 For any t ≥ 0 denote by F
t
the σalgebra generated by F
t
and all null sets of Ω (called the completion of F
t
). By using Proposition 4.4
one can easily show that (F
t
)
t≥0
is both right and left continuous.
46 Chapter 4
4.2 Stopping times
A nonnegative extended (that is with values in [0, +∞]) random variable τ in
(C
0
, B(C
0
), Q) is called a stopping time with respect to the ﬁltration (F
t
)
t≥0
if
¦τ ≤ t¦ ∈ F
t
for all t ≥ 0.
To any stopping time τ we associate the σalgebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ ≤ t¦ ∈ F
t
for all t ≥ 0¦.
Let us describe the σalgebra F
τ
, For 0 < t
1
< ... < t
n
and I∈B(R) we
deﬁne
C
(τ)
t
1
,...,t
n
;I
= ¦ω ∈ Ω : t
n
(ω) < τ, (ω(t
1
), ..., ω(t
n
)) ∈ I¦ = C
t
1
,...,t
n
;I
∩¦t
n
< τ¦.
We claim that C
(τ)
t
1
,...,t
n
;I
is F
τ
measurable.
In fact
C
(τ)
t
1
,...,t
n
;I
∩ ¦τ ≤ t¦ = C
t
1
,...,t
n
;I
∩ ¦t
n
< τ ≤ t¦
So, the σalgebra generated by all C
(τ)
t
1
,...,t
n
;I
in included in F
τ
and one can
show that it coincides with F
τ
.
If τ is stopping time, then ¦τ > t¦ and ¦τ = t¦ belong obviously to F
t
for all t ≥ 0.
Moreover, τ is F
τ
measurable. In fact, if A = ¦τ ≤ s¦ we have
A ∩ ¦τ ≤ t¦ = ¦τ ≤ t ∧ s¦ ∈ F
t∧s
⊂ F
t
.
In other words we have
F
τ
⊃ σ(τ),
where σ(τ) is the σalgebra generated by τ.
Remark 4.6 Let τ be an extended random variable such that
¦τ < t¦ ∈ F
t
, for all t ≥ 0.
Then τ is not in general a stopping time with respect to (F
t
)
t≥0
, but it is a
stopping time with respect to the ﬁltration (F
t
+)
t≥0
. In fact
¦τ ≤ t¦ =
∞
k=1
_
τ ≤ t +
1
k
_
∈ F
t
+.
Markov property 47
Exercise 4.7 Assume that the nonnegative random variable τ is discrete,
that is that τ(Ω) = (µ
k
)
k∈N
where µ
k
is an increasing sequence of positive
numbers. Show that τ is a stopping time if and only if ¦τ = µ
k
¦ ∈ F
µ
k
for
all k ∈ N. Show that in this case F
τ
is the σ–algebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ = µ
k
¦ ∈ F
µ
k
for all k ∈ N¦.
Proposition 4.8 Let τ be a stopping time. Then there exists a decreasing
sequence (τ
n
) of discrete stopping times convergent pointwise to τ such that
F
τ
n
⊃ F
τ
for all n ∈ N.
Proof. Deﬁne for any n ∈ N and ω ∈ Ω
τ
n
(ω) =
k
2
n
if
k −1
2
n
≤ τ(ω) <
k
2
n
, k ∈ N. (4.2)
It is clear that the sequence (τ
n
) is decreasing. Moreover, τ
n
is a stopping
time. In fact, if t =
k
2
n
with k ∈ N we have
¦τ
n
= t¦ =
_
k −1
2
n
≤ τ <
k
2
n
_
∈ F
t
. (4.3)
Finally, let A ∈ F
τ
, that is
A ∩ ¦τ ≤ t¦ ∈ F
t
, ∀ t ≥ 0.
Then we have
A ∩
_
τ
n
=
k
2
n
_
= A ∩
_
k −1
2
n
≤ τ <
k
2
n
_
∈ F k
2
n
, ∀ k ∈ N,
so that A ∈ F
τ
n
.
We want to extend several properties concerning time t to general stop
ping times τ. We start by showing that W
τ
is F
τ
measurable.
Proposition 4.9 Let τ be a stopping time and set
W
τ
(ω) = W(τ(ω), ω), ω ∈ Ω.
Then W
τ
is F
τ
measurable.
Proof. Assume ﬁrst τ discrete,
τ(Ω) = ¦t
k
¦, 0 < t
1
< < t
k
<
48 Chapter 4
and set A
k
= ¦τ = t
k
¦, k ∈ N. Then we have
W
τ
(ω) = W(t
k
)(ω), ∀ω ∈ A
k
, k ∈ N.
Let I ∈ B(R). Then
¦W
τ
∈ I¦ ∩ ¦τ ≤ t¦ =
∞
k=1
[¦W
τ
∈ I¦ ∩ ¦τ ≤ t¦ ∩ A
k
]
=
∞
k=1
[¦W
t
k
∈ I¦ ∩ ¦τ ≤ t¦ ∩ A
k
]
=
∞
{k∈N: t
k
≤t}
[¦W
t
k
∈ I¦ ∩ ¦τ ≤ t¦ ∩ A
k
] ∈ F
t
.
So, the conclusion holds in this case.
Let now τ be arbitrary, let τ
n
be deﬁned by (4.2) and set
W
τ
n
(ω) = W(τ
n
(ω), ω), ω ∈ Ω.
Since W is continuous we have
lim
n→∞
W
τ
n
(ω) = W
τ
(ω), ω ∈ Ω.
Fix t ≥ 0. By the previous argument we have
¦W
τ
n
∈ I¦ ∩ ¦τ
n
≤ t¦ ∈ F
t
for all I ∈ B(R). (4.4)
Now the conclusion follows letting n → ∞.
Example 4.10 Let a ∈ R and set
(1)
τ
a
= inf¦t ≥ 0 : W(t) = a¦.
Then
¦τ
a
> t¦ =
s∈[0,t]
¦W(s) < a¦ =
s∈[0,t]∩Q
¦W(s) < a¦ ∈ F
t
.
So, τ
a
is a stopping time with respect to the ﬁltration (F
t
)
t≥0
.
Let now
τ = inf¦t ≥ 0 : W(t) > a¦.
Then we have
¦τ ≥ t¦ =
s∈[0,t]
¦W(s) ≤ a¦ =
s∈[0,t]∩Q
¦W(s) ≤ a¦ ∈ F
t
.
Consequently, by Remark 4.6, τ is a stopping time with respect to ﬁltration
¦F
t
+¦
t≥0
.
(1)
We use the convention that the inﬁmum of the empty set is +∞.
Markov property 49
4.3 The Brownian motion W(t + τ) −W(τ)
We recall that W(t +h) −W(t), t ≥ 0, is a Brownian motion for any h > 0.
We want now to show that the same holds when h is replaced by a stopping
time.
Proposition 4.11 Let τ be a stopping time. Then
C(t) := W(t + τ) −W(τ), t ≥ 0,
is a Brownian motion.
Proof. Let us ﬁrst prove that the law of C(t) is N
t
. For this it is enough to
show that for any α ∈ R we have
E
_
e
iαC(t)
_
= E
_
e
iα(W(t+τ)−W(τ))
_
= e
−
1
2
α
2
t
, α ∈ R. (4.5)
Assume ﬁrst that τ is discrete, τ(Ω) = (t
k
) and set
A
i
= ¦τ = t
i
¦ ∈ F
t
i
, ∀ i ∈ N.
Then we have
E
_
e
iα(W(t+τ)−W(τ))
_
=
∞
i=1
_
A
i
e
iα(W(t+t
i
)−W(t
i
))
dP =
∞
i=1
E
_
1l
A
i
e
iα(W(t+t
i
)−W(t
i
))
_
.
Since 1l
A
i
and W(t + t
i
) −W(t
i
) are independent, it follows that
E
_
e
iα(W(t+τ)−W(τ))
_
=
∞
i=1
P(A
i
)E
_
e
iα(W(t+t
i
)−W(t
i
))
_
= e
−
1
2
α
2
t
and so (4.5) is proved.
Let now τ be general and let (τ
n
) be the sequence of ﬁnite stoppping
times deﬁned by (4.2). We have just proved that
E
_
e
iα(W(t+τ
n
)−W(τ
n
))
_
= e
−
1
2
α
2
t
, α ∈ R.
Now (4.5) follows letting n tend to inﬁnity. By (4.5) it follows that C(t) is a
Gaussian random variable N
t
. Proceeding similarly one can prove that the
law of C(t) − C(s) with t > s > 0 is N
t−s
and that C(t) has independent
increments. Continuity of C(t) is obvious.
50 Chapter 4
4.4 Transition semigroup
We shall denote by B
b
(R) the set of all real, bounded and Borel functions
and by C
b
(R) the subspace of B
b
(R) of those functions which are uniformly
continuous and bounded on R.
Given ϕ ∈ B
b
(R) we want to study the evolution in time of ϕ(W(t) +x).
To this purpose, we deﬁne the transition semigroup
P
t
ϕ(x) = E[ϕ(W(t) + x)], t ≥ 0, x ∈ R, ϕ ∈ B
b
(R), (4.6)
Since the law of W(t) + x is N
x,t
we have
P
t
ϕ(x) = E[ϕ(W(t) + x)]
=
1
√
2πt
_
+∞
−∞
e
−
1
2t
(x−y)
2
ϕ(y)dy
=
_
+∞
−∞
g
t
(x −y)ϕ(y)dy,
(4.7)
where
g
t
(ξ) =
1
√
2πt
e
−
ξ
2
2t
, t > 0, ξ ∈ R. (4.8)
We deduce, by an explicit computation, that P
t
, t ≥ 0, is a semigroup of
linear operators in B
b
(R), that is P
0
= I and
P
t+s
= P
t
P
s
, ∀ t, s ≥ 0.
Notice that P
t
coincides with the heat semigroup in R. In fact one checks
easily that if ϕ ∈ C
b
(R) then the function u : [0, +∞) R → R, u(t, x) =
P
t
ϕ(x) is continuous, inﬁnitely diﬀerentiable and fulﬁlls
_
¸
_
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), ∀ t > 0, x ∈ R,
u(0, x) = ϕ(x), ∀ x ∈ R.
Remark 4.12 One can show that u(t, x) = P
t
ϕ(x), t ≥ 0, x ∈ R, is the
unique solution of the Dirichlet problem above.
There is a simple deterministic proof based on maximum principle and a
stochastic proof, which we will present later, based on Itˆo’s formula.
Exercise 4.13 Prove that for t > s ≥ 0,
P
t−s
ϕ(x) = E[ϕ(W(t) −W(s) + x)], ϕ ∈ B
b
(H), x ∈ R. (4.9)
Markov property 51
4.5 Markov property
In this section we shall use several properties of conditional expectation, they
are recalled in Appendix A.
We are here concerned with the stochastic process
X(t) = X(t, x) = W(t) + x, t ≥ 0,
where x ∈ R.
Proposition 4.14 For any t > s > 0 and any ϕ ∈ B
b
(H) we have
E[ϕ(X(t))[F
s
] = (P
t−s
ϕ)(X(s)). (4.10)
Equivalently
_
A
ϕ(X(t))dP =
_
A
(P
t−s
ϕ)(X(s))dP, ∀ A ∈ F
s
. (4.11)
Moreover X() is a Markov process.
Proof. Set
X(t) = W(t) + x = (W(s) + x) + (W(t) −W(s)) =: U + V.
Notice that U is F
s
measurable and V is independent of F
s
. By Proposition
B.6 it follows that
E[ϕ(X(t))[F
s
] = E[ϕ(U + V )[F
s
] = h(U),
where (recall Exercise 4.13)
h(u) = E[ϕ(u + V )] = E[ϕ(u + W(t) −W(s))] = P
t−s
ϕ(u).
So, (4.10) is proved.
To prove the last statement notice that by Proposition B.3 we have
E[ϕ(X(t))[X(s)] = E[E[ϕ(X(t))[F
s
][X(s)]
= E[P
t−s
ϕ(X(s))[X(s)]
= P
t−s
ϕ(X(s)) = E[ϕ(X(t))[F
s
].
Exercise 4.15 Let s > 0, η a F
s
measurable random variable and ϕ ∈
B
b
(R). Show that
E[ϕ(W(t) + η[F
s
] = (P
t−s
ϕ(η)).
52 Chapter 4
4.5.1 Strong Markov property
We now consider conditional expectation with respect to F
τ
where τ is a
stopping time.
Proposition 4.16 Let τ be a stopping time and let t ≥ τ and ϕ ∈ B
b
(H).Then
we have
E[ϕ(X(t))[F
τ
] = (P
t−τ
ϕ)(X(τ)). (4.12)
Equivalently
_
A
ϕ(X(t))dP =
_
A
(P
t−τ
ϕ)(X(τ))dP, ∀ A ∈ F
τ
. (4.13)
Proof. We set x = 0 for simplicity, so that X(t) = W(t). Assume ﬁrst that
τ is of the form
τ(Ω) = (t
k
)
k∈N
.
Let A ∈ F
τ
. Then we have
_
A
(P
t−τ
ϕ)(W(τ))dP =
∞
i=1
_
A∩{τ=t
i
}
(P
t−τ
ϕ)(W(τ))dP
=
∞
i=1
_
A∩{τ=t
i
}
(P
t−t
i
ϕ)(W(t
i
))dP.
Therefore, by (4.10) and taking into account that by the deﬁnition of F
τ
we
have
A ∩ ¦τ = t
i
¦ ∈ F
t
i
, i = 1, ..., n,
we can write,
_
A
(P
t−τ
ϕ)(W(τ))dP =
∞
i=1
_
A∩{τ=t
i
}
(P
t−t
i
ϕ)(W(t
i
))dP
=
∞
i=1
_
A∩{τ=t
i
}
E[ϕ(W(t))[F
t
i
]dP
=
∞
i=1
_
A∩{τ=t
i
}
ϕ(W(t))dP =
_
A
ϕ(W(t))dP.
Therefore, (4.13) is proved.
Markov property 53
Let now τ be an arbitrary stopping time and let (τ
n
) be deﬁned by (4.2).
Recall that (Proposition 4.8)
F
τ
⊂ F
τ
n
for all n ∈ N.
Let A ∈ F
τ
. Then by (4.13) it follows that
_
A
ϕ(W(t))dP =
_
A
(P
t−τ
n
ϕ)(W(τ
n
))dP for all A ∈ F
τ
.
Now the conclusion follows letting n → ∞.
Property (4.12) is called the strong Markov property of W.
4.6 Some consequences of the strong Markov
property
In this section we want to determine the laws of the following important
random variables.
• T
b
= inf¦t ≥ 0 : B(t) = b¦, b ∈ R.
• M(t) = max
s∈[0,t]
B(s), t ≥ 0.
• m(t) = min
s∈[0,t]
B(s), t ≥ 0.
Notice that
¦T
a
≤ t¦ = ¦M(t) ≥ a¦, t ≥ 0, a ≥ 0 (4.14)
and
¦T
a
≤ t¦ = ¦m(t) ≤ a¦, t ≥ 0, a ≤ 0. (4.15)
To ﬁnd the laws of T
a
with a ≥ 0 and M(t) the following lemma is useful.
Lemma 4.17 Let a ≥ 0 and t ≥ 0. Then we have
P(B(t) ≤ a, M(t) ≥ a) = P(B(t) ≥ a). (4.16)
Proof. We have, taking into account that
¦T
a
≤ t¦ = ¦M(t) ≥ a¦
54 Chapter 4
P(W(t) ≤ a, M(t) ≥ a) = P(W(t) ≤ a, T
a
≤ t)
=
_
{T
a
≤t}
1l
(−∞,a]
(W(t))dP
=
_
{T
a
≤t}
E[1l
(−∞,a]
(W(t))[F
T
a
]dP,
since ¦T
a
≤ t¦ ∈ F
T
a
. By the strong Markov property it follows that
P(W(t) ≤ a, M(t) ≥ a) =
_
{T
a
≤t}
E[1l
(−∞,a]
(W(t))[F
T
a
]dP
=
_
{T
a
≤t}
E[P
t−T
a
1l
(−∞,a]
(W(T
a
))]dP
=
_
{T
a
≤t}
E[P
t−T
a
1l
(−∞,a]
(a)]dP.
On the other hand, we have, as easily checked,
P
s
1l
(−∞,a]
(a) = P
s
1l
[a,+∞)
(a), ∀ s > 0, a > 0.
Therefore
P(W(t) ≤ a, M(t) ≥ a) =
_
{T
a
≤t}
E[P
t−T
a
1l
(−∞,a]
(a)]dP
=
_
{T
a
≤t}
E[P
t−T
a
1l
[a,+∞)
(a)]dP
=
_
{T
a
≤t}
E[1l
[a,+∞)
(W(t))[F
T
a
]dP
= P(W(t) ≥ a, M(t) ≥ a)
= P(W(t) ≥ a).
Proposition 4.18 (Reﬂection principle) For all a ≥ 0 we have
P(M(t) ≥ a) = 2P(W(t) ≥ a), (4.17)
Proof. Write
P(M(t) ≥ a) = P(M(t) ≥ a, W(t) ≤ a) +P(M(t) ≥ a, W(t) ≥ a).
Markov property 55
Now, by Lemma 4.17 we have P(M(t) ≥ a, W(t) ≤ a) = P(W(t) ≥ a).
Moreover, it is clear that P(M(t) ≥ a, W(t) ≥ a) = P(W(t) ≥ a) so, the
conclusion follows.
By Proposition 4.18 we can easily deduce the expressions of the laws of
M(t) and T
a
for all a ∈ R.
Corollary 4.19 (Law of M(t)) For all t ≥ 0 we have
(M(t)
#
P)(dξ) =
2
√
2πt
e
−
ξ
2
2t
1l
[0,+∞)
(ξ)dξ. (4.18)
Proof. We have in fact by Proposition 4.18 for any a ≥ 0
P(M(t) ≥ a) = 2P(W(t)[ ≥ a) =
2
√
2πt
_
+∞
a
e
−
ξ
2
2t
dξ
= P([W(t)[ ≥ a).
Remark 4.20 From Corollary 4.19 it follows that at ﬁxed time t the law
of M(t) coincides with that of [W(t)[, though random variables M(t) and
[W(t)[ are diﬀerent; in particular M(t) is increasing whereas [W(t)[ is not.
Obviously the laws of M() and [W()[ on C
0
([0, +∞)) are diﬀerent.
Corollary 4.21 (Law of T
a
) Let a ≥ 0 and t ≥ 0. Then we have
((T
a
)
#
P)(dt) =
a
√
2πt
3
e
−
a
2
2t
dt. (4.19)
Proof. By (4.14) and Proposition 4.18 we have
P(T
a
≤ t) = P(M(t) ≥ a) =
2
√
2πt
_
+∞
a
e
−
ξ
2
2t
dξ
=
2
√
2π
_
+∞
at
−1/2
e
−
η
2
2
dξ.
Therefore
d
dt
P(T
a
≤ t) =
a
√
2πt
3
e
−
a
2
2t
dt,
which implies the conclusion.
The following results can be proved similarly.
56 Chapter 4
Lemma 4.22 Let a ≤ 0 and t ≥ 0. Then we have
P(W(t) ≥ a, m(t) ≤ a) = P(W(t) ≤ a). (4.20)
Proposition 4.23 (Reﬂection principle) For all a ≤ 0 we have
P(m(t) ≤ a) = 2P(W(t) ≤ a). (4.21)
Corollary 4.24 (Law of m(t)) For all t ≥ 0 we have
(m(t)
#
P)(dξ) = −
2
√
2πt
e
−
ξ
2
2t
1
(−∞,a]
(ξ)dξ. (4.22)
Corollary 4.25 (Law of T
a
) Let a ∈ R and t ≥ 0. Then we have
((T
a
)
#
P)(dt) =
[a[
√
2πt
3
e
−
a
2
2t
dt. (4.23)
4.7 Application to partial diﬀerential equa
tions
For any x ≥ 0 we set in this section
τ
x
= inf¦t ≥ 0 : W(t) + x = 0¦ = T
−x
.
Moreover we consider the following processes which take values in [0, +∞).
(i) Y (t) = W(t) + x, ∀ t ∈ [0, τ
x
].
Y (t) is called the Brownian motion killed in 0.
(ii) U(t) = [W(t) + x[, x ≥ 0, t ≥ 0.
U(t) is called the Brownian motion reﬂected in 0
(iii) V (t) = W(t ∧ τ
x
) + x, t ≥ 0. V (t) is called the Brownian motion
absorbed in 0
Markov property 57
4.7.1 The Dirichlet problem in the halfline
We are here concerned with the process Y (t) = W(t) + x, ∀ t ∈ [0, τ
x
].
Deﬁne for any ϕ ∈ B
b
([0, +∞))
U
t
ϕ(x) := u(t, x) := E[ϕ(W(t) + x)1l
t≤τ
x
], t ≥ 0, x ∈ H. (4.24)
We are going to show that u(t, x) is the solution of the Dirichlet problem in
[0, +∞),
_
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), x > 0, t > 0
u(t, 0) = 0, t > 0,
u(0, x) = ϕ(x), x ≥ 0.
(4.25)
Proposition 4.26 We have
u(t, x) =
_
+∞
0
[g
t
(x −y) −g
t
(x + y)]ϕ(y)dy, x ≥ 0, t ≥ 0, (4.26)
where g is deﬁned by (4.8).
Proof. We have
u(t, x) = E[ϕ(W(t) + x)1l
t≤τ
x
]
= P
t
ϕ(x) −E[ϕ(W(t) + x)1l
t>τ
x
],
where ϕ is extended to R by setting
ϕ(−x) = ϕ(x), x ≥ 0.
Write
E[ϕ(W(t) + x)1l
t>τ
x
] = E[E[1l
t>τ
x
ϕ(W(t) + x)[F
τ
x
]]
= E[1l
t>τ
x
E[ϕ(W(t) + x)[F
τ
x
]]
Now, using the strong Markov property we ﬁnd that,
E[ϕ(W(t) + x)1l
t>τ
x
] = E[1l
t>τ
x
(P
t−τ
x
ϕ)(0)] =: E[ψ(τ
x
)],
where
ψ(λ) = 1l
t>λ
1
_
2π(t −λ)
_
R
e
−
ξ
2
2(t−λ)
ϕ(ξ)dξ, λ > 0.
58 Chapter 4
Next, recalling the law of τ
x
(see (4.23)) it follows that
E[ϕ(W(t) + x)1l
t>τ
x
] =
_
t
0
__
R
g
t−s
(y)ϕ(y)dy
_
x
√
2πs
3
e
−
x
2
2s
ds
=
∂
∂x
_
t
0
__
R
g
t−s
(y)ϕ(y)dy
_
g
s
(x)ds
=
_
R
g
t
(x −y)ϕ(y)dy +
∂
∂x
_
R
G
x,y
ϕ(y)dy,
where
(2)
G
x,y
=
_
t
0
g
t−s
(y)g
s
(x)ds =
1
2
Erfc
_
[x[ +[y[
√
2t
_
.
Since, for x > 0,
∂
∂x
G
x,y
= −
1
√
2πt
e
−
(x+y)
2
2t
= −g
t
(x +[y[)
we get
u(t, x) =
_
R
g
t
(x −y)ϕ(y)dy −
_
R
g
t
(x +[y[)ϕ(y)dy,
and the conclusion follows.
It is easy to check, by a direct computation, that if ϕ ∈ C
b
([0, +∞)),
U
t
ϕ(x) = u(t, x) is the solution of the Dirichlet problem (4.25). Moreover
U
0
= I and U
t+s
= U(t)U(s) for all t, s ≥ 0.
4.7.2 The Neumann problem
We consider the process
U(t) = [W(t) + x[, x ≥ 0, t ≥ 0.
For any ϕ ∈ B
b
([0, +∞)) we set
Q
t
ϕ(x) = E[ϕ([W(t) + x[)] = (2πt)
−1/2
_
R
e
−
x−y
2
2t
ϕ([y[)dy.
Replacing in the last integral y with −y, we see that
Q
t
ϕ(x) =
_
+∞
0
[g
t
(x −y) + g
t
(x + y)]ϕ(y),
(2)
We recall that Erfc (a) =
2
√
π
_
+∞
a
e
−r
2
dr.
Markov property 59
where g
t
is deﬁned by (4.8).
Now it is easy to check that if ϕ ∈ C
b
([0, +∞)) then u(t, x) = Q
t
ϕ(x) is
continuous in [0, ∞) [0, ∞), inﬁnitely diﬀerentiable in (0, ∞) [0, ∞) and
solves the following Neumann problem
_
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), x ≥ 0, t > 0,
u
x
(t, 0) = 0, t > 0,
u(0, x) = ϕ(x), x ≥ 0.
Moreover Q
0
= I and Q
t+s
= Q(t)Q(s) for all t, s ≥ 0.
4.7.3 The Ventzell problem
Let us consider the stochastic process,
V (t) = W(t ∧ τ
x
) + x, t ≥ 0,
where x ≥ 0.
Set
Z
t
ϕ(x) = E[ϕ(W(t ∧ τ
x
) + x)], ϕ ∈ B
b
([0, +∞)), x ≥ 0.
So,
Z
t
ϕ(x) =
_
Ω
ϕ(B(t ∧ τ
x
) + x)dP
=
_
{t<τ
x
}
ϕ(W(t) + x)dP +
_
{t≥τ
x
}
ϕ(0)dP,
since W(τ
x
) + x = 0. Therefore
Z
t
ϕ(x) = U
t
ϕ(x) + ϕ(0) P(T
−x
≤ t),
where U
t
is deﬁned by (4.24). So
Z
t
ϕ(x) =
_
+∞
0
[g
t
(x −y) −g
t
(x + y)]ϕ(y)dy +
ϕ(0)
√
2πt
_
x
−∞
e
−
y
2
2t
dy.
If ϕ ∈ C
b
([0, +∞)), setting u(t, x) = Z
t
ϕ(x) we see that u is the solution to
the Ventzell problem,
_
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), x ≥ 0, t ≥ 0
u
xx
(t, 0) = 0, t ≥ 0,
u(0, x) = ϕ(x), x ≥ 0.
60 Chapter 4
Moreover Z
0
= I and Z
t+s
= Z(t)Z(s) for all t, s ≥ 0.
Chapter 5
The Itˆ o integral
In all this chapter B represents a Brownian motion in a probability space
(Ω, F, P).
Similarly as in Chapter 4, for any t > 0 we denote by C
t
the algebra of
all cylindrical sets
C
t
1
,··· ,t
n
;A
= ¦ω ∈ C
0
: (B(t
1
), ..., B(t
n
)) ∈ A¦
where 0 ≤ t
1
< ... < t
n
, t
n
≤ t and A ∈ B(R
n
).
Moreover, we denote by F
t
the σalgebra generated by C
t
and all Pnull
sets of Ω. We call F
t
, t ≥ 0 the natural ﬁltration of B augmented with the
null sets of P.
The family of σ–algebras (F
t
)
t≥0
is increasing; it is called the natural
ﬁltration of B.
We denote by (F
t
)
t≥0
the completion of the natural ﬁltration of B with
all Pnull sets of Ω.
We say that a stochastic process F(t), t ∈ [0, T], is adapted to the Brow
nian motion B if F(t) is F
t
measurable for any t ∈ [0, T].
5.1 Deﬁnition of Itˆo’s integral
5.1.1 Itˆ o’s integral for elementary processes
Deﬁnition 5.1 Let T > 0. An elementary process F(t), t ∈ [0, T], in
(Ω, F, P) is a stochastic process of the form
F =
n
i=1
F
i−1
1l
[t
i−1
,t
i
)
, (5.1)
61
62 The Itˆo integral
where n ∈ N, 0 = t
0
< t
1
< < t
n
= T and F
i
is F
t
i
measurable for any
i = 0, 1, ..., n −1.
For any elementary process F(t), t ∈ [0, T], we deﬁne the Itˆo integral
setting
I(F): =
_
T
0
F(s)dB(s) =
n
i=1
F
i−1
(B(t
i
) −B(t
i−1
)). (5.2)
Obviously any elementary process is adapted. This property is needed to
prove some basic identities (similar to those obtained for the Wiener integral)
which allow to extend the integral to more general processes.
Proposition 5.2 Assume that F ∈ E
2
B
(0, T). Then I(F) ∈ L
2
(Ω, F, P) and
we have
E
__
T
0
F(s)dB(s)
_
= 0 (5.3)
E
_
__
T
0
F(s)dB(s)
_
2
_
=
_
T
0
E([F(s)[
2
)ds. (5.4)
Proof. Let us prove (5.3). We have
E[I(F)] =
n
j=1
E[F
j−1
(B(t
j
) −B(t
j−1
))].
Since F
j−1
is F
j−1
measurable, it is independent of B(t
j
)−B(t
j−1
), by Lemma
4.3. Therefore we have
E[I(F)] =
n
j=1
E[F
j−1
]E[B(t
j
) −B(t
j−1
)] = 0
and (5.3) is proved.
Let us prove (5.4). We have
E[[I(F)[
2
] = E
_
n
j=1
[F
j−1
[
2
[B(t
j
) −B(t
j−1
)]
2
_
+2E
_
j<k
F
j−1
F
k−1
[B(t
j
) −B(t
j−1
)] [B(t
k
) −B(t
k−1
)]
_
.
Notice now that for j < k the random variable
F
j−1
F
k−1
[B(t
j
) −B(t
j−1
)],
Chapter 5 63
is F
k−1
–measurable and consequently is independent of B(t
k
) − B(t
k−1
).
Therefore, taking the expectation, we have
E[F
j−1
F
k−1
[B(t
j
) −B(t
j−1
)][B(t
k
) −B(t
k−1
)]]
= E[F
j−1
F
j−1
[B(t
j
) −B(t
j−1
)]] E[B(t
k
) −B(t
k−1
)] = 0.
It follows that
E[[I(F)[
2
] =
n
j=1
E[[F
j−1
[
2
](t
j
−t
j−1
),
as required.
Exercise 5.3 Let F, G ∈ E
2
B
(0, T). Prove that
E
__
T
0
F(s)dB(s)
_
T
0
G(s)dB(s)
_
=
_
T
0
E[F(s)G(s)]ds.
Hint: Use the identity
ab =
1
2
(a + b)
2
−
1
2
a
2
−
1
2
b
2
, a, b ∈ R.
5.1.2 General deﬁnition of Itˆ o’s integral
Let us denote by
Z
T
:= L
2
([0, T] Ω, B(0, T) F, dt P)
the Hilbert space of all (equivalence classes of) functions
F : [0, T] Ω, (t, ω) → F(t, ω),
which are measurable with respect to the product σalgebra, B(0, T) F
and such that
F
Z
T
:= E
_
T
0
[F(t, )[
2
dt < ∞.
The scalar product on Z is deﬁned by
¸F, F
1
) = E
_
T
0
F(t, )F
1
(t, )dt.
Obviously any elementary process F belongs to Z.
64 The Itˆo integral
In view of (5.4), the mapping
E
2
B
(0, T) ⊂ Z
T
→ L
2
(Ω, F
T
, P)F →
_
T
0
F(s)dB(s),
is an isometry. Therefore it can be uniquely extended to the closure E
2
B
(0, T)
of E
2
B
(0, T) in Z
T
.
Processes belonging to E
2
B
(0, T) are called predictable.
So, the Itˆ o integral can be uniquely deﬁned by extension for any pre
dictable square integrable process F(t), t ≥ 0 and the following properties
are fulﬁlled.
E
__
T
0
F(s)dB(s)
_
= 0 (5.5)
E
_
__
T
0
F(s)dB(s)
_
2
_
=
_
T
0
E([F(s)[
2
)ds. (5.6)
Moreover, from Exercise 5.3 it follows that if F and G are predictable square
integrable processes we have
E
__
T
0
F(s)G(s)dB(s)
_
=
_
T
0
E[F(s)G(s)]ds. (5.7)
We can deﬁne in an obvious way the Itˆo integral
_
b
a
F(s)dB(s) in any
interval [a, b] ⊂ [0, T]. We have
E
__
b
a
F(s)dB(s)
_
= 0,
and
E
_
__
b
a
F(s)dB(s)
_
2
_
=
_
b
a
(E[F(s)[
2
)ds.
Moreover, for any a, b, c ∈ [0, T] we have
_
c
a
F(s)dB(s) =
_
b
a
F(s)dB(s) +
_
c
b
F(s)dB(s).
Let us now present a characterization of predictable processes (that is of
space E
2
B
(0, T)). Note ﬁrst that an elementary process is a linear combination
of processes of the form
F1l
[a,b)
, with F F
a
measurable.
Chapter 5 65
In turn each F can be approximated by linear combinations of characteristic
functions of F
a
measurable sets. So, it is natural to approximate a general
predictable process by linear combinations of functions of the form
1l
A×[a,b)
, with A F
a
measurable.
We call A [a, b) a predictable rectangle. We denote by R the family of all
predictable rectangles and by P the σalgebra generated by R. P is called
the σalgebra of all predictable events.
Deﬁnition 5.4 A real predictable process in [0, T] is a real random variable
in the probability space
([0, T] Ω, P, dt P).
Proposition 5.5 The closure E
2
B
([0, T]) is precisely L
2
([0, T]Ω, P, dtP).
Proof. Denote by Λ
T
the closure of E
2
B
([0, T]) in L
2
([0, T] Ω, P, dt P).
Since any element of L
2
([0, T] Ω, P, dt P) can be approximated by a
monotonic sequence of simple functions, it is enough to show that 1l
A
∈ Λ
T
for any A ∈ P. For this we shall use the Dynkin Theorem, see Appendix A.
We ﬁrst note that R is a πsystem. Then we set
D = ¦A ∈ P : 1l
A
∈ Λ
T
¦.
We claim that D is a λsystem, i.e. that it fulﬁlls (A.1). Properties (B.1)
(i)(ii) are clear, let us show (A.1)(iii). Let (A
n
) ⊂ D be mutually disjoint
sets and set
φ
n
=
n
k=1
1l
A
k
.
Then, by the monotone convergence theorem, φ
n
→ φ = 1l
A
in L
2
([0, T]
Ω, P, dt P) where A =
∞
k=1
A
k
. So, A ∈ D and (A.1)(iii) is fulﬁlled. Now
the conclusion follows by Theorem A.1.
Exercise 5.6 Let F ∈ L
2
([0, T] Ω, P, dt P), [s, t] ⊂ [0, T] and let ϕ ∈
L
∞
(Ω, F
s
, P). Prove that
ϕ
_
t
s
F(r)dB(r) =
_
t
s
ϕ F(r)dB(r). (5.8)
Exercise 5.7 Let F ∈ L
2
([0, T] Ω, P, dt P) such that
_
T
0
F(s)dB(s) = 0.
Show that F = 0.
66 The Itˆo integral
5.2 Itˆ o integral for mean square continuous
processes
We shall denote by C
B
([0, T]; L
2
(Ω)) the space of all stochastic processes
which are mean square continuous and adapted. We recall that if F ∈
C
B
([0, T]; L
2
(Ω)) then F(t) is F
t
measurable for all t ∈ [0, T] and the map
ping
[0, T] → L
2
(Ω, F, P), t → F(t),
is continuous.
For any decomposition σ = ¦t
0
, t
1
, , t
n
¦ ∈ Σ(0, T) consider the ele
mentary process
F
σ
:=
n
j=1
F(t
j−1
)1l
[t
j−1
,t
j
)
and set
I
σ
(F) :=
_
T
0
F
σ
(s)dB(s) =
n
j=1
F(t
j−1
)(B(t
j
) −B(t
j−1
)).
Clearly F
σ
∈ E
2
B
(0, T) and, using the continuity of F one can check easily
that
lim
σ→0
F
σ
= F, in L
2
([0, T] Ω, P, dt P). (5.9)
Consequently we have
lim
σ→0
I
σ
(F) =
_
T
0
F(s)dB(s) in L
2
(Ω, F, P). (5.10)
Example 5.8 Let us prove that
_
T
0
B(t)dB(t) =
1
2
(B
2
(T) −T). (5.11)
Let σ = ¦t
0
, t
1
, ..., t
n
¦ ∈ Σ(0, T). Write
B(t
k−1
)(B(t
k
) −B(t
k−1
)) = B(t
k−1
)B(t
k
) −B
2
(t
k−1
))
= −
1
2
B
2
(t
k
) + B(t
k−1
)B(t
k
) −
1
2
B
2
(t
k−1
) +
1
2
B
2
(t
k
) −
1
2
B
2
(t
k−1
)
=
1
2
B
2
(t
k
) −
1
2
B
2
(t
k−1
) −
1
2
(B(t
k
) −B(t
k−1
))
2
.
Chapter 5 67
Then we have
I
σ
(B) =
1
2
B
2
(T) −
1
2
n
k=1
(B(t
k
) −B(t
k−1
))
2
.
Recalling that the quadratic variation of B is T (Theorem 3.19), we deduce
that
_
T
0
B(t)dB(t) = lim
σ→0
I
σ
(B) =
1
2
(B
2
(T) −T).
Exercise 5.9 Prove that
lim
σ→0
n
k=1
B(t
k
)(B(t
k
) −B(t
k−1
)) =
1
2
(B
2
(T) + T), in L
2
(Ω, F, P),
and
lim
σ→0
n
k=1
B
_
t
k
+ t
k−1
2
_
(B(t
k
) −B(t
k−1
)) =
1
2
B
2
(T), in L
2
(Ω, F, P).
Therefore the deﬁnition of the Itˆo integral depends on the particular form of
the integral sums.
5.3 The Itˆ o integral as a stochastic process
Let F ∈ L
2
([0, T] Ω, P, dt P and set
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
We ﬁrst notice that X(t), t ≥ 0, is not a process with independent increments
in general (unless f is deterministic); take for instance
X(t) =
_
t
0
B(s)dB(s) =
1
2
(B
2
(t) −t), t ≥ 0.
However, X(t), t ≥ 0, has orthogonal increments (in the sense of L
2
(Ω, F, P))
as the following result shows.
Proposition 5.10 Let 0 ≤ t
1
≤ t
2
≤ t
3
≤ t
4
≤ T. Then we have
E[(X(t
2
) −X(t
1
))(X(t
4
) −X(t
3
))] = 0
68 The Itˆo integral
Proof. We have in fact, taking into account (5.7)
E[(X(t
2
) −X(t
1
))(X(t
4
) −X(t
3
))]
= E
__
t
2
t
1
F(s)dB(s)
_
t
4
t
3
F(s)dB(s)
_
= E
__
T
0
1l
[t
1
,t
2
]
F(s)dB(s)
_
T
0
1l
[t
3
,t
4
]
F(s)dB(s)
_
=
_
T
0
1l
[t
1
,t
2
]
1l
[t
3
,t
4
]
E(F
2
(s))ds = 0.
We are going to show that X(t), t ≥ 0, is mean square continuous, then
that it is a continuous process.
Proposition 5.11 Let F ∈ L
2
([0, T]Ω, P, dtP). Then X ∈ C
B
([0, T]; L
2
(Ω)).
Proof. We know that for any t ∈ [0, T], X(t) ∈ L
2
(Ω, F
t
, P). Moreover, for
any t, t
0
∈ [0, T] we have
E([X(t) −X(t
0
)[
2
) =
¸
¸
¸
¸
_
t
t
0
E([F(r)[
2
)dr
¸
¸
¸
¸
,
so that
lim
t→t
0
E([X(t) −X(t
0
)[
2
) = 0.
The conclusion follows.
We show now that X(t), t ≥ 0, is a continuous process. For this we ﬁrst
prove that it is a martingale with respect to the ﬁltration (F
t
) (see Appendix
C).
Proposition 5.12 X(t), t ∈ [0, T], is a F
t
–martingale
Proof. Let t > s. Since
X(t) −X(s) =
_
t
s
F(r)dB(r),
we have
E[X(t)[F
s
] = X(s) +E
__
t
s
F(r)dB(r)[F
s
_
.
Chapter 5 69
So, it remains to prove that
E
__
t
s
F(r)dB(r)[F
s
_
= 0. (5.12)
Notice that this is not obvious since
_
t
s
F(r)dB(r) is not independent of F
s
in general
(1)
. It is enough to prove (5.12) when F is an elementary process,
F =
n
i=1
F
i−1
1l
[t
i−1
,t
i
)
,
where s = t
1
, , t
n
= t and F
i−1
∈ L
2
(Ω, F, P). In this case, taking into
account that F
s
⊂ F
i−1
, we write
E
__
t
s
F(r)dB(r)[F
s
_
=
n
i=1
E[F
i−1
(B(t
i
) −B(t
i−1
))[F
s
]
=
n
i=1
E¦E[F
i−1
(B(t
i
) −B(t
i−1
))[F
i−1
][F
s
¦ = 0,
since F
i−1
is F
i−1
–measurable and B(t
i
) − B(t
i−1
) is independent of F
i−1
.
So, (5.12) is proved and the conclusion follows.
We are now ready to prove the continuity of X.
Theorem 5.13 Let F ∈ L
2
([0, T] Ω, P, dt P) and let
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
Then X has a continuous version and
E
_
sup
t∈[0,T]
[X(t)[
2
_
≤ 4
_
T
0
E[F(s)[
2
ds. (5.13)
Proof. Let (F
n
) ⊂ E
2
B
(0, T) such that
F
n
→ F in L
2
([0, T] Ω, P, dt P)
and set
X
n
(t) =
_
t
0
F
n
(s)dB(s), n ∈ N, t ∈ [0, T].
(1)
because F(r) contains in general the “story” of the Brownian motion from 0 to r.
70 The Itˆo integral
Since B(t) is continuous it is clear that X
n
(t) is continuous for all n ∈
N. Taking into account Proposition 5.12 we see that X(t), t ∈ [0, T], is
a continuous F
t
–martingale. Then by Corollary C.6 it follows that for any
n, m ∈ N
E
_
sup
t∈[0,T]
[X
n
(t) −X
m
(t)[
2
_
≤ 4E([X
n
(T) −X
m
(T)[
2
)
= 4E
__
T
0
[F
n
(s) −F
m
(s)[
2
ds
_
.
Consequently (X
n
)(ω) is Cauchy in C([0, T]) for almost all ω and its limit,
which coincides with X(ω) is continuous.
5.4 Itˆ o integral with stopping times
5.4.1 Stopping times
We proceed here as in Section 4.2.
A nonnegative extended random variable τ in (Ω, F, P) is called a stopping
time with respect to the ﬁltration (F
t
)
t≥0
if
¦τ ≤ t¦ ∈ F
t
for all t ≥ 0.
To any stopping time τ we associate the σalgebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ ≤ t¦ ∈ F
t
for all t ≥ 0¦.
The proofs of the two following propositions are completely similar to that
of Proposition 4.8 and 4.8. So, they will be omitted.
Proposition 5.14 Let τ be a stopping time. Then there exists a decreasing
sequence (τ
n
) of discrete stopping times convergent pointwise to τ such that
F
τ
n
⊃ F
τ
for all n ∈ N.
Proposition 5.15 Let τ be a stopping time and set
W(τ)(ω) = W(τ(ω))(ω), ω ∈ Ω.
Then W(τ) is F
τ
measurable and W(t + τ) − W(τ), t ≥ 0 is a Brownian
motion in (Ω, F, P).
Chapter 5 71
5.4.2 Itˆ o’s integral with stopping times
Let F ∈ L
2
([0, T] Ω, P, λ P) and set
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
Let moreover τ ≤ T be a stopping time. Deﬁne
_
τ
0
F(s)dB(s): = X(τ),
where
X(τ, ω) = X(τ(ω), ω), ω ∈ Ω.
Arguing as in Proposition 5.15 and using the fact that X(t), t ∈ [0, T], has
a continuous version, one can see that X(τ) is F
τ
–measurable.
The following result reduces a Itˆ o’s integral with a stopping time to a
usual one between 0 to T.
Proposition 5.16 Let F ∈ L
2
([0, T] Ω, P, dt P) and let τ ≤ T be a
stopping time. Then we have
_
τ
0
F(s)dB(s) =
_
T
0
1l
{s<τ}
F(s)dB(s). (5.14)
Proof. It is enough to prove the result when τ is of the form,
τ(Ω) = (t
1
, t
2
, ..., t
n
),
with 0 < t
1
< t
2
< < t
n
≤ T.
Set
A
i
:= ¦τ = t
i
¦, i = 1, ..., n.
T
¯
hen A
i
∈ F
t
i
, i = 1, ..., n.
Consider now the stochastic process
h(s) = 1l
{s≤τ}
, s ∈ [0, T].
We have
h(s) = 1, s ∈ [0, t
1
).
If s ∈ [t
1
, t
2
) we have
h(s)(ω) = 1 if ω ∈ A
2
∪ ∪ A
n
,
72 The Itˆo integral
so that
h(s) = 1l
A
2
∪···∪A
n
= 1l
A
c
1
.
Similarly, if s ∈ [t
k−1
, t
k
) with k ≤ n we have
h(s) = 1l
(A
k
∪...∪A
n
)
c.
Then h is predictable and
_
T
0
1l
{t<τ}
F(s)dB(s) =
_
t
1
0
F(s)dB(s) + 1l
(A
1
)
c
_
t
2
t
1
F(s)dB(s)
+ + 1l
(A
1
∪A
2
∪···∪A
n−1
)
c
_
t
n
t
n−1
F(s)dB(s)
= X(t
1
) + 1l
(A
1
)
c(X(t
2
) −X(t
1
))
+ + 1l
(A
1
∪A
2
∪···∪A
n−1
)
c(X(t
n
) −X(t
n−1
) = X(τ).
5.5 Multidimensional Itˆ o integrals
Let m ∈ N be ﬁxed and consider a standard mdimensional Brownian motion
B(t) = (B
1
(t), ..., B
m
(t)), t ≥ 0
in the probability space (Ω, F, P). Let (F
t
)
t∈[0,T]
be the natural ﬁltration of
B (augmented with all Pnull sets of Ω) .
We shall deﬁne the Itˆ o integral for predictable processes with values
in L(R
m
, R
d
) (that is such that any matrix element belongs to L
2
([0, T]
Ω, P, dtP)). We shall denote this space by L
2
([0, T]Ω, P, dtP; L(R
m
, R
d
))).
First we need a lemma whose simple proof is left to the reader.
Lemma 5.17 Let f, g ∈ L
2
([0, T] Ω, P, dt P). Then we have
E
__
T
0
f(s)dB
i
(s)
_
T
0
g(s)dB
j
(s)
_
= δ
i,j
_
T
0
E[f(s)g(s)]ds, i, j = 1, ..., m.
(5.15)
Let now F ∈ L
2
([0, T] Ω, P, dt P; L(R
m
, R
d
)). We deﬁne the Itˆo
integral of F as the ddimensional process
__
T
0
F(t)dB(t)
_
i
=
m
j=1
_
T
0
F
i,j
(t)dB
j
(t), i = 1, ..., d.
Chapter 5 73
Proposition 5.18 Let F ∈ L
2
([0, T] Ω, P, dt P; L(R
m
, R
d
)). Then we
have
E
¸
¸
¸
¸
_
T
0
F(t)dB(t)
¸
¸
¸
¸
2
=
_
T
0
E[Tr (F(t)F
∗
(t))]dt, (5.16)
where Tr denotes the trace.
Proof. Set I(F) =
_
T
0
F(t)dB(t). Then we have
(I(F))
i
=
m
j=1
_
T
0
F
i,j
(t)dB
j
(t), i = 1, ..., d.
It follows that
E[I(F)[
2
=
d
i=1
E
_
m
j=1
_
T
0
F
i,j
(t)dB
j
(t)
_
2
and, taking into account (5.15),
E[I(F)[
2
=
d
i=1
m
j=1
_
T
0
E[F
i,j
(t)
2
]dt,
which yields (5.16).
Remark 5.19 Assume that d = 1 so that L(R
d
; R
m
) is isomorphic to R
m
and F becomes a vector F = (F
1
, , F
m
).
In this case we shall write the Itˆo integral of F as
_
T
0
¸F(s), dB(s))
and formula (5.16) reduces to
E
¸
¸
¸
¸
_
T
0
¸F(t), dB(t))
¸
¸
¸
¸
2
=
_
T
0
E[F(t)[
2
dt. (5.17)
74 The Itˆo integral
Chapter 6
The Itˆ o formula
6.1 Introduction
Let (Ω, F, P) be a probability space, B a real Brownian motion, (F
t
)
t≥0
the
natural ﬁltration of B augmented with the null sets of P and P the σalgebra
of all predictable events (also augmented with the null sets of P).
We are given two stochastic processes b, σ ∈ L
2
([0, T] Ω, P, dt P) and
consider the stochastic process
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dB(s), t ≥ 0, (6.1)
where x ∈ R. X is adapted, continuous and continuous in mean square.
We set
dX(t) = b(t)dt + σ(t)dB(t)
and call dX(t) the Itˆo diﬀerential of X.
Given a regular real function ϕ, we are going to give a meaning to the
Itˆo’s diﬀerential ϕ
(X(t)).
We need some notations. For any k ∈ N we denote by C
k
b
(R) the linear
space of all real mappings which are uniformly continuous and bounded to
gether with their derivatives of order less or equal to k. If ϕ ∈ C
k
b
(R) we
set
ϕ
0
= sup
x∈R
[ϕ(x)[,
and
ϕ
k
= ϕ
0
+
k
j=1
sup
x∈R
[D
j
ϕ(x)[.
75
76 Chapter 6
We shall prove the following Itˆo’s formula,
ϕ(X(t)) = ϕ(x) +
_
t
0
ϕ
(X(s))σ(s)dB(s)
+
_
t
0
_
1
2
σ
2
(s)ϕ
(X(s)) + b(s)ϕ
(X(s))
_
ds, t ≥ 0.
(6.2)
We shall write (6.2) in the diﬀerential form, setting
ϕ
(X(t)) = ϕ
(X(t))σ(t)dB(t),
+
_
1
2
σ
2
(t)ϕ
(X(t)) + b(t)ϕ
(X(t))
_
dt, t ≥ 0,
(6.3)
or, also as
ϕ
(X(t)) = ϕ
(X(t))dX(t) +
1
2
σ
2
(t)ϕ
(X(t))dt, t ≥ 0. (6.4)
Remark 6.1 One can deduce formally Itˆo’s formula by proceeding as fol
lows. Write dX = b(t)dt + σ(t)dB and
dϕ(X) = ϕ(X + dX) −ϕ(X) = ϕ
(X)dX +
1
2
ϕ
(X)(dX)
2
= ϕ
(X)dX +
1
2
ϕ
(X)b
2
(t)(dt)
2
+ 2b(t)σ(t)dt dB + σ
2
(t)(dB)
2
.
Put (dB)
2
= dt and neglet the terms of order greater than dt, that is terms
with (dt)
2
and dt dB(t).
Writing (dB)
2
= dt is justiﬁed by Lemma 6.2 below.
Tthe following result on quadratic sums of a process is a generalization of
Theorem 3.19.
Lemma 6.2 Let F ∈ C
B
([0, T]; L
2
(Ω, F, P)) and let η = ¦0 = t
0
< t
1
<
< t
n
= T¦ ∈ Σ(0, T). Then we have
lim
η→0
n
k=1
F(t
k−1
)(B(t
k
) −B(t
k−1
))
2
=
_
T
0
F(s)ds in L
2
(Ω, F, P) (6.5)
Proof. Set
J
η
:=
n
k=1
F(t
k−1
)(B(t
k
) −B(t
k−1
))
2
.
The Itˆo formula 77
It is enough to prove that
lim
η→0
E
_
_
_
J
η
−
n
k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
= 0, (6.6)
since, obviously
lim
η→0
n
k=1
F(t
k−1
)(t
k
−t
k−1
) =
_
T
0
F(s)ds in L
2
(Ω, F, P).
To prove (6.6) write
E
_
_
_
J
η
−
n
k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
= E
_
_
_
n
k=1
F(t
k−1
)
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
_
_
2
_
_
=
n
k=1
E
_
[F(t
k−1
)[
2
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
¸
2
_
+2
n
j<k=1
E
_
F(t
j−1
)[[B(t
j
) −B(t
j−1
)[
2
−(t
j
−t
j−1
)]
F(t
k−1
)[[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)]
_
Since the Brownian motion has independent increments, the last sum van
ishes, so that
E
_
_
_
J
η
−
n
k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
=
n
k=1
E
_
[F(t
k−1
)[
2
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
¸
2
_
=
n
k=1
E[F(t
k−1
)[
2
E
_
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
¸
2
_
,
(6.7)
78 Chapter 6
since F(t
k−1
) and B(t
k
) −B(t
k−1
) are independent.
Now, taking into account that
E[[B(t
k
) −B(t
k−1
)[
2
] = (t
k
−t
k−1
),
E[[B(t
k
) −B(t
k−1
)[
4
] = 3(t
k
−t
k−1
)
2
,
we have
E
_
_
_
J
η
−
n
k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
= 2
n
k=1
E[[F(t
k−1
)[
2
](t
k
−t
k−1
)
2
≤ 2[η[
n
k=1
E[[F(t
k−1
)[
2
(t
k
−t
k−1
)] → 0,
as [η[ → 0. The conclusion follows.
Now we are in position to prove Itˆ o’s formula. First we assume that b
and σ are elementary processes,
b =
p
i=1
b
i−1
1l
[λ
i−1
,λ
i
)
, σ =
p
i=1
σ
i−1
1l
[λ
i−1
,λ
i
)
, (6.8)
where p ∈ N, 0 = λ
0
< λ
1
< < λ
p
and b
i
, σ
i
are F
t
i
measurable for any
i = 0, 1, ..., p −1.
Lemma 6.3 Let ϕ ∈ C
2
b
(R), x ∈ R, b and σ given by (6.8) and X by (6.1).
Then identity (6.2) holds.
Proof. Since C
3
b
(R) is dense in C
2
b
(R) it is enough to show (6.2) when
ϕ ∈ C
3
b
(R). We start by proving (6.2) in [0, t] with t ≤ λ
1
. In this case we
have
b(t) = b
0
, σ(t) = σ
0
, t ∈ [0, λ
1
]
and
X(t) = b
0
t + σ
0
B(t), t ∈ [0, λ
1
].
Let η = ¦t
0
= 0 < t
1
< < t
N
= t¦. Then we obviously have
ϕ(X(t)) −ϕ(x) =
N
k=1
[ϕ(X(t
k
)) −ϕ(X(t
k−1
))].
The Itˆo formula 79
On the other hand, using Taylor’s formula we can write
ϕ(X(t)) −ϕ(x) =
N
k=1
ϕ
(X(t
k−1
))(X(t
k
) −X(t
k−1
))
+
1
2
N
k=1
ϕ
(X(t
k−1
))(X(t
k
) −X(t
k−1
))
2
+ R
η
=: I
1
+ I
2
+ I
3
. (6.9)
Concerning I
1
we have
I
1
=
N
k=1
ϕ
(X(t
k−1
))(b
0
(t
k
−t
k−1
) + σ
0
(B(t
k
) −B(t
k−1
)).
So,
lim
η→0
I
1
=
_
t
0
ϕ
(X(s))b(s)ds +
_
t
0
ϕ
(X(s))σ(s)dB(s) in L
2
(Ω, F, P).
(6.10)
Concerning I
2
we write
2I
2
=
N
k=1
ϕ
(X(t
k−1
))b
2
0
(t
k
−t
k−1
)
2
+ 2
N
k=1
ϕ
(X(t
k−1
))b
0
σ
0
(t
k
−
k−1
)(B(t
k
) −B(t
k−1
))
+
N
k=1
ϕ
(X(t
k−1
))σ
2
0
(B(t
k
) −B(t
k−1
))
2
=: I
2,1
+ I
2,2
+ I
2,3
. (6.11)
It is easy to check that
lim
η→0
I
2,1
= lim
η→0
I
2,2
= 0 in L
1
(Ω, F, P) (6.12)
In fact
[I
2,1
[ ≤
1
2
ϕ
2
[b
0
[
2
N
k=1
(t
k
−t
k−1
)
2
→ 0 as [η[ → 0
80 Chapter 6
and
(1)
E[I
2,2
[ ≤ ϕ
2
[b
0
[ [σ
0
[
N
k=1
(t
k
−t
k−1
)E[B(t
k
) −B(t
k−1
)[
≤ ϕ
2
[b
0
[ [σ
0
[
N
k=1
(t
k
−t
k−1
)
3/2
→ 0 as [η[ → 0.
Moreover, by Lemma 6.2 it follows that
lim
η→0
2I
2,3
=
_
t
0
ϕ
(X(s))σ
2
(s)ds in L
2
(Ω, F, P). (6.13)
So, the conclusion will follow provided
lim
η→0
E[R
η
[ = 0, (6.14)
Let us prove (6.14). We have
R
η
=
N
k=1
_
1
0
(1 −ξ)[ϕ
(ξ
k
) −ϕ
(X(t
k−1
))](X(t
k
) −X(t
k−1
))
2
dξ,
where
ξ
k
= (1 −ξ)X(t
k−1
) + ξX(t
k
).
Since ϕ ∈ C
3
b
(R) we have by the mean value theorem,
[ϕ
(ξ
k
) −ϕ
(X(t
k−1
))[ ≤ ϕ
0
(1 −ξ)[X(t
k
) −X(t
k−1
)[,
so that, we deduce setting 1 −ξ ≤ 1,
[R
η
[ ≤ ϕ
3
N
k=1
[X(t
k
) −X(t
k−1
)[
3
.
Consequently
[R
η
[ ≤ 3ϕ
3
[b
0
[
3
N
k=1
[t
k
−t
k−1
[
3
+ 3ϕ
3
[σ
0
[
3
N
k=1
[B(t
k
) −B(t
k−1
)[
3
(1)
since E[B(t)[ ≤ [E[B
2
(t)[]
1/2
= t
1/2
.
The Itˆo formula 81
and so
(2)
,
E([R
η
[) ≤ 3ϕ
3
[b
0
[
3
N
k=1
[t
k
−t
k−1
[
3
+ 3ϕ
3
[σ
0
[
3
√
15
N
k=1
[t
k
−t
k−1
[
3/2
→ 0,
as [η[ → 0. The proof is complete when t ≤ λ
1
. The general case can be
treated in the same way taking into account that b
k−1
and σ
k−1
are indepen
dent of B(t
k
) −B(t
k−1
).
We ﬁnally prove
Theorem 6.4 Let x ∈ R, b, σ ∈ L
2
([0, T] Ω, P, dt P) and ϕ ∈ C
2
b
(R).
Then identity (6.2) holds for all t ∈ [0, T].
Proof. Let (b
j
) and (σ
j
) be sequences of elementary processes such that
lim
j→∞
b
j
= b, lim
j→∞
σ
j
= σ in L
2
([0, T] Ω, P, dt P).
Set, for any j ∈ N,
X
j
(t) = x +
_
t
0
b
j
(s)ds +
_
t
0
σ
j
(s)dB(s), s ∈ [0, T]. (6.15)
Then we have (see (5.10))
lim
j→∞
X
j
= X in C
B
([0, T]; L
2
(Ω)).
Moreover by (6.2) we have
ϕ(X
j
(t)) = ϕ(x) +
_
t
0
ϕ
(X
j
(s))σ
j
(s)dB(s),
+
_
t
0
_
1
2
σ
j
(s)ϕ
(X
j
(s)) + b
j
(s)ϕ
(X
j
(s))
_
ds.
(6.16)
Now the conclusion follows by the dominated convergence theorem letting
j → ∞.
Taking expectation in the Itˆo formula we ﬁnd a useful identity which
allows to estimate the expectation of ϕ(X(t)).
(2)
Since E[B(t)[
3
) ≤ [E(B(t)
6
)]
1/2
=
√
15.
82 Chapter 6
Proposition 6.5 Assume that x ∈ R, b, σ ∈ L
2
([0, T] Ω, P, dt P) and
ϕ ∈ C
2
b
(R). Let
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dB(s), t ∈ [0, T].
Then
E[ϕ(X(t))] = ϕ(x) +
1
2
E
_
t
0
[ϕ
(X(s))σ
2
(s) + 2ϕ
(X(s))b(s)]ds. (6.17)
6.1.1 The Itˆ o formula for unbounded functions
We want now to show that formula (6.17) also holds without the assumption
that ϕ is bounded, provided the integrand in the right hand side is summable.
Proposition 6.6 Assume that x ∈ R, b, σ ∈ L
2
([0, T] Ω, P, dt P) and
ϕ ∈ C
2
(R). Set
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dB(s), t ∈ [0, T]. (6.18)
and assume in addition that
E
_
t
0
[ϕ
(X(s))σ
2
(s) + 2ϕ
(X(s))b(s)[ds < +∞. (6.19)
Then E[ϕ(X(t))] < +∞ and (6.17) holds.
Example 6.7 Take ϕ(x) = x
2
. Then condition (6.19) becomes
E
_
t
0
[σ
2
(s) + 2X(s)b(s)[ds < +∞
which is clearly fulﬁlled. Then
E([X(t)[
2
) = [x[
2
+E
_
t
0
(σ
2
(s) + 2X(s)b(s))ds.
Proof of Proposition 6.6. For any R > 0 consider a function ϕ
R
∈
C
2
b
(R) such that
ϕ
R
(x) =
_
ϕ(x) if [x[ ≤ R,
0 if [x[ ≥ R + 1.
The Itˆo formula 83
Then, applying Itˆo’s formula (6.2) to ϕ
R
(X(t)), yields for any R > 0
ϕ
R
(X(t)) −ϕ(x) =
1
2
_
t
0
[ϕ
R
(X(s))σ
2
(s) + 2ϕ
R
(X(s)b(s)]ds
+
_
t
0
ϕ
R
(X(s)))σ(s)dB(s).
(6.20)
Let now τ
R
be the stopping time
τ
R
=
_
¸
¸
_
¸
¸
_
inf¦t ∈ [0, T] : [X(t)[ ≥ R¦ if sup
t∈[0,T]
[X(t)[ ≥ R,
T if sup
t∈[0,T]
[X(t)[ < R.
It is clear that τ
R
is increasing and bounded by T. We know that X(, ω) is
continuous for almost all ω ∈ Ω. For such a ω, X(, ω) attains the maximum,
say M(ω). Then we have τ
R
(ω) = T for all R > M(ω). So,
lim
R→∞
τ
R
= T P–a.s.. (6.21)
Now, in view of Proposition 5.16 we can write
ϕ(X(t ∧ τ
R
)) −ϕ(x) =
1
2
_
t
0
1l
s<(t∧τ
R
)
[ϕ
(X(s))σ
2
(s) + 2ϕ
(X(s)b(s)]ds
+
_
t
0
1l
s<(t∧τ
R
)
ϕ
(X(s)))σ(s)dB(s).
(6.22)
Taking expectation we obtain
E[ϕ(X(t ∧ τ
R
))] −ϕ(x)
=
1
2
E
_
t
0
1l
s<(t∧τ
R
)
[ϕ
(X(s))σ
2
(s) + 2ϕ
(X(s)b(s)]ds.
(6.23)
Now, by the assumption (6.19), (6.21) and the dominated convergence theo
rem, we can let R → ∞ obtaining the conclusion.
As an application of Proposition 6.6 let us estimate E
_
_
T
0
F(s)dB(s)
_
2m
where F is predictable and m ∈ N, m > 1.
84 Chapter 6
Proposition 6.8 Assume that F ∈ L
2m
([0, T] Ω; P, dt P), m ∈ N, and
set
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
Then X ∈ L
2m
([0, T] Ω; P, dt P) and we have
E[[X(T)[
2m
] ≤ [m(2m−1)]
m
T
m−1
_
T
0
E
_
[F(t)[
2m
¸
dt. (6.24)
Proof. It is enough to prove (6.24) when F is bounded (because L
∞
([0, T]
Ω; P, dt P) is dense in L
2m
([0, T] Ω; P, dt P)).
We start from the case m = 2, setting ϕ(x) = x
4
. Then (6.19) holds so
that, by Proposition 6.6 we have
E[[X(t)[
4
] = 6E
__
t
0
[X(s)[
2
[F(s)[
2
ds
_
.
By H¨older’s inequality it follows that
E[[X(t)[
4
] ≤ 6
_
E
_
t
0
[X(s)[
4
ds
_
1/2
_
E
_
t
0
[F(s)[
4
ds
_
1/2
. (6.25)
Integrating between 0 and T, yields
_
T
0
E[X(t)[
4
dt ≤ 6T
_
E
_
T
0
[X(t)[
4
dt
_
1/2
_
E
_
T
0
[F(t)[
4
dt
_
1/2
. (6.26)
From which
_
T
0
E[X(t)[
4
dt ≤ 36T
2
_
T
0
E[F(t)[
4
dt.
Substituting this in (6.25) yields
E[[X(t)[
4
] ≤ 36TE
_
T
0
[F(t)[
4
dt.
So, (6.24) is proved for m = 2. We can now easily iterate the previous
argument taking successively m = 3, 4 and so on.
6.2 Itˆ o’ formula for a vector valued process
Let d, m ∈ N. Assume that x ∈ R
d
, b ∈ L
2
([0, T] Ω; P, dt P; R
d
) and
σ ∈ L
2
([0, T] Ω; P, dt P; L(R
m
; R
d
)). Set
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dW(s), t ∈ [0, T]
The Itˆo formula 85
We are going to prove the following Itˆo’s formula,
ϕ(X(t)) = ϕ(x) +
_
t
0
¸Dϕ(X(s)), σ(s)dB(s)),
+
_
t
0
_
1
2
Tr[(σσ
∗
)(s)D
2
ϕ(X(s))] +¸b(s), Dϕ(X(s)))
_
ds,
(6.27)
for all t ∈ [0, T]. We shall write (6.27) in the diﬀerential form
ϕ
(X(t)) = ¸Dϕ(X(t)), σ(t)dB(t))
+
_
1
2
Tr[(σσ
∗
)(t)D
2
ϕ(X(t))] +¸b(t), Dϕ(X(t)))
_
dt, t ≥ 0,
(6.28)
The proof is similar to that of the onedimensional case seen before. So, we
shall only sketch some points of the proof. Let us start with a preliminary
lemma.
Lemma 6.9 Let f ∈ C
B
([0, T]; L
2
(Ω)) and let i, j ∈ ¦1, 2..., m¦. Then we
have
lim
σ→0
n
k=1
f(t
k−1
)(B
i
(t
k
) −B
i
(t
k−1
))(B
j
(t
k
) −B
j
(t
k−1
))
= δ
i,j
_
T
0
f(s)ds, in L
2
(Ω, F, P).
(6.29)
Proof. Let η = ¦0 = t
0
< t
1
< < t
n
= T¦ be a decomposition of [0, T].
If i = j, (6.29) follows from Lemma 6.2. Let i ,= j and set
I
η
i,j
:=
n
k=1
f(t
k−1
)(B
i
(t
k
) −B
i
(t
k−1
))(B
j
(t
k
) −B
j
(t
k−1
)).
Then we have
E[(I
σ
i,j
)
2
] = E
n
h,k=1
f(t
h−1
)f(t
k−1
)(B
i
(t
h
) −B
i
(t
h−1
))(B
j
(t
h
) −B
j
(t
h−1
))
(B
i
(t
k
) −B
i
(t
k−1
))(B
j
(t
k
) −B
j
(t
k−1
))
= E
n
h=1
f
2
(t
h−1
)(B
i
(t
h
) −B
i
(t
h−1
))
2
(B
j
(t
h
) −B
j
(t
h−1
))
2
=
n
h=1
E(f
2
(t
h−1
))(t
h
−t
h−1
)
2
→ 0,
86 Chapter 6
as [σ[ → 0.
Now we prove Itˆo’s formula when b and σ are elementary processes as,
b =
p
i=1
b
i−1
1l
[λ
i−1
,λ
i
)
, σ =
p
i=1
σ
i−1
1l
[λ
i−1
,λ
i
)
, (6.30)
where p ∈ N, 0 = λ
0
< λ
1
< < λ
p
b
i
∈ L
2
(Ω, F
t
i
, P; R
d
) and σ
i
∈
L
2
(Ω, F
t
i
, P; L(R
m
; R
d
)) i = 0, 1, ..., p −1.
Lemma 6.10 Let ϕ ∈ C
2
b
(R
d
), x ∈ R
d
and let b and σ given by (6.30).
Then identity (6.27) holds.
Proof. We proceed as in the proof of Lemma 6.3, taking ϕ ∈ C
3
b
(R
d
) and
proving (6.6) in [0, t] with t ≤ λ
1
. We have
b(t) = b
0
, σ(t) = σ
0
, t ∈ [0, λ
1
]
and
X(t) = b
0
t + σ
0
B(t), t ∈ [0, λ
1
].
Let η = ¦t
0
= 0 < t
1
< < t
N
= t¦. Then we obviously have
ϕ(X(t)) −ϕ(x) =
N
k=1
[ϕ(X(t
k
)) −ϕ(X(t
k−1
))].
On the other hand, by Taylor’s formula we can write
(3)
ϕ(X(t)) −ϕ(x) =
N
k=1
¸Dϕ(X(t
k−1
)), X(t
k
) −X(t
k−1
))
+
1
2
N
k=1
¸D
2
ϕ(X(t
k−1
))(X(t
k
) −X(t
k−1
)), X(t
k
) −X(t
k−1
)) + R
η
=: I
1
+ I
2
+ I
3
. (6.31)
Concerning I
1
we have
I
1
=
N
k=1
¸Dϕ(X(t
k−1
)), b
0
(t
k
−t
k−1
) + σ
0
(B(t
k
) −B(t
k−1
)).
(3)
We use the notations Dϕ(x)h = ¸Dϕ(x), h) and D
2
ϕ(x)(h, k) = ¸D
2
ϕ(x)h, k) for all
x, h, k ∈ R
d
.
The Itˆo formula 87
So,
lim
η→0
I
1
=
_
t
0
¸Dϕ(X(s)), b(s))ds+
_
t
0
¸Dϕ(X(s)), σ(s)dB(s)) in L
2
(Ω, F, P).
(6.32)
Concerning I
2
we write
2I
2
=
N
k=1
¸D
2
ϕ(X(t
k−1
))b
0
, b
0
)(t
k
−t
k−1
)
2
+ 2
N
k=1
¸D
2
ϕ(X(t
k−1
))b
0
, σ
0
(B(t
k
) −B(t
k−1
)))(t
k
−t
k−1
)
+
N
k=1
¸D
2
ϕ(X(t
k−1
))σ
0
(B(t
k
)−B(t
k−1
)), σ
0
(B(t
k
)−B(t
k−1
))) =: I
2,1
+I
2,2
+I
2,3
.
(6.33)
It is easy to check that
lim
η→0
I
2,1
= lim
η→0
I
2,2
= 0 in L
1
(Ω, F, P) (6.34)
Moreover, we have
2I
2,3
=
N
k=1
¸D
2
ϕ(X(t
k−1
))(σ(B(t
k
) −B(t
k−1
))), σ(B(t
k
) −B(t
k−1
)))
=
N
k=1
d
i,j=1
m
α,β=1
D
2
i,j
ϕσ
i,α
(B
α
(t
k
) −B
α
(t
k−1
)) σ
i,β
(B
β
(t
k
) −B
β
(t
k−1
)).
Therefore, taking into account Lemma 6.9 we have
lim
η→0
2I
2,3
=
_
t
0
d
i,j=1
m
α=1
D
2
i,j
ϕ(X(s)) σ
i,α
(s)σ
i,β
(s)ds
=
_
t
0
Tr [D
2
ϕ(X(s))(σσ
∗
(s))]ds.
Now, proceeding as before, we see that
lim
η→0
E[R
η
[ = 0, (6.35)
88 Chapter 6
The proof is complete when t ≤ λ
1
. The general case can be treated in
the same way taking into account that b
k−1
and σ
k−1
are independent of
B(t
k
) −B(t
k−1
).
Finally, proceeding as we did for the proof of Theorem 6.4 we obtain the
result
Theorem 6.11 Let b ∈ L
2
([0, T] Ω, P, dt P : R
d
), σ ∈ L
2
([0, T]
Ω, P, dt P : L(R
m
; R
d
)), x ∈ R
d
and ϕ ∈ C
2
b
(R
d
). Then identity (6.27)
holds for any t ∈ [0, T].
Exercise 6.12 Let d = 1, m ∈ N, b, σ
k
∈ L
2
([0, T] Ω, P, dt P), k =
1, ..., m.
Set
X(t) =
_
t
0
b(s)ds +
m
k=1
_
t
0
σ
k
(s)dB
k
(s).
Let ϕ ∈ C
2
b
(R). Prove that
dϕ(X(t)) = ϕ
(X(t))dX(t) +
1
2
ϕ
(X(t))[σ(t)[
2
dt, (6.36)
where σ(t) = (σ
1
(t), ..., σ
m
(t)).
Exercise 6.13 Let d ∈ N, m = 1 b
i
, σ
i
∈ L
2
([0, T] Ω, P, dt P), i = 1, 2 =
..., d. Set
X(t) = b(t)dt + σdB(t), i = 1, 2,
where σ = (σ
1
, ..., σ
d
). Let moreover ϕ ∈ C
2
b
(R
d
). Prove that
dϕ(X(t)) = ¸Dϕ(X(t)), dX(t)) +
1
2
¸D
2
ϕ(X(t))σ(t), σ(t))dt. (6.37)
Chapter 7
Stochastic evolution equations
We are given two positive integers r, d and an rdimensional standard Brow
nian motion B(t), t ≥ 0, in a probability space (Ω, F, P). We denote by
(F
t
)
t≥0
the natural ﬁltration of B(t) (augmented with all Pnull sets of Ω).
Let us consider the following integral equation
X(t) = η +
_
t
s
b(u, X(u))du +
_
t
s
σ(u, X(u))dB(u), t ∈ [s, T], (7.1)
where s ∈ [0, T), η ∈ L
2
(Ω, F
s
, P; R
d
), b: [0, T] R
d
→ R
d
and σ: [0, T]
R
d
→ L(R
r
, R
d
). b is called the drift and σ the diﬀusion coeﬃcient of the
equation.
We shall write (7.1) in diﬀerential form as
_
_
_
dX(t) = b(t, X(t))dt + σ(t, X(t))dB(t),
X(s) = η.
(7.2)
By a solution of equation (7.1) on the interval [s, T] we mean a function
X ∈ C
B
([s, T]; L
2
(Ω; R
d
)) that fulﬁlls equation (7.1).
In order to solve (7.1) we shall use a ﬁxed point argument, based on the
identity
E
¸
¸
¸
¸
_
b
a
G(t)dB(t)
¸
¸
¸
¸
2
=
_
b
a
E[Tr (G(t)G
∗
(t))] dt.
for all G ∈ C
B
([0, T]; L
2
(Ω, L(R
r
, R
d
))) and 0 ≤ a < b ≤ T. This suggests to
endow L(R
r
, R
d
) with the Hilbert–Schmidt norm, setting
S
HS
: = [Tr(SS
∗
)]
1/2
, S ∈ L(R
r
, R
d
)
and to write
E
¸
¸
¸
¸
_
b
a
G(t)dB(t)
¸
¸
¸
¸
2
=
_
b
a
E
_
G(t)
2
HS
_
dt. (7.3)
89
90 Chapter 7
7.1 Existence and uniqueness
The standard assumptions for the wellposedness of problem (7.1) are the
following.
Hypothesis 7.1
(i) b and σ are continuous on [0, T] R
d
.
(ii) There exists M > 0 such that for all t ∈ [0, T], x, y ∈ R
d
, we have
[b(t, x) −b(t, y)[
2
+σ(t, x) −σ(t, y)
2
HS
≤ M
2
[x −y[
2
(7.4)
and
[b(t, x)[
2
+σ(t, x)
2
HS
≤ M
2
(1 +[x[
2
). (7.5)
Notice that, after possibly changing the constant M, (7.5) is a consequence
of (7.4).
Theorem 7.1 Assume that Hypothesis 7.1 holds and let s ∈ [0, T), η ∈
L
2
(Ω, F
s
, P; R
d
). Then problem (7.1) has a unique solution
X ∈ C
B
([s, T]; L
2
(Ω; R
d
)).
Proof. We are going to solve (7.1) by a ﬁxed point argument in the space
C
B
:= C
B
([s, T]; L
2
(Ω; R
d
)).
Deﬁne
γ
1
(X)(t) :=
_
t
s
b(u, X(u))du, X ∈ C
B
, t ∈ [s, T],
γ
2
(X)(t) :=
_
t
s
σ(u, X(u))dB(u), X ∈ C
B
, t ∈ [s, T]
and set
γ(X) := η + γ
1
(X) + γ
2
(X), X ∈ C
B
.
Then equation (7.1) is equivalent to the following,
X = η + γ
1
(X) + γ
2
(X) = γ(X). (7.6)
Step 1. γ
1
and γ
2
map C
B
into itself.
Stochastic evolution equations 91
Concerning γ
1
we have, using the H¨ older inequality and taking into ac
count (7.5),
[γ
1
(X)(t)[
2
≤ (t −s)
_
t
s
[b(u, X(u))[
2
du ≤ M
2
(t −s)
_
t
s
(1 +[X(u)[
2
)du
≤ M
2
(t −s)
2
(1 +X
2
C
B
).
Since γ
1
(X)(t) is F
t
–measurable for all t ∈ [s, T], γ
1
maps C
B
into itself and
γ
1
(X)
C
B
≤ M(t −s)(1 +X
C
B
).
Concerning γ
2
we have taking into account (7.3) and (7.5),
E[γ
2
(X)(t)[
2
=
_
t
s
E(σ(u, X(u))
2
HS
)du
≤ M
2
_
t
s
(1 +[X(u)[
2
)du ≤ M
2
(t −s)(1 +X
2
C
B
)
So, we see that γ
2
maps C
B
into itself.
Step 2. γ is Lipschitz continuous.
Let X, Y ∈ C
B
. We have, using again the H¨older inequality and taking
into account (7.4),
[γ
1
(X)(t) −γ
1
(Y )(t)[
2
≤ (t −s)
_
t
s
[b(u, X(u)) −b(u, Y (u))[
2
du
≤ (t −s)M
2
_
t
s
[X(u) −Y (u)[
2
du ≤ (t −s)
2
M
2
X −Y 
2
C
B
du.
Consequently
γ
1
(X) −γ
1
(Y )
C
B
≤ M (T −s) X −Y 
C
B
, X, Y ∈ C
B
(7.7)
Furthermore
E[γ
2
(X)(t) −γ
2
(Y )(t)[
2
=
_
t
s
E(σ(u, X(u)) −σ(u, Y (u))
2
HS
)du
≤ M
2
(t −s)X −Y 
2
C
B
,
92 Chapter 7
and so,
γ
2
(X) −γ
2
(Y )
C
B
≤ M
√
T −s X −Y 
C
B
, X, Y ∈ C
B
. (7.8)
By (7.7) and (7.8) it follows that γ maps C
B
into itself and
γ(X) −γ(Y )
C
B
≤ M(T −s +
√
T −s )X −Y [
C
B
,
for all X, Y ∈ C
B
. Now if T −s is such that
M
_
T −s +
√
T −s
_
≤ 1/2, (7.9)
γ is a 1/2–contraction on C
B
, and so, it possesses a unique ﬁxed point. If
(7.9) does not hold we choose T
1
∈ (s, T] such that
M
_
T
1
−s +
_
T
1
−s
_
≤ 1/2.
Then by the previous argument there is a unique solution to (7.1) on [s, T
1
].
Now we repeat the proof with T
1
replacing s and in a ﬁnite number of steps
we arrive to the conclusion.
Remark 7.2 By Theorem 5.13 it follows that there exists a version of the
solution X(, s, η) which belongs to L
2
(Ω, C([s, T])) and so it is a continuous
process.
In the following we shall denote by X(, s, η) the solution of problem (7.1).
Whe shall use greek letters for stochastic initial data and latin letters for
deterministic ones.
Let us prove the cocycle law.
Proposition 7.3 Assume that Hypothesis 7.1 holds and let η ∈ L
2
(Ω, F
s
, P; R
d
).
Then
X(t, s, η) = X(t, r, X(r, s, η)), 0 ≤ s ≤ r ≤ t ≤ T. (7.10)
Proof. Deﬁne Z(t) = X(t, s, η), t ∈ [s, T]. Then Z solves the problem
_
_
_
dZ(t) = b(t, Z(t))dt + σ(t, Z(t))dB(t),
Z(r) = X(r, s, η).
By the uniqueness part of Theorem 7.1 it follows that
Z(t) = X(t, s, η) = X(t, r, X(r, s, η)),
as required.
Stochastic evolution equations 93
Remark 7.4 By the contraction principle it follows that the solution X(t, s, η)
of problem (7.1) can be obtained as a limit of successive approximations.
More precisely, deﬁne X
0
(t, s, η) = η and for any N ∈ N,
X
N+1
(t, s, η) = η +
_
t
s
b(u, X
N
(u, s, η))du +
_
t
s
σ(u, X
N
(u, s, η))dB(u).
(7.11)
Then we have
lim
N→∞
X
N
(, s, η) = X(, s, η) in C
B
([s, T]; L
2
(Ω; R
d
)). (7.12)
Next result, which as we shall see plays an important rˆole in proving that
X(, s, x) is a Markov process, gives some information about the relationship
between X(t, s, η), η ∈ L
2
(Ω, F
s
, P; R
d
) and X(t, s, x), x ∈ R
d
.
Proposition 7.5 Assume that Hypothesis 7.1 holds and that
η =
n
k=1
x
k
1l
A
k
, (7.13)
where x
1
, ..., x
n
∈ R
d
, and A
1
, ..., A
n
are mutually disjoints sets in F
s
such
that
Ω =
n
_
k=1
A
k
.
Then we have
X(t, s, η) =
n
k=1
X(t, s, x
k
)1l
A
k
. (7.14)
Proof. Let X
N
be deﬁned by (7.11). We claim that
X
N
(t, s, η) =
n
k=1
X
N
(t, s, x
k
)1l
A
k
, ∀ N ∈ N. (7.15)
Once (7.15) is proved, the conclusion follows letting N tend to inﬁnity. Let
us proceed by recurrence. Equality (7.15) is clear for N = 0. Assume that it
holds for a given N ∈ N, so that
X
N
(t, s, η) = X
N
(t, s, x
k
) in A
k
, k = 1, ..., n.
Then we have
b(u, X
N
(u, s, η)) = b(u, X
N
(u, s, x
k
)) in A
k
, k = 1, ..., n,
σ(u, X
N
(u, s, η)) = σ(u, X
N
(u, s, x
k
)) in A
k
, k = 1, ..., n,
94 Chapter 7
so that
b(u, X
N
(u, s, η)) =
n
k=1
1l
A
k
b(u, X
N
(u, s, x
k
)),
σ(u, X
N
(u, s, η)) =
n
k=1
1l
A
k
σ(u, X
N
(u, s, x
k
)).
Consequently
X
N+1
(t, s, η) =
n
k=1
1l
A
k
_
X
0
(t, s, x
k
) +
_
t
s
b(u, X
N
(u, s, x
k
)du
+
_
t
s
σ(u, X
N
(u, s, x
k
))dB(u)
_
=
n
k=1
1l
A
k
X
N+1
(t, s, x
k
)
and (7.15) holds for N + 1. So, the conclusion follows.
7.1.1 Solution of the stochastic diﬀerential equation in
the space C
B
([s, T]; L
2m
(Ω; R
d
)).
Theorem 7.6 Assume that Hypothesis 7.1 holds and let m ∈ N, s ∈ [0, T),
η ∈ L
2m
(Ω, F
s
, P; R
d
). Then problem (7.1) has a unique solution
X(, s, η) ∈ C
B
([s, T]; L
2m
(Ω; R
d
)).
In particular
X(, s, x) ∈ C
B
([s, T]; L
2m
(Ω; R
d
)), ∀ x ∈ R
d
.
Proof. We proceed as in the proof of Theorem 7.1 by a ﬁxed point argument
in the space
C
m
B
:= C
B
([s, T]; L
2m
(Ω; R
d
)),
using inequality (6.24) proved in Proposition 6.8.
7.1.2 Examples
Example 7.7 Consider the stochastic diﬀerential equation
dX = AXdt + CdB(t), X(0) = x, (7.16)
where A ∈ L(R
d
), C ∈ L(R
r
; R
d
) and x ∈ R
d
.
Stochastic evolution equations 95
Clearly Theorem 7.1 applies so that (7.16) has a unique solution X(t)
which fulﬁlls the integral equation
X(t) = x + A
_
t
0
X(s)ds + CB(t). (7.17)
Setting
Y (t) =
_
t
0
X(s)ds, t ∈ [0, T],
Y fulﬁlls the equation
Y
(t) = AY (t) + x + CB(t), Y (0) = 0, t ∈ [0, T],
which can be easily solved by the method of variation of constants. We
obtain
Y (t) =
_
t
0
e
(t−s)A
(x + CB(s))ds, t ∈ [0, T].
By substituting Y (t) in (7.17) yields
X(t) = A
_
t
0
e
(t−s)A
(x + CB(s))ds + x + CB(t).
Taking into account that, thanks to Proposition 3.12,
_
t
0
e
(t−s)A
CdB(s) = CB(t) + A
_
t
0
e
(t−s)A
CB(s)ds,
we ﬁnd
X(t) = e
tA
x +
_
t
0
e
(t−s)A
CdB(s). (7.18)
Example 7.8 Let r = d = 1 and consider the stochastic diﬀerential equation
dX = aXdt + cXdB(t), X(0) = x, (7.19)
where a, c, x ∈ R. Again Theorem 7.1 applies. We want to show that the
solution of (7.19) is given by
X(t) = e
t
(
a−
1
2
c
2
)
e
cB(t)
x, t ≥ 0. (7.20)
For this we check that X(t) given by (7.20) solves (7.19).
Write X(t) = e
F(t)
where F(t) = t
_
a −
1
2
c
2
_
+ cB(t). Then we have
dF(t) =
_
a −
1
2
c
2
_
dt + cdB(t)
96 Chapter 7
and, by Itˆo’s formula,
dX(t) = e
F(t)
dF(t) +
1
2
c
2
e
F(t)
dt
= e
F(t)
_
a −
1
2
c
2
_
dt + cdB(t) +
1
2
c
2
e
F(t)
dt
= aX(t)dt + cX(t)dB(t).
Exercise 7.9 Let r = 1 and consider the diﬀerential stochastic equation
dX = AXdt + CXdB(t), X(0) = x, (7.21)
where A, C ∈ L(R
d
), x ∈ R
d
and AC = CA. Show that the solution of (7.21)
is given by
X(t) = e
t(A−C
2
/2)
e
CB(t)
x. (7.22)
7.1.3 Diﬀerential stochastic equations with random co
eﬃcients
In some situations (see Subsections 7.3 and 7.4) one deals with stochastic
diﬀerential equations having random coeﬃcients,
X(t, ω) = η(ω) +
_
t
s
b(u, X(u, ω), ω)du +
_
t
s
σ(u, X(u, ω), ω)dB(u). (7.23)
Here η ∈ L
2
(Ω, F
s
, R
d
), b: [0, T] R
d
Ω →R
d
and σ: [0, T] L(R
r
, R
d
)
Ω →R
d
are such that:
Hypothesis 7.2
(i) There exists M > 0 such that for all t ∈ [0, T], x, y ∈ R
d
, ω ∈ Ω
[b(t, x, ω)−b(t, y, ω)[
2
+σ(t, x, ω)−σ(t, y, ω)
2
HS
≤ M
2
[x−y[
2
(7.24)
and
[b(t, x, ω)[
2
+σ(t, x, ω)
2
HS
≤ M
2
(1 +[x[
2
). (7.25)
(ii) For any Y ∈ C
B
([0, T]; L
2
(Ω, R
d
)) we have U ∈ C
B
([0, T]; L
2
(Ω, R
d
))
and V ∈ C
B
([0, T]; L
2
(Ω, L(R
r
, R
d
))) where, for all t ∈ [0, T], ω ∈ Ω,
U(t, ω) = b(t, Y (t, ω), ω)), V (t, ω) = σ(t, Y (t, ω), ω)).
The following result can be proved as Theorem 7.1.
Stochastic evolution equations 97
Theorem 7.10 Assume that Hypothesis 7.2 holds. Let s ∈ [0, T) and η ∈
L
2
(Ω, F
s
, R
d
). Then problem (7.23) has a unique solution
X ∈ C
B
([s, T]; L
2
(Ω; R
d
)).
Example 7.11 Let d = 1 and consider the stochastic diﬀerential equation
_
_
_
dX(t) = X(t)¸F(t), dB(t)), t ∈ [0, T],
X(0) = x,
(7.26)
where F ∈ C
B
(0, T; L
∞
(Ω; R
d
)). Now it is easy to check that Theorem 7.10
applies and so there exists a solution X of (7.26). Let us show that
X(t) = e
−
1
2
R
t
0
F(s)
2
ds+
R
t
0
F(s),dB(s)
x, t ≥ 0. (7.27)
For this we check that X(t) given by (7.27) solves (7.26).
Write X(t) = e
H(t)
where
H(t) = −
1
2
_
t
0
[F(s)[
2
ds +
_
t
0
¸F(s), dB(s)).
Then we have
dH(t) = −
1
2
[F(t)[
2
dt +¸F(t), dB(t)), t ≥ 0.
Now by Itˆo’s formula we ﬁnd
dX(t) = e
H(t)
dH(t) +
1
2
e
H(t)
[F(t)[
2
dt
= e
H(t)
¸F(t), dB(t)) = X(t)¸F(t), dB(t)), t ≥ 0.
So, (7.27) is proved.
7.2 Continuous dependence on data
7.2.1 Continuous dependence on mean square
We assume here that Hypothesis 7.1 holds. We are going to prove that
the solution X(t, s, η) to (7.1) is H¨ older continuous on t, s and Lipschitz
continuous on η in mean square. First we show that E[X(t, s, η)[
2
is bounded.
98 Chapter 7
Lemma 7.12 Assume that Hypothesis 7.1 holds. Then for all s ∈ [0, T] and
η ∈ L
2
(Ω, F
s
, P; R
d
) we have
E
_
[X(t, s, η)[
2
_
≤ 3[E([η[
2
) + M
2
((T −s)
2
+ (T −s)]e
3M
2
(T−s+1)
. (7.28)
Proof. Writing for short X(t, s, η) = X(t), we have
E([X(t)[
2
) ≤ 3E([η[
2
) + 3E
_
¸
¸
¸
¸
_
t
s
b(u, X(u))du
¸
¸
¸
¸
2
_
+3
_
t
s
E(σ(u, X(u))
2
HS
)du.
By Hypothesis 7.1(ii) and the H¨ older inequality we deduce that
E([X(t)[
2
) ≤ 3E([η[
2
) + 3M
2
(t −s)
_
t
s
(1 +E
_
[X(u)[
2
_
)du
+3M
2
_
t
s
(1 +E
_
[X(u)[
2
_
)du.
Consequently
E([X(t)[
2
) ≤ 3E([η[
2
) + 3M
2
((T −s)
2
+ (T −s))
+3M
2
((T −s) + 1)
_
t
s
E
_
[X(u)[
2
_
du.
The conclusion follows from the Gronwall lemma.
We now study the regularity of X(t, s, η) with respect to t, s, η. We note
that, by Lemma 7.12, there exists a constant C(T, E([η[
2
)) such that
E
_
[X(t, s, η)[
2
_
≤ C(T, E([η[
2
)), 0 ≤ s < t ≤ T. (7.29)
We start with the regularity of X(t, s, η) with respect to t.
Proposition 7.13 Assume that Hypothesis 7.1 holds. Let 0 ≤ s ≤ t
1
< t ≤
T and η ∈ L
2
(Ω, F
s
, R
d
). Then there exists a constant C
1
(T, E([η[
2
)) such
that we have
E
_
[X(t, s, η) −X(t
1
, s, η)[
2
_
≤ C
1
(T, E([η[
2
))(t −t
1
). (7.30)
Stochastic evolution equations 99
Proof. We have
E
_
[X(t, s, η) −X(t
1
, s, η)[
2
_
≤ 2M
2
(t −t
1
)
_
t
t
1
(1 +E
_
[X(u, s, η)[
2
_
du
+ 2M
2
_
t
t
1
(1 +E
_
[X(u, s, η)[
2
_
)du.
Consequently,
E
_
[X(t, s, η) −X(t
1
, s, η)[
2
_
≤ 2M
2
((t −t
1
)
2
+ t −t
1
)(1 + C
2
(T, E([η[
2
)))
and the conclusion follows.
Let us study the regularity of X(t, s, η) with respect to η.
Proposition 7.14 Assume that Hypothesis 7.1 holds, let 0 ≤ s < t ≤ T and
η, ζ ∈ L
2
(Ω, F
s
, R
d
). Then
E
_
[X(t, s, η) −X(t, s, ζ)[
2
_
≤ 3e
3M
2
(T−s+1)(t−s)
E([η −ζ[
2
). (7.31)
Proof. We have
[X(t, s, η) −X(t, s, ζ)[
2
≤ 3[η −ζ[
2
+ 3
¸
¸
¸
¸
_
t
s
(b(u, X(u, s, η) −b(u, X(u, s, ζ))du
¸
¸
¸
¸
2
+ 3
¸
¸
¸
¸
_
t
s
(σ(u, X(u, s, η) −σ(u, X(u, s, ζ))dB(u)
¸
¸
¸
¸
2
.
Taking expectation and using (7.4) we obtain
E([X(t, s, η) −X(t, s, ζ)[
2
) ≤ 3E([η −ζ[
2
) + 3M
2
(T −s + 1)
_
t
s
E
_
[X(u, s, η) −X(u, s, ζ)[
2
_
du
and the conclusion follows from the Gronwall lemma.
We ﬁnally study the regularity of X(t, s, η) with respect to s.
Proposition 7.15 Assume that Hypothesis 7.1 holds, let 0 < s < s
1
< t ≤
T, and η ∈ L
2
(Ω, F
s
, P; R
d
). Then there exists a constant C
T,η
> 0 such that
E
_
[X(t, s, η) −X(t, s
1
, η)[
2
_
≤ C
T,η
[s −s
1
[. (7.32)
100 Chapter 7
Proof. Taking into account the cocycle law (7.10), we can write
X(t, s, η) −X(t, s
1
, η) = X(t, s
1
, X(s
1
, s, η)) −X(t, s
1
, η).
By (7.31) there exists C
T
> 0 such that
E([X(t, s, η) −X(t, s
1
, η)[
2
) ≤ C
2
T
E([X(s
1
, s, η) −η[
2
)
= C
2
T
E([X(s
1
, s, η) −X(s, s, η)[
2
) .
The conclusion follows now from (7.30).
7.3 Almost sure continuity and h¨olderianity
of trajectories
In this section we show that X(, s, x) belongs to a suitable Sobolev space,
whose deﬁnition is recalled in Appendix E below. Then the Sobolev embed
ding theorem (also stated in Appendix E) will imply that X(, s, x) is H¨ older
continuous almost surely.
First we need a lemma, which can be proved as Proposition 7.13 using
(6.24).
Lemma 7.16 Assume that Hypothesis 7.1 holds. Let 0 ≤ s ≤ t
1
< t ≤
T, x ∈ R
d
and m ∈ N. Then there exists a constant C
1
(T, [x[) such that
E
_
[X(t, s, x) −X(t
1
, s, x)[
2m
_
≤ C
1
(T, [x[
2
))(t −t
1
)
m
. (7.33)
Now from Proposition E.3 and the Sobolev embedding theorem E.1 it
follows that
Proposition 7.17 Assume that Hypothesis 7.1 holds. Let x ∈ R
d
, 0 ≤ s ≤
t ≤ T, m ∈ N and ∈ (0, 1/2). Then we have
E
_
[X(, s, x)[
2m
,2m
¸
< +∞. (7.34)
Moreover, X(, s, x) belongs to C
−1/(2m)
([s, T]) almost surely.
Finally, we consider almost sure regularity of X(t, s, ). First, arguing as
in the proof of Proposition 7.14 we have
Lemma 7.18 Assume that Hypothesis 7.1 holds, let 0 ≤ s < t ≤ T and
x, y ∈ R
d
. Then there is a constant C(T) > 0 such that
E
_
[X(t, s, x) −X(t, s, y)[
2m
_
≤ C(T)[x −y[
2m
. (7.35)
Stochastic evolution equations 101
Now from Proposition E.3 it follows that
Proposition 7.19 Assume that Hypothesis 7.1 holds, let 0 ≤ s < t ≤ T and
x, y ∈ [0, 1]
d
. Then for any m > 1 and ∈ (0, 1) we have
E
_
[X(t, s, )[
2m
,2m
¸
< +∞. (7.36)
Moreover, X(t, s, ) belongs to C
−d/(2m)
([0, 1]
d
) almost surely.
7.4 Diﬀerentiability of X(t, s, x) with respect
to x
In this section we assume, besides Hypothesis 7.1, that
Hypothesis 7.3
(i) D
x
b, D
2
x
b, D
x
σ and D
2
x
σ are continuous on [0, T] R
d
.
(ii) We have
(1)
sup
t∈[0,T]
([b(t, )]
2
+ [σ(t, )]
2
) < ∞. (7.37)
We set
C
B
= C
B
([s, T]) =: C
B
([s, T]; L
2
(Ω; R
d
)).
7.4.1 Existence of X
x
(t, s, x)
Theorem 7.20 Assume that Hypotheses 7.1 and 7.3 hold. Then for any
s ∈ [0, T] the mapping
R
d
→ C
B
, x → X(, s, x),
is continuously Gateaux diﬀerentiable and its Gateaux derivative is given by
X
x
(t, s, x) h = η
h
(t, s, x), x, h ∈ R
d
, (7.38)
where η
h
(t, s, x) is the solution to the stochastic diﬀerential equation with
random coeﬃcients,
_
¸
¸
¸
¸
_
¸
¸
¸
¸
_
dη
h
(t, s, x) = b
x
(t, X(t, s, x)) η
h
(t, s, x)dt
+σ
x
(t, X(t, s, x))(η
h
(t, s, x), dB(t))
η
h
(s, s, x) = h.
(7.39)
(1)
Recall the notations given at the beginning of Chapter 6.
102 Chapter 7
Proof. Note that the coeﬃcients of equation (7.39) fulﬁll Hypothesis 7.3, so
it possesses a unique solution by Theorem 7.10.
To prove the theorem we use Theorem D.6 from Appendix D (with Λ = R
d
and E = C
B
). We set C
B
= C
B
([s, T
1
]) and deﬁne a mapping
F : R
d
C
B
→ C
B
,
setting
[F(x, X)](t): = x +
_
t
s
b(r, X(r))dr +
_
t
s
σ(r, X(r))dB(r), t ∈ [s, T
1
],
(7.40)
where T
1
> s is chosen such that
F(x, X
1
) −F(x, X
2
)
C
B
≤
1
2
X
1
−X
2

C
B
for all X
1
, X
2
∈ C
B
, x ∈ R
d
.
(7.41)
Then F fulﬁlls Hypothesis D.1 so that it possesses a unique ﬁxed point
X(x) ∈ C
B
, that is
F(x, X(x)) = X(x), x ∈ R
d
,
which depends continuously on x. X(x) coincides with the solution X(, s, x)
of (7.2).
It is not diﬃcult to check that F is Gateaux continuously diﬀerentiable,
(the straightforward proof is left to the reader) and that for each x ∈ R
d
,
X, Y ∈ C
B
we have
F
x
(x, X) = I,
[F
X
(x, X)Y ](t) =
_
t
s
b
x
(r, X(r))Y (r)dr+
_
t
s
σ
x
(r, X(r))Y (r)dB(r), t ∈ [s, T
1
],
So, the conclusion follows from Theorem D.6.
7.4.2 Existence of X
xx
(t, s, x)
We now prove the existence of the second derivative of X(t, s, x) with respect
to x.
Theorem 7.21 Assume that Hypotheses 7.1 and 7.3 hold. Then the mapping
R
d
→ C
B
, x → X(, s, x),
is twice diﬀerentiable with respect to x in any couple of directions (h, k) in
R
d
. Moreover, setting
X
xx
(t, s, x)(h, k) = ζ
h,k
(t, s, x), x, h ∈ R
d
, (7.42)
Stochastic evolution equations 103
ζ
h,k
(t, s, x) is the solution to the stochastic diﬀerential equation (with random
coeﬃcients)
_
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
_
d ζ
h,k
(t, s, x) = b
x
(t, X(t, s, x)) ζ
h,k
(t, s, x)dt
+b
xx
(t, X(t, s, x))(η
h
(t, s, x), η
k
(t, s, x))dt
+σ
x
(t, X(t, s, x))(ζ
h,k
(t, s, x), dB(s))
+σ
xx
(t, X(t, s, x)) (η
h
(t, s, x), η
k
(t, s, x), dB(t))
ζ
h,k
(s, s, x) = 0.
(7.43)
We shall prove the theorem when n = r = 1 for simplicity. We ﬁrst prove a
lemma.
Lemma 7.22 Let η(, s, x) ∈ C
B
([s, T]; L
2
(Ω)) be the solution of the equa
tion
η(t, s, x) = 1 +
_
t
s
b
x
(r, X(r, s, x))η(r, s, x)dr
+
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r).
(7.44)
Then η(, s, x) ∈ C
B
([s, T]; L
4
(Ω)) and there exists C > 0 such that
E[η(, s, x)[
4
≤ C, ∀ s ∈ [0, T), x ∈ R
d
. (7.45)
Proof. We have,
[η(t, s, x)[
4
≤ 27 + 27
¸
¸
¸
¸
_
t
s
b
x
(r, X(r, s, x))η(r, s, x)dr
¸
¸
¸
¸
4
+27
¸
¸
¸
¸
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r)
¸
¸
¸
¸
4
.
By using (7.37) and the H¨older inequality we see that there exists a constant
C
1
such that
[η(t, s, x)[
4
≤ 27 + C
1
_
t
s
[η(r, s, x)[
4
dr
+C
1
¸
¸
¸
¸
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r)
¸
¸
¸
¸
4
.
104 Chapter 7
Now, taking expectation on both sides of this inequality and using Corollary
6.8, we ﬁnd that
E[η(t, s, x)[
4
≤ C
2
(1 +
_
t
s
E[η(r, s, x)[
4
dr), 0 ≤ s ≤ t ≤ T, x ∈ R,
where C
2
is another constant. The conclusion follows from the Gronwall
lemma.
Proof of Theorem 7.21. We choose T
1
as in (7.41) and C
B
= C
B
([s, T
1
])
as before. By Theorem 7.20 we know that X(t, s, x) is diﬀerentiable with
respect to x and that its derivative η(, s, x) = X
x
(, s, x) belongs to C
B
and
fulﬁlls equation (7.44). For any x ∈ R we deﬁne a linear bounded operator
T(x) from C
B
into C
B
setting for all t ∈ [s, T
1
],
(T(x)Z)(t) = −
_
t
s
b
x
(r, X(r, s, x))Z(r)dr −
_
t
s
σ
x
(r, X(r, s, x))Z(r)dB(r).
(7.46)
Notice that, since η(, s, x) ∈ C
B
([s, T]; L
4
(Ω)), T(x)Z is diﬀerentiable with
respect to x for any Z ∈ C
B
([s, T]; L
4
(Ω)) and it results
(T
(x)Z)(t) = −
_
t
s
b
xx
(r, X(r, s, x))Z(r)η(, r, x)dr
−
_
t
s
σ
xx
(r, X(r, s, x))Z(r)η(, r, x)dB(r).
(7.47)
Now we write equation (7.44) as
η(, s, x) = 1 + T(x)η(, s, x) (7.48)
By (7.41) it follows that
T(x)
L(C
B
)
≤ 1/2, ∀ x ∈ R.
Thus the solution of (7.48) is given by
η(, s, x) = (1 −T(x))
−1
(1). (7.49)
From this identity it is easy to show the existence of η
x
(, s, x) := ζ(, s, x).
We have in fact, by a straightforward computation
η
x
(, s, x) = (1 −T(x))
−1
(T
(x)η(, s, x)), (7.50)
Stochastic evolution equations 105
where
T
(x)η(, s, x)(t) =
_
t
s
b
xx
(r, X(r, s, x))η
2
(, s, x)dr
+
_
t
s
σ
xx
(r, X(r, s, x))η
2
(, s, x)dB(r).
(7.51)
Now by (7.50) it follows that
η
x
(t, s, x) −T(x)η
x
(, s, x)(t) =
_
t
s
b
xx
(r, X(r, s, x))η
2
(, s, x)dr
+
_
t
s
σ
xx
(r, X(r, s, x))η
2
(, s, x)dB(r),
and the conclusion follows.
7.5 Itˆ o Diﬀerentiability of X(t, s, x) with re
spect to s.
It is useful to recall ﬁrst some results in the deterministic case.
7.5.1 The deterministic case
Let us consider the problem
_
_
_
X
(t) = b(t, X(t)), t ∈ [s, T],
X(s) = x,
(7.52)
under Hypotheses 7.1 and 7.3 with σ = 0. Denote by X(t, s, x) the solution
of (7.52). Let us compute X
s
(t, s, x) (it is well known that X(t, s, x) is C
1
in all variables).
Write
X(t, s, x) = X(t, r, X(r, s, x)), t ≥ r ≥ s. (7.53)
Diﬀerentiating (7.53) with respect to r yields
0 = X
s
(t, r, X(r, s, x)) + X
x
(t, r, X(r, s, x)) X
t
(r, s, x).
Setting r = s we ﬁnd
X
s
(t, s, x) = −X
x
(t, s, x)b(s, x),
106 Chapter 7
which is equivalent to
X(t, s, x) = x +
_
t
s
X
x
(t, r, x)b(r, x)dr, 0 ≤ s ≤ t ≤ T. (7.54)
In the next subsection we are going to generalize this formula for the solution
X(t, s, x) of (7.2).
7.5.2 The stochastic case
Here we want to study the diﬀerentiability of X(t, s, x) with respect to s in
a sense to be precised. A diﬃculty arises since the process s → X(t, s, x) is
not adapted, because X(t, s, x) is not F
s
measurable. It happens, however,
that for any s ∈ [0, T], X(t, s, x) is measurable with respect to the σ–algebra
F
+
s
generated by all sets of the form
¦ω ∈ Ω : (B(s
1
(ω)) −B(s(ω)), ..., B(s
n
(ω)) −B(s(ω))) ∈ A¦ ,
where n ∈ N, 0 ≤ s ≤ s
1
< ... < s
n
≤ T and A ∈ B(R
n
). The family
(F
+
s
)
s∈[0,T]
is called the future ﬁltration of B.
Proposition 7.23 Assume that Hypotheses 7.1 holds. Let x ∈ R
d
, s ∈ [0, T].
Then X(t, s, x) is F
+
s
measurable.
Proof. Let X
N
(t, s, x) be deﬁned by (7.11), N ∈ N. Then X
1
(t, s, x) is
F
+
s
–measurable. We have in fact
X
1
(t, s, x) = x +
_
t
s
b(u, x)du +
_
t
s
σ(u, x)dB(u).
Since
_
t
s
σ(u, x)dB(u) = lim
η→0
n
k=1
σ(t
k−1
, x)(B(t
k
) −B(t
k−1
)),
where η = ¦s = t
0
< t
1
< < t
n
= t¦, then X
1
(t, s, x) is F
+
s
measurable.
We end the proof by recurrence.
Now we introduce the backward Itˆo integral for a process wich is adapted
to the future ﬁltration. For this we need the following result which can be
proved as Lemma 4.3.
Lemma 7.24 Let t
1
< t
2
≤ s, and let ϕ ∈ L
2
(Ω, F
+
s
, P). Then B(t
2
)−B(t
1
)
and ϕ are independent.
Stochastic evolution equations 107
We deﬁne C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))) by a straightforward generaliza
tion of the space C
B
([0, T]; L
2
(Ω; L(R
r
; R
d
))) deﬁned in Chapter 5.
The elements of C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
)) are called stochastic pro
cesses adapted to the future ﬁltration (F
+
t
) and continuous in quadratic
mean.
Let F ∈ C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))). For any η ∈ Σ with η = ¦0 =
s
0
< s
1
< < s
n
= T¦ we set
I
σ
(F) =
n
k=1
F(t
k
)(B(t
k
) −B(t
k−1
))
The proof of next theorem is completely similar to that of equation (5.10).
Theorem 7.25 For any F ∈ C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))) there exists the
limit
lim
σ→0
I
σ
(F) =:
_
T
0
F(s)dB(s), (7.55)
in L
2
(Ω). Moreover we have
E
_
T
0
F(s)dB(s) = 0, (7.56)
and
E
¸
¸
¸
¸
_
T
0
F(s)dB(s)
¸
¸
¸
¸
2
=
_
T
0
E
_
F(s)
2
HS
¸
ds. (7.57)
_
T
0
F(s)dB(s) is called the backward Itˆo integral of the function F in [0, T].
Exercise 7.26 Let t > s. Prove that
_
t
s
B(r)dB(r) =
1
2
(B(t)
2
−B(s)
2
+ (t −s)).
7.5.3 Backward Itˆo’s formula
Theorem 7.27 Assume that Hypotheses 7.1 and 7.3 hold. Then we have
X(t, s, x) −x =
_
t
s
X
x
(t, r, x) b(r, x)dr
+
1
2
_
t
s
TR [X
xx
(t, r, x)(σ(r, x), σ(r, x))]dr
+
_
t
s
X
x
(t, r, x)(σ(r, x), dB(r))),
(7.58)
108 Chapter 7
where
TR [X
xx
(t, r, x)(σ(r, x), σ(r, x))] =
d
k=1
X
xx
(t, r, x)(σ(r, x)e
k
, σ(r, x)e
k
)
and (e
k
) is any orthonormal basis in R
d
.
Proof. We take d = r = 1 for simplicity. For any η ∈ Σ(s, t) we set
[η[ = max
k=1,...,n
(t
k
−t
k−1
).
If η ∈ Σ(s, t) we have
X(t, s, x) −x = −
n
k=1
[X(t, s
k
, x) −X(t, s
k−1
, x)]
= −
n
k=1
[X(t, s
k
, x) −X(t, s
k
, X(s
k
, s
k−1
, x))]
= −
n
k=1
X
x
(t, s
k
, x)(x −X(s
k
, s
k−1
, x))
−
1
2
n
k=1
X
xx
(t, s
k
, x)(x −X(s
k
, s
k−1
, x))
2
+ o([η[).
(7.59)
Arguing as in the proof of Itˆ o’s formula one can show, after some tedious but
straighforward computations, that
lim
η→0
o([η[) = 0, Pa.s..
On the other hand we have
X(s
k
, s
k−1
, x) −x =
_
s
k
s
k−1
b(r, X(r, s
k−1
, x))dr
+
_
s
k
s
k−1
σ(r, X(r, s
k−1
, x))dB(r)
= b(s
k
, x)(s
k
−s
k−1
) + σ(s
k
, x)(B(s
k
) −B(s
k−1
)) + o(s
k
−s
k−1
).
(7.60)
Stochastic evolution equations 109
(Notice that, since b is deterministic, one can replace in (7.60) b(s
k
, x) with
b(ξ
k
, x) where ξ
k
is any point in [s
k−1
, s
k
].) Substituting (7.60) in (7.59) we
ﬁnd that
X(t, s, x) −x =
n
k=1
X
x
(t, s
k
, x)b(s
k
, x)(s
k
−s
k−1
)
+
n
k=1
X
x
(t, s
k
, x)σ(s
k
, x)(B(s
k
) −B(s
k−1
))
+
1
2
n
k=1
X
xx
(t, s
k
, x)σ
2
(s
k
, x)(B(s
k
) −B(s
k−1
))
2
+I
1
(η) + I
2
(η) + I
3
(η) + o
1
([η[).
(7.61)
Obviously
lim
η→0
I
1
(η) =
_
t
s
X
x
(r, x)b(r, x)dr.
Concerning I
2
(η), we note that it is an integral sum corresponding to the
backward Itˆ o integral since X
x
(t, s
k
, x) is F
+
s
k
measurable by Proposition
7.23. Therefore we have
lim
η→0
I
2
(η) =
_
t
s
X
x
(r, x)σ(r, x)dB(r).
The other terms I
3
(η) and o
1
([η[) can be handled as in the proof of Itˆo’s
formula.
In a similar way one can prove the following backward Itˆo formula.
Theorem 7.28 Let ϕ ∈ C
2
b
(R
d
). Then for any 0 ≤ s < t ≤ T, we have
ϕ(X(t, s, x)) −ϕ(x) =
_
t
s
¸D
x
[ϕ(X(t, r, x))], b(r, x))dr
+
1
2
_
t
s
Tr [D
2
x
[ϕ(X(t, r, x))]σ(r, x)σ
∗
(r, x)]dr
+
_
t
s
¸D
x
[ϕ(X(t, r, x))], σ(r, x)dB(r).
(7.62)
110 Chapter 7
Chapter 8
Kolmogorov equations
8.1 The deterministic case
We consider here the problem
_
_
_
X
(t) = b(t, X(t)), t ∈ [s, T],
X(s) = x ∈ R
n
,
(8.1)
where s ∈ [0, T) and b : [0, T] R
n
→R
n
fulﬁlls the following hypothesis.
Hypothesis 8.1
(i) b is continuous on [0, T] R
n
.
(ii) There exists M > 0 such that
[b(t, x) −b(t, y)[ ≤ M[x −y[, x, y ∈ R
n
, t ∈ [0, T].
(iii) b is diﬀerentiable with respect to x and b
x
is continuous on [0, T] R
n
.
As well known, under Hypothesis 8.1 problem (8.1) has a unique solution
X() = X(, s, x) ∈ C
1
([s, T]; R
n
), and it holds
X(t, s, x) = X(t, u, X(u, s, x)), 0 ≤ s ≤ u ≤ t ≤ T, x ∈ R
n
. (8.2)
Morever, diﬀerentiating (8.2) with respect to u and setting u = s we ﬁnd
X
s
(t, s, x) + X
x
(t, s, x) b(s, x) = 0, 0 ≤ s ≤ t ≤ T, x ∈ R
n
. (8.3)
Of great interest for the applications is the transition evolution operator
P
s,t
, s, t ∈ [0, T], deﬁned on the space C
b
(R
n
) by
P
s,t
ϕ(x) = ϕ(X(t, s, x)), x ∈ R
n
, s, t ∈ [0, T]. (8.4)
111
112 Kolmogorov equations
As easily checked, P
s,t
is a linear bounded operator on C
b
(R
n
). Moreover for
any ϕ ∈ C
b
(R
n
) the mapping
[0, T] [0, T] R
n
→R
n
, (s, t, x) → P
s,t
ϕ(x),
is continuous. From (8.2) it follows immediately the cocycle property
P
s,t
= P
s,u
P
u,t
, s, t, u ∈ [0, T]. (8.5)
Proposition 8.1 For any ϕ ∈ C
1
b
(R
n
) we have
d
dt
P
s,t
ϕ = P
s,t
L(t)ϕ, t ≥ s (8.6)
and
d
ds
P
s,t
ϕ = −L(s)P
s,t
ϕ, t ≥ s, (8.7)
where
L(t)ϕ(x) = ¸b(t, x), ϕ
x
(x)), ϕ ∈ C
1
b
(R
n
), x ∈ R
n
. (8.8)
Proof. We have
d
dt
P
s,t
ϕ(x) =
d
dt
ϕ(X(t, s, x)) = ¸b(t, X(t, s, x)), ϕ
x
(X(t, s, x)))
and
P
s,t
L(t)ϕ(x) = ¸b(t, X(t, s, x)), ϕ
x
(X(t, s, x))),
so that (8.6) follows.
Let us prove (8.7). We have, taking into acccount (8.3),
d
ds
P
s,t
ϕ(x) =
d
ds
ϕ(X(t, s, x)) = −¸ϕ
x
(X(t, s, x)), X
x
(t, s, x) b(s, x))
= −L(s)P
s,t
ϕ(x).
Let us now consider the following partial diﬀerential equation called trans
port equation
_
_
_
z
s
(s, x) +¸b(s, x), z
x
(s, x)) = 0, s ∈ [0, T]
z(T, x) = ϕ(x),
(8.9)
where ϕ ∈ C
1
b
(R
n
) and T > 0 is ﬁxed.
Chapter 8 113
Theorem 8.2 Assume that b : [0, T] R
n
→ R
n
fulﬁlls Hypothesis 8.1 and
let ϕ ∈ C
1
b
(R
n
). Then problem (8.9) has a unique solution z. z is given by
z(s, x) = P
s,T
ϕ(x) = ϕ(X(T, s, x)), s ∈ [0, T], x ∈ R
n
. (8.10)
Proof Existence. It is enough to notice that z, given by (8.10), is a
solution of (8.9) by (8.6).
Uniqueness. If z is a solution of problem (8.9) we have
d
ds
z(s, X(s, u, x))
= z
t
(s, X(s, u, x)) +¸z
x
(s, X(s, u, x)), X
t
(s, u, x))
= z
t
(s, X(s, u, x)) +¸z
x
(s, X(s, u, x)), b(s, X(s, u, x))) = 0.
Therefore z(s, X(s, u, x)) is constant in s. Setting s = T and s = u we ﬁnd
that z(T, X(T, u, x)) = z(u, X(u, u, x)) which implies z(u, x) = ϕ(X(T, s, x))
as required.
8.1.1 The autonomous case
We assume here that b(t, x) = b(x) and consider the problem
_
_
_
X
(t) = b(X(t)), t ≥ 0,
X(0) = x ∈ R
n
,
(8.11)
whose solution we denote by X(, x). In this case it is easy to check that for
any t > s ≥ 0, we have P
s,t
= P
0,t−s
.
Deﬁne
P
t
ϕ(x) = ϕ(X(t, x)), ϕ ∈ C
b
(R
n
), t ≥ 0, x ∈ R
n
, (8.12)
so that by (8.5) it follows the semigroup law
P
t+s
= P
t
P
s
, t, s ≥ 0. (8.13)
P
t
is called the transition semigroup associated with (8.11). By Proposition
8.1 we deduce
Proposition 8.3 For any ϕ ∈ C
1
b
(R
n
) we have
D
t
P
t
ϕ = P
t
Lϕ = LP
t
ϕ, t ≥ 0 (8.14)
where
Lϕ(x) = ¸b(x), ϕ
x
(x)), ϕ ∈ C
1
b
(R
n
), x ∈ R
n
. (8.15)
114 Kolmogorov equations
Finally, by Theorem 8.2 we have
Theorem 8.4 Assume that b ∈ C
1
b
(R
n
) and let ϕ ∈ C
1
b
(R). Then problem
_
_
_
u
t
(t, x) = ¸b(x), u
x
(t, x)), t ≥ 0, x ∈ R
n
u(0, x) = ϕ(x), x ∈ R
n
.
(8.16)
has a unique solution given by
u(t, x) = P
t
ϕ(x) = ϕ(X(t, x)), t ≥ 0, x ∈ R
n
. (8.17)
8.2 Stochastic case
We consider the stochastic evolution equation
_
_
_
dX(t) = b(t, X(t))dt + σ(t, X(t))dB(t)
X(s) = x ∈ R
d
(8.18)
and assume that the following hypothesis holds.
Hypothesis 8.2 (i) b : [0, T] R
n
→R
n
and σ : [0, T] R
n
→ L(R
r
, R
n
)
are continuous.
(ii) There exists M > 0 such that
[b(t, x)−b(t, y)[+σ(t, x)−σ(t, y)
HS
≤ M[x−y[, x, y ∈ R
n
, t ∈ [0, T].
(iii) b and σ have ﬁrst and second partial derivatives with respect to x con
tinuous and bounded in [0, T] R
n
.
We denote as before by X(, s, x) the solution of (8.18) corresponding to
η = x ∈ R
n
. For all t, s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ C
b
(R
n
)
we set
P
s,t
ϕ(x) = E[ϕ(X(t, s, x))], x ∈ R
n
, 0 ≤ s ≤ t ≤ T. (8.19)
As easily checked, P
s,t
is a linear bounded operator on C
b
(R
n
).
P
s,t
, 0 < s ≤ t ≤ T, is called the transition evolution operator associated with
(8.18). By Chapter 6 we know that the mapping
(s, t, x) → P
s,t
ϕ(x),
is continuous for all ϕ ∈ C
b
(R
n
).
Chapter 8 115
8.3 Basic properties of transition operators
Let us introduce the Kolmogorov operator
(L(s)ϕ)(x) =
1
2
Tr [ϕ
xx
(x)σ(s, x)σ
∗
(s, x)] +¸b(s, x), ϕ
x
(x)), ϕ ∈ C
2
b
(R
n
).
(8.20)
The ﬁrst basic identity is the following.
Proposition 8.5 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
).
Then P
s,t
ϕ is diﬀerentiable in t and we have
d
dt
P
s,t
ϕ = P
s,t
L(t)ϕ, t ≥ 0. (8.21)
Proof. By the Itˆ o formula we have that
d
t
ϕ(X(t, s, x)) = (L(t)ϕ)(X(t, s, x)) +¸ϕ
x
(X(t, s, x)), σ(t, X(t, s, x))dB(t)).
Integrating with respect to t and taking expectation, yields
E[ϕ(X(t, s, x))] = ϕ(x) +
_
t
s
E[(L(r)ϕ)(X(r, s, x))]dr,
that is
P
s,t
ϕ(x) = ϕ(x) +
_
t
s
P
r,t
(L(r)ϕ)(x)dr,
which coincides with (8.21).
The second basic identity is the following,
Proposition 8.6 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
).
Then P
s,t
ϕ is diﬀerentiable in s and we have
d
ds
P
s,t
ϕ = −L(s)P
s,t
ϕ, t ≥ 0. (8.22)
Proof. Taking expectation in the backward Itˆ o formula (7.62) we ﬁnd
P
s,t
ϕ(x) −ϕ(x) =
_
t
s
L(r)P
s,r
ϕ(x)dr,
which yields (8.22).
116 Kolmogorov equations
8.4 Parabolic equations
We consider here the parabolic equation
_
_
_
z
s
(s, x) + (L(s)(z(s, )))(x) = 0, 0 ≤ s < T,
z(T, x) = ϕ(x), x ∈ R
n
,
(8.23)
We say that a function z : [0, T] R
n
→ R is a solution to (8.23) if z is
continuous and bounded together with its partial derivatives z
t
, z
x
, z
xx
, and
fulﬁlls (8.23).
Theorem 8.7 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
). Then
there exists a unique solution z of problem (8.23). z is given by
z(s, x) = E[ϕ(X(T, s, x))], 0 < s ≤ T, ϕ ∈ C
2
b
(R
n
). (8.24)
Proof. Existence. By (8.22) it follows that
z(s, x) = P
s,T
ϕ(x), s ∈ [0, T], x ∈ R
n
,
fulﬁlls (8.23).
Uniqueness. Let z be a solution to (8.23), and let 0 ≤ u ≤ s ≤ T. Let us
compute the Itˆ o diﬀerential of z(s, X(s, u, x)). We have
d
s
z(s, X(s, u, x)) = z
s
(s, X(s, u, x))ds + (L(s)z(s, X(s, u, )))(x)
+¸z
x
(s, X(s, u, x)), σ(s, X(s, u, x))dB(s))
= ¸z
x
(s, X(s, u, x)), σ(s, X(s, u, x))dB(s)).
since z fulﬁlls (8.23). Integrating in s between u and T yields
z(T, X(T, u, x)) −z(u, X(u, u, x)) = ϕ(X(t, u, x)) −z(u, x)
=
_
t
u
z
x
(s, X(s, u, x))σ(s, X(s, u, x))dB(s).
Now, taking expectation we ﬁnd
z(u, x) = E[ϕ(X(t, u, x))].
Exercise 8.8 Prove the cocycle law
P
s,r
P
r,t
= P
s,t
(8.25)
for 0 ≤ s ≤ t ≤ t ≤ T.
Chapter 8 117
8.4.1 Autonomous case
Assume that b and σ are independent of t :
b(t, x) = b(x), σ(t, x) = σ(x), x ∈ R
n
.
Then we have L(s) = L where
Lϕ(x) =
1
2
Tr [ϕ
xx
(x)σ(x)σ
∗
(x)] +¸b(x), ϕ
x
(x)), ϕ ∈ C
2
b
(R
n
).
Proposition 8.9 Let X(t, s, x) be the solution of the stochastic evolution
equation
_
_
_
dX(t) = b(X(t))dt + σ(X(t))dB(t)
X(s) = x ∈ R
n
.
(8.26)
Then for any and a > 0 the laws of X(t, s, x) and X(t +a, s +a, x) coincide.
Proof. Set Y (t) = X(t + a, s + a, x). The we have
X(t+a, s+a, x) = x+
_
t+a
s+a
b(X(r, s+a, x))dr+
_
t+a
s+a
σ(X(r, s+a, x))dB(r).
Setting r −a = ρ yields
Y (t) = x +
_
t
s
b(Y (ρ))dρ +
_
t
s
σ(Y (ρ))d[B(ρ + a) −B(a)].
Setting B
1
(t) = B(t + a) − B(a) we see that Y (t) fulﬁlls equation (8.26)
but with the Brownian motion B(t) replaced by B
1
(t). Now the conclusion
follows.
By the proposition and the cocycle law (8.25)it follows that, setting
P
t
= P
0,t
, t ≥ 0,
we have
P
t+s
= P
t
P
s
, t, s ≥ 0, P
0
= 1.
Thus P
t
, t ≥ 0 is a semgroup of linear operators in C
b
(R
d
).
Setting
v(s, x) = u(t, t −s, x), t ≥ 0, s ∈ [0, t], x ∈ R
n
,
problem (8.23) becomes
_
_
_
v
s
(s, x) = Lv(s, x), s ∈ [0, t], x ∈ R
n
,
v(0, x) = ϕ(x), x ∈ R
(8.27)
Then by Theorem 8.7 we ﬁnd the result
118 Kolmogorov equations
Theorem 8.10 Assume that b, σ : R → R are Lipschitz continuous and of
class C
2
. Then, for any ϕ ∈ C
2
b
(R), problem (8.27) has a unique solution
given by
v(s, x) = P
t−s,t
ϕ(x) = P
t
ϕ(x), t ≥ 0, s ∈ [0, t], x ∈ R. (8.28)
8.5 Examples
Example 8.11 Consider the parabolic equation in R
n
_
_
_
u
t
(t, x) =
1
2
Tr [Qu
xx
(t, x)] +¸Ax + u
x
(t, x))
u(0, x) = ϕ(x),
(8.29)
where A, Q ∈ L(R
n
), Q is symmetric and ¸Qx, x) ≥ 0 for all x ∈ R
n
.
The corresponding stochastic diﬀerential equation is
_
_
_
dX(t) = AX(t)dt +
√
Q dB(t),
X(0) = x,
(8.30)
where B is a standard Brownian motion in a probability space (Ω, G, P)
taking values in R
n
. The solution of (8.30) is given by the variation of
constants formula
X(t, x) = e
tA
x +
_
t
0
e
(t−s)A
_
QdB(s). (8.31)
Therefore the law of X(t, x) is given by
X(t, x)
#
P = N
e
tA
x,Q
t
, (8.32)
where
Q
t
=
_
t
0
e
sA
Qe
sA
∗
ds, t ≥ 0, (8.33)
where A
∗
is the adjoint of A.
Consequently, the transition semigroup P
t
looks like
P
t
ϕ(x) =
_
R
n
ϕ(y)N
e
tA
x,Q
t
(dy). (8.34)
So, the solution of (8.29) is given by
u(t, x) = P
t
ϕ(x).
Chapter 8 119
If, in particular, det Q
t
> 0 we have
u(t, x) = (2π)
−n/2
[det Q
t
]
−1/2
_
R
n
e
−
1
2
Q
−1
t
(y−e
tA
x),(y−e
tA
x)
ϕ(y)dy. (8.35)
Example 8.12 Consider the parabolic equation in R
_
_
_
u
t
(t, x) =
1
2
qx
2
u
xx
(t, x) + axu
x
(t, x)
u(0, x) = ϕ(x),
(8.36)
where q > 0 and a ∈ R.
The corresponding stochastic diﬀerential equation is
_
_
_
dX(t) = aX(t)dt +
√
q X(t)dB(t),
X(0) = x,
(8.37)
where B is a real Brownian motion in is a real Brownian motion in some
probability space (Ω, F, P).
The solution of (8.37) is given by
X(t, x) = e
(a−q/2)t+
√
q B(t)
x. (8.38)
Therefore
P
t
ϕ(x) =
1
√
2πt
_
+∞
−∞
e
−
y
2
2t
ϕ(e
(a−q/2)t+
√
q y
x)dy. (8.39)
120 Kolmogorov equations
Appendix A
λsystems and πsystems
Let Ω be a non empty set. A non empty family R of parts of Ω is called a
πsystem if
A, B ∈ R =⇒ A ∩ B ∈ R,
a λsystem if
_
¸
¸
¸
¸
_
¸
¸
¸
¸
_
(i) Ω, ∅ ∈ D.
(ii) A ∈ D =⇒ A
c
∈ D.
(iii) (A
i
) ⊂ D mutually disjoint =⇒
∞
i=1
A
i
∈ D.
(A.1)
Obviously any algebra is a πsystem. Moreover, if D is a λsystem such that
A, B ∈ D =⇒ A ∩ B ∈ D then it is σ–algebra. In fact if (A
i
) is a sequence
in D of not necessarily disjoint sets we have
∞
_
i=1
A
i
= A
1
∪ (A
2
¸ A
1
) ∪ (A
3
¸ A
2
¸ A
1
) ∪ ∈ D
and so
∞
i=1
A
i
∈ D by (ii) and (iii).
Let us prove the following Dynkin theorem.
Theorem A.1 Let R be a πsystem and let D be a λsystem including R.
Then we have σ(R) ⊂ D, where σ(R) is the σ algebra generated by R. If in
particular, D ⊂ σ(R) we have σ(R) = D.
Proof. Let D
0
be the minimal λsystem including R. We are going to show
that D
0
is a σ–algebra, which will imply the theorem. For this it is enough
to show, as remarked before, that the following inclusion holds
A, B ∈ D
0
=⇒ A ∩ B ∈ D
0
. (A.2)
121
122 λsystems and πsystems
For any B ∈ D
0
we set
H (B) = ¦F ∈ D
0
: B ∩ F ∈ D
0
¦.
We claim that H (B) is a λsystem. In fact properties (i) and (iii) are clear.
It remains to show that if F ∩ B ∈ D
0
then F
c
∩ B ∈ D
0
or, equivalently,
that F ∪B
c
∈ D
0
. In fact, since F ∪B
c
= (F ¸ B
c
) ∪B
c
= (F ∩B) ∪B
c
and
F ∩ B and B
c
are disjoint, we have that F ∪ B
c
∈ D
0
as required.
If we show that
H (B) ⊃ R, ∀B ∈ D
0
(A.3)
then we conclude that H (B) = D
0
by the minimality of D
0
and (A.2) is
proved.
On the other hand it is clear that if R ∈ R we have R ⊂ H (R) since R is
a πsystem. Therefore H (R) = D
0
by the minimality of D
0
. Consequently,
the following implication holds
R ∈ R, B ∈ D
0
⇒ R ∩ B ∈ D
0
,
which yields R ⊂ H (B) and (A.3) is fulﬁlled.
Example A.2 Let A be an algebra of subsets of Ω and let F be the σ
algebra generated by A. Let P
1
and P
2
be probability measures on (Ω, F)
such that
P
1
(I) = P
2
(I), ∀ I ∈ A.
Using the Dynkin theorem we can show that P
1
= P
2
. It is clear in fact that
A is a πsystem. Deﬁne
D = ¦B ∈ F : P
1
(B) = P
2
(B)¦.
It is easy to see that D is a λsystem which contains D. So, by Corollary
A.1 it follows that P
1
= P
2
.
Appendix B
Conditional expectation
B.1 Deﬁnition
We are given a probability space (Ω, F, P) and a σalgebra G included in F.
Let X : Ω →R be a real random variable on (Ω, F, P)
(1)
.
We say that X is Gmeasurable if
I ∈ B(R) ⇒ X
−1
(I) ∈ F.
It is clear that X is not Gmeasurable in general.
Let us consider the signed measure
µ(G) =
_
G
XdP, G ∈ G.
It is clear that µ is absolutely continuous with respect to the restriction of
P to G. Therefore, by the RadonNikodym Theorem there exists a unique
Y ∈ L
1
(Ω, G, P) such that
µ(G) =
_
G
XdP =
_
G
Y dP, ∀ G ∈ G. (B.1)
The Gmeasurable random variable Y is called the conditional expectation of
X given G; it is denoted by E(X[G).
In view of (B.1) E(X[G) is characterized by
_
G
XdP =
_
G
E(X[G)dP, ∀ G ∈ G. (B.2)
Exercise B.1 Assume that X ∈ L
2
(Ω, F, P). Show that E(X[G) coincides
with the orthogonal projection of X into the closed subspace L
2
(Ω, G, P) of
L
2
(Ω, F, P).
(1)
In all this appendix by random variable we mean an equivalence class of random
variables with respect to the usual equivalence relation.
123
124 Conditional expectation
B.2 Basic properties
Let X, Y ∈ L
1
(Ω, F, P) and let G be σalgebra included in F. It is obvious
that if X is Gmeasurable, we have E(X[G) = X. Setting G = Ω in (B.2)
yields
E[E(X[G)] = E(X). (B.3)
Moreover, one can check easily the linearity of conditional expectation,
E(αX + βY [G) = αE(X[G) + βE(Y [G), (B.4)
for all α, β ∈ R and all X, Y ∈ L
1
(Ω, F, P). Also if X ≥ 0, Pa.s., one has
E(X[G) ≥ 0, Pa.s. From this one deduces the inequality
[E(X[G)[ ≤ E([X[ [G). (B.5)
Proposition B.2 Assume that X is independent of G. Then we have
E(X[G) = E(X). (B.6)
Proof. Let A ∈ G. Then 1l
A
and X are independent so that
_
A
XdP =
_
Ω
1l
A
XdP = P(A)E(X) =
_
A
E(X[G)dP.
Proposition B.3 Let H be a σalgebra included in G. Then we have
E(X[H ) = E
_
E(X[G)
¸
¸
H
¸
. (B.7)
Proof. Let A ∈ H . Then we have
_
A
XdP =
_
A
E(X[H )dP (B.8)
and
_
A
XdP =
_
A
E(X[G)dP =
_
A
E
_
E(X[G)
¸
¸
H
¸
dP. (B.9)
So, comparing (B.8) and (B.9) we see that
_
A
E(X[H )dP =
_
A
XdP =
_
A
E
_
E(X[G)
¸
¸
H
¸
dP.
Proposition B.4 Let X, Y, XY ∈ L
1
(Ω, F, P). Assume that X is Gmeasurable.
Then we have
E(XY [G) = XE(Y [G). (B.10)
Appendix B 125
Proof. It is enough to show (B.10) for X = 1l
A
where A ∈ G. Let now
G ∈ G, then since G∩ A ∈ G we have
_
G
E(1l
A
Y [G)dP =
_
G
1l
A
Y dP =
_
G∩A
Y dP
=
_
G∩A
E(Y [G)dP =
_
G
1l
A
E(Y [G)dP,
for any G ∈ G.
Recalling Proposition B.2 we ﬁnd.
Corollary B.5 Let X, Y, XY ∈ L
1
(Ω, F, P). Assume that X is Gmeasurable
and that Y is independent of G. Then we have
E(XY [G) = XE(Y ). (B.11)
Let us prove now a useful generalization of this Corollary.
Proposition B.6 Let X, Y ∈ L
1
(Ω, F, P) and let φ : R
2
→ R be bounded
and Borel. Assume that X is Gmeasurable and Y is independent of G. Then
we have
E(φ(X, Y )[G) = h(X), (B.12)
where
h(x) = E[φ(x, Y )], x ∈ R. (B.13)
Proof. We have to show that
_
G
φ(X, Y )dP =
_
G
h(X)dP, ∀ G ∈ G.
This is clearly equivalent to
E(Zφ(X, Y )) = E(Zh(X)), ∀Z ∈ L
1
(Ω, G, P). (B.14)
Denote by µ the law of the random variable (X, Y, Z) with values in R
3
µ = (X, Y, Z)
#
P.
So,
E(Zφ(X, Y )) =
_
R
3
zφ(x, y)µ(dx, dy, dz). (B.15)
126 Conditional expectation
Since X and Z are Gmeasurable and Y is independent of G, the random
variables (X, Z) and Y are independent so that
µ(dx, dy, dz) = ν(dx, dz)λ(dy),
where
ν(dx, dz) = (X, Z)
#
P(dx, dz), λ(dy) = Y
#
P(dy).
Therefore we can write (B.15) as
E(Zφ(X, Y )) =
_
R
3
zφ(x, y)ν(dx, dz)λ(dy).
Using the Fubini Theorem we get ﬁnally
E(Zφ(X, Y )) =
_
R
2
z
__
R
φ(x, y)λ(dy)
_
ν(dx, dz)
=
_
R
2
zh(x)ν(dx, dz) = E(Zh(X)),
as required.
Exercise B.7 Let F, H, FH ∈ L
1
(Ω, G, P) and Z = E(H[G). Prove that
E(FH) = E(FZ). (B.16)
Exercise B.8 Let g : R → R be convex and let F, g(F) ∈ L
1
(Ω, F, P).
Prove the Jensen inequality
E(g(F)[G) ≥ g(E(F[G)). (B.17)
Appendix C
Martingales
C.1 Deﬁnitions
Let (Ω, F, P) be a probability space, (F
t
)
t≥0
an increasing family of σ
algebras included in F and (M(t))
t∈[0,T]
with M(t) ∈ L
1
(Ω, F
t
, P), t ∈ [0, T],
a stochastic process.
(M(t))
t∈[0,T]
is said to be a martingale (with respect to the ﬁltration
(F
t
)
t≥0
) if
E[M(t)[F
s
] = M(s), ∀ 0 ≤ s < t ≤ T,
a submartingale if
E[M(t)[F
s
] ≥ M(s), ∀ 0 ≤ s < t ≤ T,
a supermartingale if
E[M(t)[F
s
] ≤ M(s), ∀ 0 ≤ s < t ≤ T.
Thus (M(t))
t∈[0,T]
is a martingale if and only if
_
A
M(s)dP =
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
,
a submartingale if and only if
_
A
M(s)dP ≥
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
,
and a supermartingale if and only if
_
A
M(s)dP ≤
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
.
127
128 Martingales
Proposition C.1 If M is a martingale then [M[ is a submartingale.
Proof. Let 0 ≤ s < t ≤ T, A ∈ F
s
. Set
A
+
= ¦ω ∈ Ω : M(s)(ω) > 0¦, A
−
= ¦ω ∈ Ω : M(s)(ω) ≤ 0¦.
Clearly A
+
and A
−
belong to F
s
. Consequently we have
_
A
[M(s)[dP =
_
A
+
M(s)dP −
_
A
−
M(s)dP
=
_
A
+
M(t)dP −
_
A
−
M(t)dP ≤
_
A
[M(t)[dP.
This shows that [M[ is a submartingale.
Example C.2 The Brownian motion B is a martingale. In fact, let t > s
and A ∈ F
s
. Since B(t) −B(s) and 1l
A
are independent we have
_
A
(B(t) −B(s))dP = E(1l
A
(B(t) −B(s))) = 0,
so that
_
A
B(t)dP =
_
A
B(s)dP.
Exercise C.3 Using Jensen’s inequality prove that any convex function of
a martingale is a submartingale. (See Exercise B.8).
C.2 The basic inequality for martingales
Let M(t) be a martingale, let 0 < t
1
< t
2
< ... < t
n
≤ T and set
S = sup
1≤i≤n
[M(t
i
)[.
We are going to prove an important estimate (due to Kolmogorov) of S in
terms of M(t
n
).
Proposition C.4 For all λ > 0 we have
P(S ≥ λ) ≤
1
λ
_
{S≥λ}
[M(t
n
)[dP. (C.1)
Appendix C 129
Proof. Set
A
1
= ¦[M(t
1
)[ ≥ λ¦,
A
2
= ¦[M(t
1
)[ < λ, [M(t
2
)[ ≥ λ¦,
A
n
= ¦[M(t
1
)[ < λ, ..., [M(t
n
)[ ≥ λ¦.
Clearly, sets A
1
, ..., A
n
are mutually disjoint. Moreover A
i
∈ F
t
i
, i = 1, ..., n,
and we have
¦S ≥ λ¦ =
n
_
i=1
A
i
.
Let us estimate
_
{S≥λ}
[M(t
n
)[dP. We have obviously
_
A
n
[M(t
n
)[dP ≥ λP(A
n
).
Now we estimate
_
A
n−1
[X(t
n
)[dP. We have, recalling that [M(t)[ is a sub–
martingale,
λP(A
n−1
) ≤
_
A
n−1
[M(t
n−1
)[dP ≤
_
A
n−1
[M(t
n
)[dP.
Therefore
_
A
n−1
[M(t
n
)[dP ≥ λP(A
n−1
).
Proceeding in a similar way we obtain
_
A
k
[M(t
n
)[dP ≥ λP(A
k
), k = 1, . . . , n. (C.2)
Summing up on k from 1 to n the conclusion follows.
C.3 Square integrable martingales
In this section we are given a martingale M(t) such that M(t) ∈ L
2
(Ω, F, P)
for all t ∈ [0, T].
Let 0 < t
1
< t
2
< ... < t
n
≤ T and set as before
S = sup
1≤i≤n
[M(t
i
)[.
We are going to estimate of E[S
2
] in terms of E[M
2
(t
n
)].
130 Martingales
Proposition C.5 We have
E
_
sup
1≤i≤n
[M(t
i
)[
2
_
≤ 4E([M(t
n
)[
2
). (C.3)
Proof. Set
F(t) = P(S > t), t ≥ 0.
By (C.1) we have
F(t) ≤
1
t
_
{S≥t}
[M(t
n
)[dP. (C.4)
Consequently
E(S
2
) =
_
∞
0
P(S
2
> t)dt =
_
∞
0
P(S >
√
t)dt.
So, by (C.1) and the Fubini Theorem we have
E(S
2
) ≤
_
∞
0
_
1
√
t
_
{S≥
√
t}
[M(t
n
)[dP
_
dt
=
_
[0,+∞)×Ω
1
√
t
[M(t
n
)[1l
{S≥
√
t}
P(dω)dt
=
_
Ω
[M(t
n
)[P(dω)
_
∞
0
1
√
t
1l
{S≥
√
t}
dt
=
_
Ω
[M(t
n
)[P(dω)
_
S
2
0
1
√
t
dt
= 2
_
Ω
[M(t
n
)SP(dω) ≤ 2
__
Ω
[M(t
n
)[
2
dP
_
1/2
__
Ω
S
2
dP
_
1/2
.
Now the conclusion follows easily.
Corollary C.6 Let M be a square integrable continuous martingale. Then
for any T > 0 we have
E
_
sup
t∈[0,T]
[M(t)[
2
_
≤ 4E[M
2
(T)]. (C.5)
Appendix C 131
Proof. Let 0 < s
1
< s
2
< < s
m
= T. By Proposition C.5 it follows that
E
_
sup
1≤i≤m
[M(s
i
)[
2
_
≤ 4E
_
[M(T)[
2
¸
.
Since M is continuous it follows, by the arbitrariness of the sequence s
1
, s
2
, . . . , s
m
,
that
E
_
sup
s∈[0,T]
[M(s)[
2
_
≤ 4E
_
[M(T)[
2
¸
,
as required.
132 Martingales
Appendix D
Fixed points depending on
parameters
D.1 Introduction
Let Λ, E be Banach spaces (norms [ [). We are given a continuous mapping
F : Λ E → E, (λ, x) → F(λ, x)
and assume that
Hypothesis D.1 There exists κ ∈ [0, 1) such that
[F(λ, x) −F(λ, y)[ ≤ κ[x −y[, ∀ λ ∈ Λ, x, y ∈ E.
The following result (contraction principle) is classical.
Theorem D.1 (i). There exists a unique continuous mapping
x : Λ → E, λ → x(λ),
such that
x(λ) = F(λ, x(λ)), ∀ λ ∈ Λ. (D.1)
(ii). If in addition F is of class C
1
, then x is of class C
1
and
x
(λ) = F
λ
(λ, x(λ)) + F
x
(λ, x(λ))x
(λ). (D.2)
We want to generalize the second part of this result to mappings F(λ, x)
which are only continuously Gˆateaux diﬀerentiable.
133
134 Fixed points
D.2 Gˆateaux diﬀerentiable mappings
Let A and B be Banach spaces and let Φ : A → B be a continuous mapping
from A into B.
Deﬁnition D.2 We say that Φ is Gˆ ateaux diﬀerentiable if there exists a
mapping
DΦ : A → L(A, B), a → DΦ(a),
such that
lim
ξ→0
1
ξ
(Φ(a + ξc) −Φ(a)) = DΦ(a)c, ∀ a, c ∈ A.
If in addition for all c ∈ A the mapping A → B, a → DΦ(a)c is continuous
we say that Φ is continuously Gˆ ateaux diﬀerentiable.
Remark D.3 It is well known that if the mapping A → L(A, B), a →
DΦ(a) is continuous then Φ is diﬀerentiable.
(1)
Example D.4 Let A, B = L
2
(0, 1) and Φ(x) = sin x. Then one can check
easily that Φ is continuously Gˆ ateaux diﬀerentiable and
DΦ(x)y = y cos x, ∀ x, y ∈ L
2
(0, 1).
However, (as one can see) Φ is not diﬀerentiable in any point.
We shall need the following result.
Proposition D.5 Let Φ : A → B be continuously Gˆateaux diﬀerentiable.
Then the following identity holds
Φ(c) −Φ(a) =
_
1
0
DΦ((1 −ξ)a + ξc)(c −a)dξ. (D.3)
Proof. Set
F(ξ) = Φ((1 −ξ)a + ξc), ξ ∈ [0, 1].
Then we have
F
(ξ) = DΦ((1 −ξ)a + ξc)(c −a)dξ,
and the conclusion follows just integrating this identity between 0 and 1.
(1)
One also says that Φ is Fr´echet diﬀerentiable.
Appendix D 135
D.3 The main result
We can back to the notations of the introduction and consider two Banach
spaces Λ and E and a continuous mapping
F : Λ E → E, (λ, x) → F(λ, x).
We assume that Hypothesis D.1 is fulﬁlled and denote by x the mapping
x : Λ → E, λ → x(λ),
such that
x(λ) = F(λ, x(λ)), ∀ λ ∈ Λ. (D.4)
Theorem D.6 Assume that Hypotheses D.1 is fulﬁlled and that F is con
tinuously Gˆateaux diﬀerentiable. Then x() is continuously Gˆateaux diﬀeren
tiable as well and we have
x
(λ) µ = (1 −F
x
(λ, x(λ)))
−1
F
λ
(λ, x(λ)) µ, (D.5)
equivalently
x
(λ) µ = F
λ
(λ, x(λ)) µ + F
x
(λ, x(λ))(x
(λ) µ). (D.6)
Proof. Let λ, µ ∈ Λ and h ∈ R. From (D.4) and (D.3) it follows that
x(λ + hµ) −x(λ) = F(λ + hµ, x(λ + hµ)) −F(λ, x(λ))
= h
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ
+
_
1
0
F
x
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) (x(λ + hµ) −x(λ))dξ.
(D.7)
Set now
G(λ, x, µ, h)z = Gz :=
_
1
0
F
x
(λ+ξhµ, x(λ)+ξ(x(λ+hµ)−x(λ)))zdξ, z ∈ E.
Then G ∈ L(E) and by Hypothesis D.1
[Gz[ ≤ κ[z[, ∀ z ∈ E.
136 Fixed points
Then from equation (D.7) we have
(1 −G(λ, x, µ, h))(x(λ + hµ) −x(λ))
= h
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ,
which implies
1
h
x(λ + hµ) −x(λ)) = (1 −G(λ, x, µ, h))
−1
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ.
Letting h → 0 we ﬁnd
x
(λ) µ = (1 −F
x
(λ, x(λ)))
−1
F
λ
(λ, x(λ)).
Therefore
x
(λ) µ −F
x
(λ, x(λ))(x
(λ) µ) = F
λ
(λ, x(λ)).
Appendix E
Fractional Sobolev spaces and
regularity of processes
E.1 Fractional Sobolev spaces on [0, 1]
Let ∈ (0, 1), m ∈ N. Deﬁne
f
2m
,2m
:=
_
[0,T]
2
[f(t) −f(s)[
2m
[t −s[
1+2m
dt ds
W
,2m
(0, T) is by deﬁnition the space of all f : [0, T] →R such that f
,2m
<
+∞.
Theorem E.1 (Sobolev embedding) Assume that > 1/(2m). Then the
following inclusion holds with continuous embedding.
W
,2m
(0, T) ⊂ C
−1/(2m)
([0, T]). (E.1)
Example E.2 (The Brownian motion) Let > 0 and let p ≥ 1. We ask
the question whether B() belongs to W
,p
(0, T) or not.
Let us compute
E(B
p
W
,p) = E
_
[0,T]
2
[B(t) −B(s)[
p
[t −s[
1+p
dt ds
Take for simplicity p = 2m, then
E
_
B
2m
W
,2m
_
= E
_
[0,T]
2
[B(t) −B(s)[
2m
[t −s[
1+2m
dt ds
= c
m
_
[0,T]
2
[t −s[
m
[t −s[
1+2m
dt ds = c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds
137
138 Fractional Sobolev spaces
The integral is ﬁnite if and only if <
1
2
.
For instance taking m = 1 we conclude that B() ∈ W
,2
(0, T) for <
1
2
.
This does not imply that B() is continuous.
But if we take m = 2 we have B() ∈ W
,4
(0, T) again for <
1
2
. Therefore
if
1
4
< <
1
2
we conclude by the Sobolev embedding that B() ∈ C
−
1
4
(0, T).
Arguing similarly taking larger m we conclude that B() ∈ C
α
(0, T) for
any α ∈ (0, 1/2).
E.2 Processes belonging to W
,2m
(0, T)
Let (Ω, F, P) be probability space and let X(t), t ∈ [0, T], be a real stochastic
process on (Ω, F, P). One situation often encountered is when the following
estimate holds for some m > 1, ∈ (0, 1/2), and c
m
> 0
E[[X(t) −X(s)[
2m
] ≤ c
m
[t −s[
m
, ∀ t, s ∈ [0, T]. (E.2)
This estimate (provided m > 1) allows us to conclude that trajectories of X
are H¨older continuous almost surely, as the next proposition shows.
Proposition E.3 Assume that there is m > 1, ∈ (0, 1/2), and c
m
> 0
such that (E.2) is fulﬁlled. Then we have
E
_
[X[
2m
,2m
¸
< +∞. (E.3)
Moreover, X(, ω) belongs to C
−1/(2m)
([0, T]) for almost ω ∈ Ω.
Proof. We have in fact
E
_
X
2m
,2m
_
≤ c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds < ∞,
since ∈ (0, 1/2) and m− 1 − 2m > −1. The last statement follows from
the Sobolev embedding theorem.
Remark E.4 Kolomogorov test It is a generalization Proposition E.3. As
sume that there is a > 0, b > 0 such that
E[[X(t) −X(s)[
1+a
] ≤ c
m
[t −s[
1+b
∀ t, s ∈ [0, T]. (E.4)
Then X has αH¨ older continuous trajectories with α <
1+b
a
.
Appendix F 139
E.3 Multi dimensional Sobolev spaces and reg
ularity of random ﬁelds
Let ∈ (0, 1), m ∈ N, d ∈ N. Deﬁne
f
2m
,2m
:=
_
[0,T]
2d
[f(x) −f(y)[
2m
[x −y[
d+2m
dx dy.
W
,2m
([0, T]
d
) is by deﬁnition the space of all f : [0, T]
d
→ R such that
f
,2m
< +∞.
Theorem E.5 (Sobolev embedding) Assume that > d/(2m). Then the
following inclusion holds with continuous embedding.
W
,2m
([0, T]
d
) ⊂ C
−d/(2m)
([0, T]
d
). (E.5)
Let (Ω, F, P) be probability space and let X(x), x ∈ [0, T]
d
, be a random
ﬁeld on (Ω, F, P).
Assume that there is m > 1, ∈ (0, 1), and c
m
> 0
E[[X(x) −X(y)[
2m
] ≤ c
m
[t −s[
2m
, ∀ t, s ∈ [0, T]. (E.6)
This estimate implies that almost all trajectories of X are H¨ older continuous
almost surely.
Proposition E.6 Assume that there is m > 1, ∈ (0, 1), and c
m
> 0 such
that (E.2) is fulﬁlled. Then we have
E
_
[X[
2m
,2m
¸
< +∞. (E.7)
Moreover, X(, ω) belongs to C
−d/(2m)
([0, T]) for almost ω ∈ Ω.
Proof. We have in fact
E(X
2m
,2m
) ≤ c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds < ∞,
since ∈ (0, 1/2) and m− 1 − 2m > −1. The last statement follows from
the Sobolev embedding theorem.
Contents
1 Gaussian measures in Hilbert spaces 1.1 Some concepts of Probability . . . . . . . . . . . 1.1.1 Random variables . . . . . . . . . . . . . . 1.1.2 Product measures . . . . . . . . . . . . . . 1.2 Probability measures in Hilbert spaces . . . . . . 1.2.1 Mean and covariance . . . . . . . . . . . . 1.2.2 Finite dimensional projections of measures 1.3 Gaussian probability measures . . . . . . . . . . . 1.3.1 Gaussian probability measures in R . . . . 1.3.2 Gaussian probability measures in Rn . . . 1.3.3 Gaussian probability measures in H . . . . 1.3.4 Computation of some Gaussian integrals . 1.3.5 The Cameron–Martin space . . . . . . . . 3 3 3 5 5 5 7 9 9 10 11 11 13 17 17 18 18 21 21 22 23 23 25 27 27 28 29 29 31
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2 Gaussian random variables 2.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Independence . . . . . . . . . . . . . . . . . . . . . . 2.2.1 Independent real variables . . . . . . . . . . . 2.2.2 Independent Gaussian random variables . . . 2.3 Gaussian random variables deﬁned in a Hilbert space 2.3.1 Aﬃne changes of variables . . . . . . . . . . . 2.4 The white noise function . . . . . . . . . . . . . . . . 2.4.1 Equivalence classes of random variables . . . . 2.4.2 Deﬁnition of the white noise function . . . . . 3 Brownian Motion 3.1 Stochastic Processes . . . . . . . . . . . . . . 3.2 Brownian motion . . . . . . . . . . . . . . . . 3.2.1 Construction of a Brownian motion . . 3.2.2 Some properties of a Brownian motion 3.3 Wiener integral . . . . . . . . . . . . . . . . . i
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ii 3.4 3.5 Continuity of Brownian motion . . . . . . . . . . . . . The standard Brownian motion . . . . . . . . . . . . . 3.5.1 Some properties of C0 . . . . . . . . . . . . . . 3.5.2 The Wiener measure and the standard Brownian Quadratic variation of the Brownian motion . . . . . . Multidimensional Brownian motions . . . . . . . . . . . . . . . . . . . . . . . motion . . . . . . . . 35 36 37 37 39 41 43 43 44 46 49 50 51 52 53 56 57 58 59 61 61 61 63 66 67 70 70 71 72
3.6 3.7
4 Markov property of the Brownian motion 4.1 Filtration . . . . . . . . . . . . . . . . . . . . . . 4.1.1 Ft measurable random variables . . . . . . 4.2 Stopping times . . . . . . . . . . . . . . . . . . . 4.3 The Brownian motion W (t + τ ) − W (τ ) . . . . . 4.4 Transition semigroup . . . . . . . . . . . . . . . . 4.5 Markov property . . . . . . . . . . . . . . . . . . 4.5.1 Strong Markov property . . . . . . . . . . 4.6 Some consequences of the strong Markov property 4.7 Application to partial diﬀerential equations . . . . 4.7.1 The Dirichlet problem in the halfline . . . 4.7.2 The Neumann problem . . . . . . . . . . . 4.7.3 The Ventzell problem . . . . . . . . . . . . 5 The Itˆ integral o 5.1 Deﬁnition of Itˆ’s integral . . . . . . . . . . . . . o 5.1.1 Itˆ’s integral for elementary processes . . . o 5.1.2 General deﬁnition of Itˆ’s integral . . . . . o 5.2 Itˆ integral for mean square continuous processes o 5.3 The Itˆ integral as a stochastic process . . . . . . o 5.4 Itˆ integral with stopping times . . . . . . . . . . o 5.4.1 Stopping times . . . . . . . . . . . . . . . 5.4.2 Itˆ’s integral with stopping times . . . . . o 5.5 Multidimensional Itˆ integrals . . . . . . . . . . . o
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. . . . . . . . .
6 The Itˆ formula o 75 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 6.1.1 The Itˆ formula for unbounded functions . . . . . . . . 82 o 6.2 Itˆ’ formula for a vector valued process . . . . . . . . . . . . . 84 o 7 Stochastic evolution equations 89 7.1 Existence and uniqueness . . . . . . . . . . . . . . . . . . . . . 90 7.1.1 Solution of the stochastic diﬀerential equation in the space CB ([s, T ]; L2m (Ω; Rd )). . . . . . . . . . . . . . . 94
.4. . . . . . . . . . . . . 115 . . . 124 C Martingales 127 C. .2 Basic properties . . . . . . . . . . . . 133 .2 Existence of Xxx (t. . . 113 . . . . . x) . .5. . 105 7. . . . . 118 121 7. . . . . . . .3 Diﬀerential stochastic equations with random coeﬃcients 96 Continuous dependence on data . . . . . . . . . . . . . . . . . . . . . . A λsystems and πsystems . . .4. s. . . . T ) . . . . . . . . . .1 The deterministic case . . .1 Autonomous case . . . . .1 Introduction . . . . . . . . 100 o Diﬀerentiability of X(t.2 Gˆteaux diﬀerentiable mappings . .3 Square integrable martingales . . .4. . . .1 The autonomous case . 8. . 129 D Fixed points depending on parameters D. . . . 8. 135 E Fractional Sobolev spaces and regularity of processes 137 E. . . . . .2 The basic inequality for martingales . . . . . . s. . . . . . . . . 106 7. . .2 The stochastic case . . . . . . . a D. . . . . . . .3 7. . . . . . . . . . . . . . .2m (0. . . . . . . . . . . . . . .1 7. . . . .1 Continuous dependence on mean square . . . . . . 107 o 111 . . . . . . . . . . 133 . . . . . . . . . . . . . .4 Parabolic equations . . . . . . . . . . . . . . . . . . . . . . . x) . . . . . 101 7. 97 7. . . .1. . . 111 . . . . . . . . . . . . . . . . . 138 . . . . . s. . 8. . . . . . . . . . . . . . . . . .4 7. . . . 94 7. 116 . . . . . . . . . . . 128 C. . 8. . . . . .1 Fractional Sobolev spaces on [0. . . 101 7. . . . .5 8 Kolmogorov equations 8. . . . 97 Almost sure continuity and h¨lderianity of trajectories . . . . . . D. . . . . .1 The deterministic case . . . . . . . . . . . . . . . .3 The main result . . . . . . . . . . . 114 . . . . . 105 o 7. . . . . . . . . . . . . . .2 7. . . . . . . . . . . . . . . B Conditional expectation 123 B. . . . . . . . . . . . . . . .2 Stochastic case . . . .1. x) with respect to x . . . 127 C. . . .2. . . . . . . . . . 8. . . . . . . . . . . . . . . .1 Deﬁnitions . . . . 1] . . . . .2 Processes belonging to W . s. . . . . . . .3 Basic properties of transition operators 8. . . . . . . . . . . . . .1 Deﬁnition . . . 123 B. . . . . .3 Backward Itˆ’s formula . . .1. . . . . . . . . . . . . . . . . . 102 Itˆ Diﬀerentiability of X(t. . . . . . . . .5. . . . . .2 Examples . .5 Examples . . . . . 117 . . 134 . x) with respect to s.5. . . . . . . . . . .1 Existence of Xx (t. . . . . . 137 E. . . .
2 E. . . . . . . . . . . . . . . . . . . . . . . . . . . 139 .3 Multi dimensional Sobolev spaces and regularity of random ﬁelds . . . . . .
T y for all x. we shall denote by Cb (H) the space of all functions ϕ : H → R which are continuous and bounded. Next section is devoted to some basic facts from Measure Theory and Probability needed in what follows.Chapter 1 Gaussian measures in Hilbert spaces We shall denote by H a real separable Hilbert space (with inner product ·. Cb (H). endowed with the norm ϕ 0: = sup ϕ(x). y = x. 1. · and norm  · ). y ∈ H. P) be a probabilty space and let E be a Polish (complete separable metric) space. The elements of B(E) are called Borel sets. positive if T x. F . Finally. The set of all symmetric and positive elements of L(H) will be denoted by L+ (H). We recall that T ∈ L(H) is said to be symmetric if T x. x=1 T x. 3 .1 1. we shall denote by B(E) the σ–algebra generated by all closed (or equivalently open) subsets of E. x∈H is a Banach space.1 Some concepts of Probability Random variables Let (Ω. x ≥ 0 for all x ∈ H. endowed with the norm T = sup x∈H.1. and by L(H) the Banach algebra of all linear bounded operators T : H → H.
l with n ∈ N. Let ﬁrst ϕ = 1 I with I ∈ B(E) l ϕ(X(ω)) = 1 X −1 (I) (ω).4 Chapter 1 By an Evalued random variable in (Ω. Sometimes we shall use the notation X# P = PX . F .1 Let X be an Evalued random variable in (Ω. Since any positive Borel functions is the limit of an increasing sequence of positive simple functions. such that I ∈ B(E) ⇒ X −1 (I) ∈ F .. (1. B(E)) deﬁned as (X# P)(I) = P(X −1 (I)). In this case we have ∀ ω ∈ Ω. Let us prove the following basic change of variables formula. Then we have ϕ(X(ω))P(dω) = Ω E (1) ϕ(x)(X# P)(dx). (1. . Theorem 1. F ) we mean a mapping X : Ω → E. Let moreover ϕ : E → R be a nonnegative Borel function.1) Proof. ω → X(ω). The law (or image measure or pushforward measure) of X is the probability measure X# P on (E. l / ... . ϕ(X(ω))P(dω) = P(X −1 (I)) = X# P(I) = Ω E ϕ(x)X# P(dx). ∀ I ∈ B(E). cn ≥ 0 and I1 . . (1) 1 I (ω) is the characteristic function of I. Consequently. l So. the conclusion follows from the monotone convergence theorem.1) holds for all simple functions ϕ of the form n ϕ= i=1 ci 1 I i . In ∈ B(E)... c1 . P).. it is equal to 1 if ω ∈ I to 0 if ω ∈ I.
i = 1.. be probability spaces. it is denoted by n Fi .2 1. n. n. Pi ). h µ(dx). . One can show that P can be uniquely extended to a probability measure on (Ω. h µ(dx). h = H x. P2 ...1. ∀ h ∈ H. Pn . F ) which is called the product probability of P1 . x2 µ(dx) < +∞.. m is called the mean of µ.. Fi .1 Probability measures in Hilbert spaces Mean and covariance Let µ be a probability measure on (H. .. by deﬁnition. H . Assume now that the second moment of µ is ﬁnite. . We shall write m= H xµ(dx). By the Riesz representation theorem there exists m ∈ H such that m. A meai=1 surable rectangle of Ω is. . xµ(dx) < +∞. i=1 For any R = n Ai we deﬁne i=1 n P(R) := i=1 Pi (Ai ). Set Ω = n Ωi . ∀ h ∈ H. Fn . B(H))... Assume that µ has ﬁnite ﬁrst momentum. i = 1.. is continuous since F (h) ≤ H xµ(dx) h.2 Product measures Let (Ωi . H Then the linear functional F : H → R deﬁned as F (h) = H x. 1. The σalgebra generated by all measurable rectangles is called the product σalgebra of Fi . ∀ h ∈ H.2.Gaussian measures 5 1.. 2. a set of the form R = n Ai where i=1 Ai ∈ Fi ...
k ∈ H. One can show that any trace class operator Q is compact and that Tr Q is the sum of its eigenvalues repeated according to their multiplicity. k ∈ N.T. To prove that Q is of trace class choose a complete orthonormal system (ek ) in H. ek < +∞ for one (and consequently for any) complete orthonormal system (ek ). k ∈ H. x − m k. It is also possible to deﬁne traceclass operators which are not symmetric. Dunford and J. Therefore. Schwartz. g. see e.6 Chapter 1 (so that the ﬁrst one is ﬁnite as well). Q is called the covariance of µ. In order to state the next result we need the concept of trace class operator. Therefore there is a unique linear bounded operator Q ∈ L(H) such that Qh. k = H h. k) = H h. Symmetry and positivity of Q are clear. Linear Operators. x − m µ(dx). Interscience. k ∈ H. Let us consider the bilinear form G : H × H → R deﬁned as G(h. k) ≤ H x − m2 µ(dx) h k. x − m k. we ﬁnd that ∞ Tr Q = k=1 (2)  x − m. Part II. but we shall not need in what follows. 1964. ∀ h. ek 2 µ(dx) = H H x − m2 µ(dx) < +∞. (2) Proposition 1. positive and of trace class. by the monotone convergence theorem and the Parseval identity. Then we have Qek . x − m µ(dx). N. G is continuous since G(h. ek = H  x − m. ∀ h. A symmetric and positive operator Q ∈ L(H) is said to be of trace class if ∞ Tr Q : = k=1 Qek . Proof. .2 The covariance operator Q of µ is symmetric. ek 2 µ(dx). ∀ h.
Proposition 1. for all ϕ ∈ Cb (R). B(Pn (H)). setting µn (I) = µn (I ∩ Pn (H)). x ∈ H. B(H). We ﬁnally deﬁne the Fourier transform µ of a probability measure µ setting µ(h) = H ei x. ∀ h ∈ H. For this we ﬁrst need the following result.3 Let µ.Gaussian measures 7 We shall denote by L+ (H) the set of all positive. ν ∈ P(H) be such that ϕ(x)µ(dx) = H H ϕ(x)ν(dx). We shall also consider µn as a probability measure on (H. symmetric operators in 1 H of trace class. ∀ ϕ ∈ Cb (H). We want now to show that µ is determined by the sequence (µn ).4) Then µ = ν. For any n ∈ N we consider the projection Pn : H → Pn (H) deﬁned as n Pn x = k=1 x. µn ). Thus µn is a probability measure on (Pn (H). Proof. Let C ⊂ H be closed and let (ϕn ) ⊂ Cb (H) be such that (i) lim ϕn (x) = 1 C (x) for all x ∈ H. ∀I ∈ B(H).2 Finite dimensional projections of measures We are given a probability measure µ ∈ P(H).2. l n→∞ . ek ek . (1. (1. 1.3) We have limn→∞ Pn x = x for all x ∈ H. µ).2) One checks easily that µ : H → C is continuous. Let (ek ) be a complete orthonormal system in H. For any n ∈ N we consider the measure µn := (Pn )# µ deﬁned by ϕ(Pn x)µ(dx) = H Hn ϕ(y)µn (dy).h µ(dx). (1.
by the dominate convergence theorem it follows that lim ϕn dµ = lim H n→∞ n→∞ ϕn dν = µ(C) = ν(C). Proposition 1. we conclude that ϕ(x)µ(dx) = H H ϕ(x)ν(dx) for all ϕ ∈ Cb (H). We can now prove the announced result. 1 if x ∈ C. ν ∈ P(H) be such that µ(h) = ν(h) for all h ∈ H. we have ϕ(x)µ(dx) = lim H n→∞ ϕ(Pn x)µ(dx) = lim H n→∞ ϕ(ξ)((Pn )# µ)(dξ) Pn (H) and ϕ(x)ν(dx) = lim H n→∞ ϕ(Pn x)ν(dx) = lim H n→∞ ϕ(ξ)((Pn )# ν)(dξ). Let ϕ ∈ Cb (H). C) ≥ n . Then. Pn (H) Since (Pn )# µ = (Pn )# ν by assumption. Now. Proof. . Proposition 1. As an application of Proposition 1.4 we prove that the Fourier transform of µ determines µ. using the dominated convergence theorem and the change of variables formula.3 we have µ = ν. C) if d(x. H Since closed sets generate the Borel σ–algebra of H this implies that µ = ν.5 Let µ.4 Let µ. in view of Proposition 1. 1 1 − n d(x. A sequence (ϕn ) ⊂ Cb (H) fulﬁlling (i) and (ii) is provided by. If (Pn )# µ = (Pn )# ν for any n ∈ N we have µ = ν. Therefore.8 (ii) ϕn 0 Chapter 1 ≤ 1 for all ∈ N. C) ≤ n ϕn (x) = 1 0 if d(x. Then µ = ν. ν ∈ P(H).
for all B ∈ B(R). 1.Pn h (Pn )# µ(dξ) = (Pn )# µ(Pn h) and ν(Pn h) = H ei x. q) with m ∈ R and q ≥ 0 we deﬁne a probability measure Nm.Pn h ν(dx) = Pn (H) ei Pn ξ. 1968. B(R)) as follows.3. Notions fondamentales de la th´orie des probabilit´es.0 = δm . where δm is the Dirac measure at m. µ(Pn h) = H (3) 9 .g.1 Gaussian probability measures in R For any pair of real numbers (m.q is a probability measure since Nm. then we go to the general case. deﬁned for all B ∈ B(R) by 1 if m ∈ B.3 Gaussian probability measures We ﬁrst recall the deﬁnition of Gaussian measure on (R.q on (R. We assume as granted the result when H is ﬁnitedimensional the general case we have by (1. δm (B) = 0 if m ∈ B. e . In ei x. Nm. B(R)). 1. M. Therefore measures (Pn )# µ and (Pn )# ν have the same Fourier tranforms and so they coincide. If q = 0 we set Nm. M´tivier.Pn h µ(dx) = Pn (H) ei Pn ξ.Gaussian measures Proof.q (B) = √ 2πq e− B (x−m)2 2q dx. / If q > 0 we set 1 Nm.q (R) = √ (3) 1 2πq +∞ e− −∞ (x−m)2 2q 1 dx = √ 2π +∞ −∞ e− 2 dx = 1.1) for any h ∈ H and n ∈ N.4. x2 See e. The conclusion follows from Proposition 1.Pn h (Pn )# ν(dξ) = (Pn )# ν(Pn h). Dunod e e e Universit´.
.x−a dx. en ) be an orthonormal basis on Rn such that Qek = λk ek . Na.Q is absolutely continuous with respect to the Lebesgue measure in Rn and we have Na.. Q ∈ L+ (Rn ) and µ = Nm.10 Chapter 1 If q > 0. 2πq When m = 0 we shall write for short Nq instead N0. z . mn ) ∈ Rn and any Q ∈ L+ (Rn ).3.Q . . The proof of the following proposition is easy... its Fourier transform is given by Nm. x − a z. h ∈ R.q (dx) = eimh− 2 qh . it is left to the reader. x − a µ(dx) = Qy. . Then we deﬁne a probability measure Na. . Then we have xµ(dx) = m. Let Q ∈ L+ (Rn ) and let (e1 .q is absolutely continuous with respect to the Lebesgue measure 1 (dx) = dx in (R.. for some λk ≥ 0. Finally.x µ(dx) = ei a. 1 2 (1.Q is given by Na. Moreover. z ∈ Rn .q . .Q (h) := Rn ei h. B(R) and Nm.h − 2 1 Qh. When m = 0 we shall write NQ instead of Nm.Q (dx) = 1 (2π)d det Q e− 2 1 Q−1 (x−a).Q for any m = (m1 . Proposition 1. Nm.. k = 1..q . Moreover the Fourier tranform of Na.5) 1.q (dx) = √ (x−m)2 1 e− 2q dx. It is easy to see that m is the mean and q the covariance of Nm. Rn y.q (h) := R eihx Nm.Q on (Rn .λk .6 Let m ∈ Rn .Q = ×N k=1 n mk ..Q .2 Gaussian probability measures in Rn We are going to deﬁne a Gaussian measure Nm.h . Therefore m is the mean and Q the covariance operator of Na. h ∈ Rn . if the determinant of Q is positive. B(Rn )) by setting Nm.Q for short.. n. Rn y.
. covariance Q and Fourier transform given by Nm.. .Gaussian measures 11 1. Hint.3.3. e1 .g.6) One can show that such a measure does exist Proposition 1. Show that the Fourier transform of µn is given by µn (h) = ei (4) Pn k=1 1 mk hk − 2 e Pn k=1 λk h2 k .Q ∈ P(H). We denote by Nm.3 Gaussian probability measures in H Let m ∈ H and Q ∈ L+ (H). ..Q the probability measure on 1 (H.λk .Q (h) = ei m. G. 2006. Pn x = k=1 x. B(H)) of mean m. en ). Since Q is compact there exists an orthonormal complete system (ek ) in H and a sequence of nonnegative numbers (λk ) such that Qek = λk ek . More precisely.Q in an inﬁnite dimensional Hilbert space H it is useful to reduce the computation to integrals on a sequence (Hn ) of ﬁnite dimensional vector spaces convergent to H and then to let n → ∞. SpringerVerlag.4 Computation of some Gaussian integrals To compute some integrals with respect to a Gaussian measure µ = Nm. it is unique thank’s to 1. en ..h − 2 1 Qh. For any n ∈ N we set mn := m. Exercise 1. x = k=1 n x.7 Prove that µn = (Pn )# µ = ×N i=1 n mk . given µ = Nm. Da Prato.5. An introduction to inﬁnitedimensional analysis. see e. we shall proceed as follows. ek ek . x. n ∀ k ∈ N.h . ek ek → ( x. n Pn (H) → R . ∀x∈H and identify Pn (H) with Rn through the isomorphism. Berlin. (4) (1. h ∈ H.
λ1 (1. ek ek . taking into account Exercise 1. ε 2 e 2 x µ(dx) = H +∞. ε 2 Since Pn x2 ↑ x2 as n → ∞ and. We have in fact.m . e 2 xk Nmk . .12 Chapter 1 We shall assume (which is always true after a rearrangement) that λ1 ≥ λ2 ≥ · · · λn ≥ · · · . Write log ∞ ∞ (1 − ελk ) k=1 = k=1 log(1 − ελk ) ∞ k=1 and show that the series is convergent since λk < +∞. Proposition 1. (1 − εQ) x = 1 − ελk k=1 In this case we can deﬁne the determinant of (1 − εQ) by setting n ∞ det(1 − εQ) : = lim Exercise 1. 1 To formulate the next result notice that for any ε < λ1 .λk (dxk ) = √ R ε 2 1 −ε e 2 1 − ελk m2 k 1−ελk . x ∈ H.λk (dξk ). if ε < 1 . as easily checked.7 n e H ε P x2 2 n µ(dx) = Pn (H) e ε P ξ2 2 n µn (dξ) = k=1 R e 2 ξk Nmk .7) Proof. the conclusion follows from the monotone convergence theorem. otherwise. ∞ 1 −1 x.8 Prove that ∞ n→∞ (1 − ελk ) := k=1 (1 − ελk ). k=1 Hint.9 Let ε ∈ R. For any n ∈ N we have. Then we have ε −1 [det(1 − εQ)]−1/2 e 2 (1−εQ) m. k=1 (1 − ελk ) > 0. the linear operator 1 − εQ is invertible and (1 − εQ)−1 is bounded. by an elementary computation.
Gaussian measures Exercise 1.10 Prove that for all m ∈ N Jm :=
H
13
x2m µ(dx) < ∞
and compute Jm . Hint. Notice that Jm = 2m F (m) (0), where F (ε) =
H
e 2 x µ(dx),
ε
2
ε > 0.
Proposition 1.11 We have e h,x µ(dx) = e a,h e 2
H
1
Qh,h
, h ∈ H.
(1.8)
Proof. For any ε > 0 we have e h,x ≤ ex h ≤ eεx e ε h . Choosing ε <
1 , λ1
2 1 2
we have, by the dominated convergence theorem, that
n→∞
e h,x µ(dx) =
H
lim
e h,Pn x µ(dx) = lim
H
1
n→∞
e h,Pn ξ µn (dx)
Pn (H)
1
=
n→∞
lim e Pn m,h e 2
Pn Qh,h
= e m,h e 2
Qh,h
.
1.3.5
The Cameron–Martin space
We are given a Gaussian measure µ = NQ , where Q ∈ L+ (H). We say that 1 µ is non degenerate if Ker Q := {x ∈ H : Qx = 0} = {0}. Thus, if H is ﬁnitedimensional µ is non degenerate if and only if det Q > 0. Assume now that H is inﬁnitedimensional and that µ is non degenerate. We denote by (ek ) a complete orthonormal system in H such that Qek = λk ek , k ∈ N, where (λk ) are the eigenvalues of Q and we set xk = x, ek , k ∈ N. We notice that the inverse Q−1 of Q (which is well deﬁned since Ker Q = {0}) is not continuous because, Q−1 ek = 1 ek , λk k∈N
and λk → 0 as k → ∞. Consequently, recalling the closed graph theorem, we see that the range Q(H) does not coincide with H. However, it is dense in H as the following lemma shows.
14 Lemma 1.12 Q(H) is a dense subspace of H.
Chapter 1
Proof. In fact if x0 is an element of H orthogonal to Q(H), we have Qx, x0 = x, Qx0 = 0, ∀ x ∈ H, which yields Qx0 = 0, and so x0 = 0 because Ker(Q) = {0}. It is useful to introduce the operator Q1/2 deﬁned as
∞
Q1/2 x =
k=1
λk x, ek ek ,
x ∈ H.
Its range Q1/2 (H) is called the Cameron–Martin space of the measure µ. Arguing as before we see that Q1/2 (H) is a subspace of H diﬀerent of H and dense in H. Moreover it is clear that x ∈ Q1/2 (H) if and only if,
∞
λ−1 x2 < +∞. k k
k=1
It is important to notice that the measure of the Cameron–Martin space is zero. Proposition 1.13 We have µ(Q1/2 (H)) = 0. Proof. For any n, k ∈ N set
∞
Un = and
y∈H:
h=1
2 λ−1 yh < n2 h
= {y ∈ Q1/2 (H) : Q−1/2 y < n},
2k
Un,k =
1/2
y∈H:
h=1
2 λ−1 yh < n2 h
.
Clearly Un ↑ Q (H) as n → ∞, and for any n ∈ N, Un,k ↓ Un as k → ∞. So, it is enough to show that µ(Un ) = lim µ(Un,k ) = 0.
k→∞
(1.9)
We have in fact µ(Un,k ) =
{y∈H:
P2k
−1 2 2 h=1 h=1 λh yh <n }
×N
2k
λk (dyk ),
Gaussian measures which, setting zh = λh
−1/2
15 yh is equivalent to NI2k (dz),
µ(Un,k ) =
{z∈R2k :z<n}
where I2k is the identity in R2k . Let us compute µ(Un,k ). We have µ(Un,k ) µ(Un,k ) = = µ(H) Therefore 1 µ(Un,k ) = (k − 1)! and (1.9) follows.
n2 /2 n − r2 2k−1 e 2r dr 0 2 +∞ − r 2k−1 e 2r dr 0
=
n2 /2 −ρ k−1 e ρ dρ 0 . +∞ −ρ k−1 e ρ dρ 0
e ρ
0
−ρ k−1
1 dρ ≤ (k − 1)!
n2 /2
ρ
0
k−1
1 dρ = k!
n2 2
k
,
16 Chapter 1 .
X : Ω → H a random variable such that X(ω)2 P(dω) < ∞. ∀ h. that is if X# P(h) = ei m(X).h P(dω).1 Notations Let (Ω. H a separable Hilbert space. h X(ω) − m(X).Chapter 2 Gaussian random variables 2.h . 17 . P) be a probability space. By the change of variables formula it follows that the Fourier transform of X# P is given by X# P(h) = Ω ei X(ω). In this case we call m(X) the mean and Q(X) the covariance of X. k = Ω X(ω) − m(X). by m(X) the mean of X# P and by Q(X) the covariance of X# P.1 We say that X# P is a Gaussian random variable if X# P is a Gaussian measure. k ∈ H. Ω We denote by X# P the law of X. ∀ h ∈ H. h P(dω). h = Ω X(ω). F . Deﬁnition 2. ∀h∈H and that m(X). ∀ h ∈ H. k P(dω).h e− 2 1 Q(X)h. and Q(X)h.
. Xn be real random variables in (Ω. m(X) is a vector of Rn denoted by (m(X)1 . F .. Xn (ω)).3 Assume that X = (X1 .. en ) be the canonical basis in Rn ..2 Independence In this section we introduce the basic concept of independence.. ek = Ω (Xj (ω) − mj (Xj ))(Xk (ω) − mk (Xk ))P(dω).. . n and a ∈ R we have eiaXk (ω) P(dω) = Ω Ω 1 ei aek .. 2. Xn ) is a Rn valued random variable. then X = (X1 . . Consider the Rn valued random variable X(ω) = (X1 (ω). ... F .. if conversely X1 ... Xn be real random variables on (Ω. Xn are real Gaussian random variables...X(ω) P(dω) = eiam(Xk ) e− 2 a 1 2 Q(X ) k = ei aek ...... n. 2. . So. m(X)n ) and Q(X) is a n × n matrix denoted Q(X)i. if j = k we ﬁnd Q(X)k. . ek = Ω Xk (ω)P(dω) = m(Xk ) and for any j. Xn ) is not necessarily Gaussian.. ..... n. . P)... X1 . In particular. More precisely. Xn ) is a ndimensional Gaussian random variable.k = Q(Xk ). n we have Q(X)j. P). Then X = (X1 . . n we have m(X)k = m(X). ω ∈ Ω... . Then for any k = 1... . .m(X) e− 2 a2 Q(X)ek . . Then X1 .k = Q(X)ej . k = 1..j .. j = 1.. ..2. In fact if k = 1. Xn are real Gaussian random variables.4 Let n ∈ N and let X1 . Example 2.ek . Notice that.1 Independent real variables Deﬁnition 2..2 Let n ∈ N.. .. i... k = 1..18 Chapter 2 Example 2.. .... let (e1 .. .
But this follows immediately setting in (2.1) ϕi = 1 Ii . Proposition 2. ξn ) = ϕ1 (ξ1 ) · · · ϕk (ξn ).. Then by the change of variable formula we have. .. Xn . A necessary and suﬃcient condition for the independence is provided by the following proposition. .. ϕn positive Borel.. .. Xn ) and let ψ : Rn → R be deﬁned as ψ(ξ1 .1) holds for any choice of positive Borel functions ϕ1 . Xn are independent if X# P = 19 ×(X ) j=1 n j # P. Conversely... n ∈ N. ξn ) ∈ Rn .. l i = 1.. be real independent random variables in (Ω. ϕn be Borel positive functions. . n. Xn it is enough to show that (X# P)(I1 × · · · × In ) = ((X1 )# P)(I1 ) · · · ((Xn )# P)(In )... Xn are independent. They are called independent if Xi1 .. then X1 . .. ϕ1 (X1 (ω)) · · · ϕn (Xn (ω))P(dω) = Ω Ω ψ(X(ω))P(dω) = Rn ψ(ξ)(X# P)(dξ) = R ϕ1 (ξ1 )((X1 )# P)(dξ1 ) · · · R ϕk (ξn )((Xn )# P)(dξn ) = Ω ϕ1 (X1 (ω))P(dω) · · · Ω ϕn (Xn (ω))P(dω). ∀ I1 . ....1) = Ω ϕ1 (X1 (ω))P(dω) · · · Ω ϕn (Xn (ω))P(dω)... Proof. ϕn ..1) holds for any choice of functions ϕ1 . . . . . Xn ... (ξ1 . . ..5 Let X1 .. Let (Xi ) be a sequence of real random variables.. Let moreover ϕ1 ... Set X = (X1 . .. Assume conversely that (2.. . F ... In ∈ B(R).. Xin are independent for any choice of n and of positive integers i1 < i2 < · · · < in .random variables We say that X1 .. if (2. .... . P). Then we have ϕ1 (X1 (ω)) · · · ϕn (Xn (ω))P(dω) Ω (2.. To prove independence of X1 . ... taking into account the independence of X1 . ..
10 Let X1 .10 does not hold in general. Xn be real random variables in (Ω. ∀ h = (h1 . We say that the sets A1 . Then the covariance matrix Q(X) is diagonal.. Show that X1 · · · Xn dP = Ω Ω X1 dP × · · · × Ω Xn dP and V (X1 + · · · + Xn ) = V (X1 ) + · · · + V (Xn ). .9 Show that sets A1 . Xn )..... .. P) and let X = (X1 . P) be a probability space and A1 . We have in fact (by Exercise 2... .. P).. F . . An ∈ F ... . for all k = 1... The following useful result is left to the reader as an exercise. F .. . Ω = Ω (Xi (ω) − mi (X))P(dω) The converse of Proposition 2. hn ) ∈ Rn . .. Proof..7 Let X1 . F .8 Let (Ω.... Proposition 2...... . F .. l l Exercise 2. jk less or equal to n.. .20 Chapter 2 Exercise 2. Xn be real independent random variables in (Ω... . n Q(X)i...j = Ω (Xi (ω) − mi (X))(Xj (ω) − mj (X))P(dω) (Xj (ω) − mj (X))P(dω) = 0. j = 1.. Deﬁnition 2.. n and k diﬀerent positive integer j1 . An are independent if the random variables 1 A1 ... Xn are independent if and only if n X# P(h) = k=1 (Xk )# P(hk ). P) and let X = (X1 .6 Let X1 .. Proposition 2. Then X1 .. An are independent if and only if P(Aj1 ∩ · · · ∩ Ajk ) = P(Aj1 ) × · · · × P(Ajk ).. . .. Xn be real independent random variables in (Ω.. .6) for i. .. . Xn ).. 1 An are so.
.h = ei m(X). Xn ) is Gaussian.11 Assume that X1 ...... Xn ).h e− 2 =e i m(X). hn ) ∈ H. let h = (h1 .. taking into account the independence of (X1 . F .2. 2... Xn are independent the conclusion follows from Proposition 2.7 it is enough to show that n X# P(h) = i=1 (Xk )# P(h)..random variables 21 2. n X# P(h) = Ω e i(X1 (ω)h1 +···+X1 (ω)hn ) P(dω) = k=1 Ω 2 eiXk (ω)hk P(dω) = ei(m(X1 )h1 +···+m(Xn )hn ) e− 2 (Q(X1 )h1 +···+Q(Xn )hn ) ... . Xn are real random variables and that X = (X1 .k h2 k e 1 −2 Pn k=1 Q(Xk )h2 k = i=1 (Xk )# P(h).. hn ) ∈ Rn . By Proposition 2.h e− 2 n 1 Pn k=1 Q(X)k.Q with m ∈ H and Q ∈ L+ (H). . . Then X1 . Proof. Xn ). .. B(H). Xn are independent Gaussian random variables. ... . 1 .. . .2 Independent Gaussian random variables Let X1 ...11..12 Assume that X1 . Xn are independent if and only if Q(X) is diagonal. In fact. .3 Gaussian random variables deﬁned in a Hilbert space We now consider the case when (Ω. If X1 .... µ). Then.. 1 2 Proposition 2.. .... Then X = (X1 .. . Xn ) is Gaussian. P) and let X = (X1 . where H is a separable Hilbert space and µ = Nm. Assume now that Q(X) is diagonal.h 1 Q(X)h. Proof. P) coincides with (H. We have in fact X# P(h) = ei m(X).. F .. for each h = (h1 .. Xn be real random variables in (Ω.. Proposition 2.
22
Chapter 2
2.3.1
Aﬃne changes of variables
Let b ∈ K and A ∈ L(H, K) where K is another separable Hilbert space. Let us consider the aﬃne transformation T (x) = Ax + b, x ∈ H.
Proposition 2.13 T is a Gaussian random variable and its law T# µ is given by NAa+b,AQA∗ , where A∗ is the transpose of A. Proof. We have in fact ei k,y T# µ(dy) =
K H
ei k,T (x) µ(dx) =
H
1
ei k,Ax+b µ(dx)
AQA∗ k,k
= ei k,b
H
ei A
∗ k,x
µ(dx) = ei k,Aa+b e− 2
, k ∈ K.
Example 2.14 Let µ = Nm,Q and n ∈ N, f1 , ..., fn ∈ H. Let F : H → Rn be deﬁned as F (x) := ( x, f1 , ..., x, fn ), x ∈ H. Then by Proposition 2.13 F is a Gaussian random variable with mean m(F ) and covariance Q(F ) given by, m(F ) = F (m) = ( m, f1 , ..., m, fn ) and Q(F ) = F QF ∗ . On the other hand, the linear operator F ∗ : Rn → H is given by
n
F (ξ) =
k=1
∗
fk ξk ,
∀ ξ = (ξ1 , ..., ξn ) ∈ Rn .
Therefore QF (ξ) =
∗
n
Qfk ξk ,
k=1
∀ ξ = (ξ1 , ..., ξn ) ∈ Rn
n
and F QF ∗ (ξ) =
n
Qfk ξk , f1
k=1
, ...,
k=1
Qfk ξk , fn
random variables so that Q(F )h,k = Qfh , fk . Therefore, F1 , ..., Fn are independent if and only if Qfh , fk = 0, if h = k. h, k = 1, ..., n,
23
(2.2)
2.4
The white noise function
In order to deﬁne the white noise function (which will play an important role in what follows), we shall deal with equivalence class of random variables (rather than random variables), which we brieﬂy discuss in the next subsection.
2.4.1
Equivalence classes of random variables
Let (Ω, F , P) be a probability space and let H be a separable Hilbert space. We denote by R(H) the set of all Hvalued random variables. Deﬁnition 2.15 We say that X, Y ∈ R(H) are equivalent (and write X ∼ Y ) if P({ω ∈ Ω : X(ω) = Y (ω)}) = 1. One can easily check that X ∼ Y, X, Y ∈ R(H) is an equivalence relation, so that the set R(H) is disjoint union of equivalences classes. We notice that if X ∼ Y then the laws of X and Y coincide. In fact set K = {ω ∈ Ω : X(ω) = Y (ω)}, so that P(K) = 0. Since for any I ∈ B(H) we have X −1 (I) ⊂ Y −1 (I) ∪ K, it follows that P(X −1 (I)) ≤ P(Y −1 (I)) and, exchanging X and Y we see that P(X −1 (I)) = P(Y −1 (I)). Consequently, all random variables belonging to a ﬁxed equivalence class ˜ ˜ X have the same law, which is called the law of X. In the following we shall not distinguish between a random variable X ˜ and the equivalence class X including X, except when needed.
24
Chapter 2
By Lp (Ω, F , P; H), p ≥ 1, we mean the space of all equivalence class of random variables X : Ω → H such that X(ω)p P(dω) < +∞.
Ω
Lp (Ω, F , P; H), endowed with the norm
1/p
X
Lp (Ω,F ,P;H)
=
Ω
X(ω)p P(dω)
,
is a Banach space. We shall write Lp (Ω, F , P; H) = Lp (Ω, P; H) for brevity. We prove now that the limit of a convergent sequence in L2 (Ω, P; H) of Gaussian random variables is Gaussian. Proposition 2.16 Let (Xn ) ⊂ L2 (Ω, P; H) be a sequence of Gaussian random variables convergent to X in L2 (Ω, P; H). Then X is a Gaussian random variable and m(X), h = lim m(Xn ), h , h ∈ H,
n→∞
and Q(X)h, k = lim Q(Xn )h, k ,
n→∞
h, k ∈ H.
Proof. Since Xn → X in L2 (Ω, P; H) we have
n→∞
lim m(Xn ), h = lim
n→∞
Xn (ω), h P(dω) =
Ω Ω
X(ω), h P(dω) = m(X), h
and
n→∞
lim Q(Xn )h, k
=
n→∞
lim
Xn (ω) − m(Xn ), h
Ω
Xn (ω) − m(Xn ), k P(dω)
=
Ω
X(ω) − m(X), h
X(ω) − m(X), k P(dω) = Q(X)h, k .
Let us show now that X is a Gaussian random variable. We have in fact ei x,h (X# µ)P(dy) =
H Ω
1
ei X(ω),h P(dω) = lim = ei m(X),k e− 2
1
n→∞
ei Xn (ω),h P(dω)
Ω
= lim ei m(Xn ),h e− 2
n→∞
Q(Xn )h,h
Q(X)h,h
.
QQ−1/2 z2 = z1 . Remark 2. z2 . y µ a.2 Deﬁnition of the white noise function In this section we assume that the Hilbert space H is inﬁnite dimensional and consider a non degenerate Gaussian measure µ = NQ in H (Ker (Q) = {0}). Q−1/2 z .random variables 25 2. µ) which we denote still by W and call the white noise function.4.13 .3) Proof. x. Here Q1/2 (H) is the Cameron–Martin space and C(H) the space of all real continuous functions on H.17 For all z1 . where Wz (x) = x. We have in fact Wz1 (x)Wz2 (x)µ(dx) = H H x. Let us deﬁne a mapping W : Q1/2 (H) → C(H). β ∈ R we have Wf (αx + βy) = αWf (x) + βWf (y). z2 ∈ Q1/2 (H) we have Wz1 (x)Wz2 (x)µ(dx) = z1 . z . Lemma 2. Wz (x) = Q−1/2 x. However this deﬁnition is meaningless because µ(Q1/2 (H)) = 0. Since Q is compact there exists a complete orthonormal basis (ek ) on H and a sequence of positive numbers (λk ) such that Qek = λk ek . the mapping W can be uniquely extended as a mapping from H into L2 (H. ∀ x ∈ H. Q−1/2 z2 µ(dx) = QQ−1/2 z1 .e. Q−1/2 z1 x. by Proposition 1.. Since Q1/2 (H) is dense in H. z2 . x ∈ Q1/2 (H). Wf is linear in the sense that for all α. H k ∈ N. z → Wz (2.18 Given z ∈ H (not belonging to Q1/2 (H)) it would be tempting to deﬁne the random variable Wz by setting.
. (zj ) be n sequences in Q1/2 (H) convergent respectively to z1 ...x +···+ξn Q−1/2 zn . Wzn ) is an ndimensional Gaussian random variable with mean 0 and covariance operator Qz given by (Qz )h.19 Let z ∈ H. ∀ η ∈ R.k=1 zj . Let (zn ) ⊂ Q1/2 (H) be a sequence such that zn → z in H.k = zh ... Let (zj ). So. . Then we have by the dominated convergence theorem.19 is important. Then (Wz1 . .4) The random variables Wz1 . Then.. zn in H. ... Then Wz is a real Gaussian random variable with mean 0 and covariance z2 .. (2.. zn are mutually orthogonal.. Wzn are independent if and only if z1 ..Q H 1 j −1/2 (ξ j j 1 z1 +···+ξn zn ) µ(dx) 2 1 = lim e− 2 ξ1 z1 +···+ξn zn  = e− 2 ξ1 z1 +···+ξn zn  = e− 2 j→∞ j 2 1 Pn j. We have to show that eiηWz (x) µ(dx) = e− 2 η H 1 2 z2 .. by the dominated convergence theorem. that ei(ξ1 Wz1 (x)+···+ξn Wzn (x)) µ(dx) = lim H j→∞ ei(ξ1 H j j Q−1/2 z1 ..x ) µ(dx) = lim j→∞ ei x.zk ξj ξk . n 1 Proof..20 Let n ∈ N. n..x µ(dx) = lim e− 2 η n→∞ 1 2 z n 2 = e− 2 η 1 2 z2 . The following generalization of Proposition 2. z1 . Proof. zn ∈ H. the conclusion follows. . Proposition 2.. .26 Chapter 2 Proposition 2. .. zk . .. . k = 1. we have eiηWz (x) µ(dx) = lim H n→∞ eiη Q H −1/2 z n . h...
Chapter 3 Brownian Motion
3.1 Stochastic Processes
We are given a probability space (Ω, F , P). We denote by P∗ the outer measure of P. We recall that a null set of Ω is a set of outer measure zero. For any integrable real random variable F we note E(F ) =
Ω
F (ω)P(dω).
So, in particular we have F# P(I) = E(1 I (F )), l ∀ I ∈ B(R).
We say that a property π concerning elements of Ω holds Pa.s. if the set where π does not hold is a null set. Deﬁnition 3.1 A family X = (X(t))t≥0 of real random variables in (Ω, F , P) is called a real stochastic process in [0, +∞). For any ω ∈ Ω, X(·, ω) is called a trajectory of X. • X is Gaussian if for any n ∈ N and any 0 ≤ t1 < · · · < tn the ndimensional random variable (X(t1 ), ..., X(tn )) is Gaussian. • X is continuous if X(·, ω) is continuous Pa.s. • X is pmean continuous, p ≥ 1, if (i) X(t) is pintegrable for any t ≥ 0. (ii) We have
t→t0
lim E[X(t) − X(t0 )p ] = 0, 27
∀ t0 ≥ 0.
(3.1)
28
Chapter 3
We notice that a pmean continuous process is not continuous in general. We say that two stochastic processes X and Y are equivalent if for all t ≥ 0 we have X(t, ω) = Y (t, ω), Pa.s..
When X and Y are equivalent we also say that Y is a version of X (or that X is a version of Y ).
3.2
Brownian motion
Deﬁnition 3.2 A real Brownian motion B = (B(t))t≥0 on (Ω, F , P) is a real stochastic process such that (i) B(0) = 0 and if 0 ≤ s < t, B(t) − B(s) is a real Gaussian random variable with law Nt−s . (ii) If 0 < t1 < ... < tn , the random variables, B(t1 ), B(t2 ) − B(t1 ), · · · , B(tn ) − B(tn−1 ) are independent. We express condition (ii) by saying that B is a process with independent increments. Lemma 3.3 Let t, s > 0. Then E[B(t)(B(s)] = min{t, s}. Proof. Let for instance t > s. Then we have E[B(t)B(s)] = E[(B(t) − B(s))B(s)] + E[B 2 (s)]. On the other hand, B(t) − B(s) is independent of B(s) so that E[(B(t) − B(s))B(s)] = E[B(t) − B(s)]E[B(s)] = 0. Since the law of B(s) is Ns we conclude that E[B(t)B(s)] = s as required. (3.2)
Brownian motion
29
3.2.1
Construction of a Brownian motion
Consider the probability space (H, B(H), µ), where H = L2 (0, +∞) and µ = NQ , Q being an arbitrary (but ﬁxed) non degenerate Gaussian measure in H. Deﬁne B(t) = W1l[0,t] , t ≥ 0, (3.3) where 1 [0,t] (s) = l 1 if s ∈ [0, t], 0 otherwise,
and W is the white noise function deﬁned in Chapter 2. More precisely, for any t ≥ 0 we choose an arbitrary element in the equivalence class of B(t) which we still denote by B(t). Clearly, for any t ≥ 0, B(t) is a Gaussian random variable Nt and for any t > s ≥ 0, B(t) − B(s) = W1l(s,t] is a Gaussian random variable Nt−s . So, B fulﬁlls Deﬁnition 3.2(i). Let us prove (ii). Since the system of elements of H, (1 [0,t1 ] , 1 (t1 ,t2 ] , ..., 1 (tn−1 ,tn ] ), l l l is orthogonal, we have by Proposition 2.20 that the random variables B(t1 ), B(t2 ) − B(t1 ), · · · , B(tn ) − B(tn−1 ) are independent. Thus (ii) is proved as well.
3.2.2
Some properties of a Brownian motion
Proposition 3.4 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F , P). Then B is a Gaussian process. Moreover, if 0 < t1 < ... < tn the law of (B(t1 ), ..., B(tn )) is given by P((B(t1 ), ..., B(tn )) ∈ I) = (2π)−n/2 (t1 (t2 − t1 ) × · · · × (tn − tn−1 ))−1/2
I
e
− 2t1 −
1
η2
(ηn −ηn−1 )2 (η2 −η1 )2 −·− 2(t −t 2(t2 −t1 ) n n−1 )
dη,
(3.4) for all I ∈ B(R ).
n
Proof. Let 0 < t1 < ... < tn and set X := (B(t1 ), B(t2 ) − B(t1 ), ..., B(tn ) − B(tn−1 )) Z := (B(t1 ), ..., B(tn )).
. Since det T = det T ∗ = 1.. Proof..η dη. It is enough to show the result for p = 2m. x1 + · · · + xn ).. be a Brownian motion on (Ω.. It is clear that Z = T (X).11 it follows that X is a ndimensional Gaussian random variable with mean 0 and covariance operator Q(X) = diag (t1 .6 Let B(t) be a Brownian motion in a probability space (Ω. . . B(tn ) − B(tn−1 ) are independent.. t ≥ 0. Proposition 3..4). If I ∈ B(Rn ) we have P(Z ∈ I) = (2π)−n/2 (det Q(Z))−1/2 I e− 2 1 (Q(Z))−1 η.30 Chapter 3 Since random variables B(t1 ). Since B(t) − B(t0 ) is a Gaussian random variable Nt−t0 . by Proposition 2. η = Q T −1 −1 −1 2 (ηn − ηn−1 )2 η1 (η2 − η1 )2 − ··· − − η = t1 (t2 − t1 ) (tn − tn−1 ) η.5 Let B(t).. the conclusion follows. consider the linear mapping T ∈ L(Rn ) deﬁned by. m!2m Therefore lim E(B(t) − B(t0 )2m ) = 0 t→0 and the conclusion follows. Exercise 3.. T (x1 .13 Z is Gaussian with mean 0 and covariance Q(Z) = T Q(X)T ∗ where T ∗ is the transpose of T . Then B is pmean square continuous for all p ≥ 1. m ∈ N. since T −1 η = (η1 . Let t > t0 ≥ 0. η2 − η1 .. P). x1 + x2 ...... . Moreover. It remain to show (3. Prove that the following are Brownian motions. we have E(B(t) − B(t0 )2m ) = R ξ2m Nt−t0 (dξ) = (2m)! (t − t0 )m . T −1 and so. F . xn ) = (x1 . P). Therefore by Proposition 2. F .. as easily checked.. . we have (Q(Z)) η. tn − tn−1 ). we have det Q(Z) = det Q(X) = t1 (t2 − t1 ) × · · · × (tn − tn−1 ).. . t2 − t1 . . ηn − ηn−1 ). Now. ∀ (x1 . . xn ) ∈ Rn . B(t2 ) − B(t1 ).
(iii) B3 (t) = tB(1/t).7) +2E j<k f (tj−1 )f (tk−1 )[B(tj ) − B(tj−1 )][B(tk ) − B(tk−1 )] . where h > 0 is given. Let us prove (3. f1 .3 Wiener integral Let B(t).Brownian motion (i) B1 (t) = B(t + h) − B(h). t ≥ 0.5) is obvious. P) and let f ∈ L2 (0. We want to deﬁne the stochastic integral: T f (s)dB(s). t ≥ 0. (3. l Then deﬁne T n f (s)dB(s) := 0 j=1 ftj−1 (B(tj ) − B(tj−1 )). t ≥ 0. Let 0 = t0 < t1 < · · · < tn = T . T ) with T > 0. (ii) B2 (t) = αB(α−2 t). fn−1 ∈ R and set n f= j=1 tj−1 1 (tj −tj−1 ] . 31 3. t > 0. F . t ≥ 0. f0 . Lemma 3. .6).... be a Brownian motion in (Ω. where α > 0 is given. . Let us prove two basic identities.7 We have T E 0 f (s)dB(s) =0 (3. Identity (3.6) Proof. 0 We start with step functions. B3 (0) = 0. (iv) B4 (t) = −B(t).5) and T 2 n t E 0 f (s)dB(s) = j=1 f (tj−1 )2 (tj − tj−1 ) = 0 f 2 (s)ds. We have n E(Iσ (f ) ) = E j=1 n 2 f (tj−1 )2 [B(tj ) − B(tj−1 )]2 (3.
It is easy to see that if a. Exercise 3. T ). is called the Wiener integral of f in [0. b.6) it follows that the linear mapping I T S(0. P). T ). is continuous. T ) the linear space of all step functions. T ) → L2 (Ω. T ) it can be uniquely extended T to the whole L2 (0. It is clear that for any f ∈ L2 (0. T ).9 Let f ∈ L2 (0.32 Chapter 3 Now the conclusion follows taking into account that B(tj ) − B(tj−1 ) is a real Gaussian random variable Ntj−1 −tj and that B(tj ) − B(tj−1 ) is independent of B(tk ) − B(tk−1 ) for k = j. T ) is dense in L2 (0. P). c ≥ 0 we have b c c f (s)dB(s) + a b f (s)dB(s) = a f (s)dB(s). (3.8 Let f. F . f → I(f ) = 0 f (s)dB(s).8) and T t E 0 f (s)dB(s) = 0 f 2 (s)ds. T 0 f (s)dB(s) is a real Proof. By (3. T ]. We still denote by I(f ) = 0 f (s)dB(s) this estension.9) The random variable (more precisely. T ) ⊂ L2 (0. It is enough to prove the result for f of the form n f= i=1 fti−1 (ti − ti−1 ). b We deﬁne in an obvious way the Wiener integral a f (s)dB(s) for any a. the equivalence class of random T variables) 0 f (s)dB(s). T ) we have T E 0 f (s)dB(s) 2 = 0. which belongs to L2 (Ω. g ∈ L2 (0. Since S(0. Proposition 3. F . Then I(f ) = T Gaussian random variable Nq with q = 0 f (s)2 ds. Denote by S(0. b ≥ 0. (3. . Show that T T T E 0 f (s)dB(s) 0 g(s)dB(s) = 0 f (s)g(s)ds.
(3. B(tn ) − B(tn−1 ). Since random variables B(t1 ).. 0 = t0 < t1 < . Let us introduce a stochastic process setting t F (t) = 0 f (s)ds.1.tk ] . < tn−1 = T .tk ] = Wf .Brownian motion where n ∈ N. We now show a relation between the white noise function and the Wiener integral. ∀ t ≥ 0. t ≥ 0 is pmean continuous for any p ≥ 1.10) It is enough to show (3. . · · · . In this case we have in fact ∞ n f (s)dB(s) = 0 k=1 ftk−1 W1l(tk−1 . T ]. Let f ∈ L2 (0. k=1 Let f : [0. Then we have ∞ Wf = 0 f (s)dB(s).10) when n f= k=1 l ftk−1 1 (tk−1 .10 We use here notations of Section 3. B(t2 ) − B(t1 ).11 The process F (t). so that n 33 I(f ) = i=1 fti−1 (B(ti ) − B(ti−1 )). we have that I(f ) is a real Gaussian random variable Nq with n q= i=1 f 2 (ti−1 )(ti − ti−1 ). Example 3. T 0.. Proposition 3. are independent. ∞) → R such that it is integrable in all interval [0. where 0 ≤ t0 < · · · < tn .tk ] = WPn ftk−1 1l(tk−1 . ∞).2.
T ]) then it is possible to express the T Wiener integral 0 f (s)dB(s) in terms of a Riemann integral as the following integration by parts formula shows. t→t0 f 2 (s)ds.11) Proof. Pa. Let p = 2m. m ∈ N and t > t0 ≥ 0. · · · . (3. Let σ = {t0 . T ]) we have T T f (s)dB(s) = f (T )B(T ) − 0 0 f (s)B(s)ds.. m!2m t0 so that lim EF (t) − F (t0 )2m = 0. where αk are suitable numbers in the interval [tk−1 . ... It follows that T σ→0 lim Iσ (f ) = f (T )B(T ) − 0 f (s)dB(s)ds. n. tk ]. ω ∈ Ω. Then by Proposition 3.34 Chapter 3 Proof. Pa. We note ﬁnally.. k = 1.e. Proposition 3.12 If f ∈ C 1 ([0.9 we have that t F (t) − F (t0 ) = t0 f (s)dB(s) t t0 is a real Gaussian random variable with mean 0 and covariance Therefore q t (2m)! 2m 2 EF (t) − F (t0 ) = f (s)ds .s. Then we have n Iσ (f ) = k=1 n f (tk−1 )(B(tk ) − B(tk−1 )) = k=1 n (f (tk )B(tk ) − f (tk−1 )B(tk−1 )) − k=1 (f (tk ) − f (tk−1 ))B(tk ) n = f (T )B(T ) − k=1 n (f (tk ) − f (tk−1 ))B(tk ) = f (T )B(T ) − k=1 f (αk )B(tk )(tk − tk−1 ). t1 . that if f ∈ C 1 ([0. tn } ∈ Σ. .
Then B possesses a continuous version.14) where α ∈ (0. P). We can now prove the result.14 Let B(t). (1) This requires a proof which is left to the reader. t ≥ 0. We are going to show that B possesses a continuous version. 0 (3. F . 1 − α) = 0 π .4 Continuity of Brownian motion Let B(t).14) becomes 1 (1 − r)α−1 r−α dr = β(α. P). (3.12) (σ − s)−α dB(s). We start from the following elementary identity which is valid for any α ∈ (0. t (t − σ)α−1 (σ − s)−α dσ = s π .13) Notice that the Wiener integral Yα is meaningful since α ∈ (0. 1). To check (3. (3.13 For any α ∈ (0. .14) it is enough to set σ = r(t − s) + s so that (3. Exchanging integrals . To this purpose we shall use a representation formula for B proved in the next proposition. sin πα 0 ≤ s ≤ σ ≤ t. t ≥ 0. B(t) = B(t) = sin πα π (1) t 0 s t s 0 dB(s) we can write (t − σ)α−1 (σ − s)−α dσ dB(s). 1). be a Brownian motion on a probability space (Ω. yields t σ sin πα B(t) = π dξ(t − σ) 0 α−1 0 (σ − s)−α dB(s) . sin πα Now since.Brownian motion 35 3. 1/2) we have B(t) = where Yα (σ) = 0 sin πα π σ t (t − σ)α−1 Yα (σ)dσ. Proof. F . obviously. Theorem 3. Proposition 3. be a Brownian motion on a probability space (Ω. 1/2).
T ] for any t0 ∈ (0. uniformly on [ t2 . T . Set t F (t) = 0 (t − σ)α−1 f (σ)dσ. 1 0 Thus limε→0 Fε (t) = F (t). t−ε Fε (t) = 0 (t − σ)α−1 f (σ)dσ. Lemma 3.5 The standard Brownian motion Let us consider a Brownian motion B(t). ω) = (t − σ)α−1 Yα (σ.16 Prove that B possesses an H¨lder continuous version with o any exponent β < 1/2. Then F ∈ C([0. H) and F is con0 tinuous at 0. 0 Fε is obviously continuous on [ t2 . 1]. Choose a version Yα (·. By H¨lder’s inequality we have o t 2m−1 2m F (t) ≤ 0 (t − σ) 2m (α−1) 2m−1 dσ f L2m (0. 3. ω) is a continuous version of B thanks to the following analytic lemma. t0 Let us set for ε < 2 . ω)dσ. and F is continuous as required. T ).T . t ∈ [0.15 Let α ∈ (0.11. T ]. (3. H). Moreover. 1/2).H) . where C0 = {η ∈ C([0. Proof. ∀ t ≥ 0. F .15) 2m (Notice that (α − 1) 2m−1 > −1. T ]. ω) of the stochastic process Yα which is 2mintegrable with 2m > 1/α. ω → B(·.) Therefore F ∈ L∞ (0. T ]. in a probability space (Ω. t ∈ [0. π 0 Then B(·.36 Chapter 3 Proof. T ]. T ]. we ﬁnd F (t) − Fε (t) ≤ M 2m − 1 2mα − 1 2m−1 2m εα− 2m f L2m (0. We denote by B the mapping B : Ω → C0 .T . ω) is continuous for all ω ∈ Ω. Exercise 3. t ≥ 0. . This is possible in view of Proposition 3. using again H¨lder’s inequalo ity. P) such that B(·. Now set t sin πα B(t. +∞)) : η(0) = 0}. ω). Let us prove that F is continuous on [ t2 . m ∈ N with 2m > 1/α and f ∈ L2m (0.H) .
5.. ω) We come back to the mapping B and we denote by Q its law (which is a probability measure on (C0 . for any nonnegative Borel mapping F : C0 → R. η k = sup{η(t) : t ∈ [0. as easily checked..tn+1 .. For n ∈ N. Moreover.. 0 < t1 < · · · < tn and A ∈ B(Rn ) we deﬁne Ct1 . Let us now consider the σalgebra B(C0 ). d(η1 .Brownian motion 37 3..tn .A×Rk . Q is called the Wiener measure on (C0 .tn .A = Ct1 .5.2 The Wiener measure and the standard Brownian motion B : Ω → C0 . k. B(C0 )).t2 ..16) Some examples of mappings F are the following. ∀ η ∈ C0 .. 3. B(C0 ))..tn+k . endowed with the metric. n ∈ N.. the σalgebra generated by C coincides with B(C0 ) since any ball (with respect to the metric of C0 ) is a countable intersection of cylindrical sets. (3. + η1 − η2 k ) is a complete metric space. . C0 .1 Some properties of C0 ∞ First we notice that.t2 ....A := {η ∈ C0 : (η(t1 ).tn . we have E[F (B(·))] = Ω F (B(·.. ω → B(·. ω))P(dω) = C0 F (η)Q(dη).t2 . η → F (η). Note that Ct1 .. k]}. η(tn )) ∈ A} . So.. It is important to notice that B(C0 ) is generated by the cylindrical subsets of C0 that we shall introduce now.. η2 ) := k=1 2k (1 η1 − η2 k . . We have set for any k ∈ N. Using this identity one can easily see that C is an algebra....
16)..1] η(t). t ≥ 0. for all η ∈ C0 .tn . (iii) F (η) = supt∈[0. where g : R → R is nonnegative Borel and t0 > 0 is given.A ) = P((B(t1 ).. Proposition 3..16) we have ei(η(t)−η(s))h Q(dη) = C0 Ω 1 2 ei(B(t.. B(C0 ). .t2 .... h ∈ R. in (C0 .ω))h P(dω) = E[ei(B(t)−B(s)) ] = e− 2 (t−s)h . 1 2 h ∈ R.17 W is a Brownian motion in (C0 .ω)−B(s.tn .. t ≥ 0. Q). Proof. We simply note that.. thanks to (3. Let us compute the Wiener measure of a cylindrical set... is given by e− 2 (t−s)h .... The proof is straightforward. called the standard Brownian motion. Proposition 3.t2 .. Proof.A be a cylindrical set. For this it is enough to show that the Fourier transform of W (t) − W (s) ψ(h) := C0 ei(η(t)−η(s))h Q(dη). for all η ∈ C0 . Q) setting W (t)(η) = η(t).. has independent increments. B(C0 ). for all η ∈ C0 .t2 . we have Q(Ct1 .. . B(tn )) ∈ A). where G : Rn → R is nonnegative Borel and t1 . In fact by (3. .. W (t) − W (s) is a Gaussian random variable Nt−s . η ∈ C0 . Then we have Q(Ct1 . h ∈ R.A ) = 1 (2π)n t1 (t2 − t1 ) · · · (tn − tn−1 ) A e 1 2 − 2t − 2(t 1 ξ2 (ξn −ξn−1 )2 (ξ −ξ1 )2 −···− 2(t −t n 2 −t1 ) n−1 ) dξ. (ii) F (η) = G(η(t1 ). tn > 0 are given. In an analogous way one can prove that W (t). so that the conclusion follows from Proposition 3. Let us show for instance that for t > s ≥ 0.4..38 Chapter 3 (i) F (η) = g(η(t0 )). η(tn )). Now we deﬁne a stochastic process W (t)... . t ≥ 0.tn .18 Let Ct1 .
.. T ] σ = {0 = t0 < t1 < · · · < tn = T }. We say that T is the quadratic variation of B in [0. We introduce a partial ordering on Σ(0.17) Moreover n 2 EJσ 2 = E k=1 n B(tk ) − B(tk−1 )2 n =E k=1 B(tk ) − B(tk−1 ) + 2 h<k=1 4 EB(th ) − B(th−1 )2 B(tk ) − B(tk−1 )2 . T ].. Then for any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0.Brownian motion 39 3. Then we prove Theorem 3. T ) we set σ := min{tk − tk−1 : k = 1. Since Btk −Btk−1 is a real Gaussian random variable with law Ntk −tk−1 . F . T ). P). (3.19 We have σ→0 lim Jσ = T in L2 (Ω.n − 1}. we have E(Jσ ) = T. Proof. P). setting σ1 ≤ σ2 if and only if σ1  ≤ σ2 . F . T ) we deﬁne n Jσ := k=1 B(tk ) − B(tk−1 )2 . For any T > 0 we denote by Σ(0. . and so. T ]. For any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. t ≥ 0. on a probability space (Ω. 2 2 E(Jσ − T 2 ) = E(Jσ ) − 2T E(Jσ ) + T 2 = E(Jσ ) − T 2 . T ) the set of all decompositions of [0.6 Quadratic variation of the Brownian motion In this section we are given a real continuous Brownian motion B(t). Let us now introduce the quadratic variation of Brownian motion B in [0.
substituting (3. T )} has outer probability zero. (3. T ] → R. we obtain n E Jσ − T  as σ → 0. we have n n EB(th ) − B(th−1 ) B(tk ) − B(tk−1 ) = h<k=1 2 2 (th − th−1 )(tk − tk−1 ). Proposition 3.40 But we have n n Chapter 3 E k=1 B(tk ) − B(tk−1 )4 = 3 k=1 (tk − tk−1 )2 . h<k=1 (3. In fact the following result holds. (2) . ω) ∈ BV (0.20) = 2 k=1 (tk − tk−1 )2 + T 2 . V (f ) is called the variation of f . (3. 2 =2 k=1 (tk − tk−1 )2 → 0. Let f : [0.18) and. In other terms the set VT := {ω ∈ Ω : B(·. tn = T } ∈ Σ(0.. T ] → R of ﬁnite variation. Then for any σ = {0 = t0 < t1 < · · · < .. An important consequence of Theorem 3.. Now.20) on (3. BV (0.20 We have P∗ (VT ) = 0. T ) is the set of all functions f : [0.19) Therefore n n EJσ 2 = 3 k=1 n (tk − tk−1 )2 + 2 n (th − th−1 )(tk − tk−1 ) h<k=1 2 = 2 k=1 n (tk − tk−1 ) + k=1 2 (tk − tk−1 ) .19 is that almost all trajectories of the Brownian motion B have not bounded variation (2) . T ) we n set Vσ (f ) = k=1 f (tk ) − f (tk−1 ) and deﬁne V (f ) := supσ∈Σ Vσ (f ). since B(th ) − B(th−1 ) and B(tk ) − B(tk−1 ) are independent.17).
. t ≥ 0.Brownian motion Proof. T ) such that σn  → 0 and a set Λ1 ⊂ F such that (i) P(Λ1 ) = 1. F .22 Let us construct an ndimensional Brownian motion.. P) there exists a sequence (σn ) ⊂ Σ(0.t] . Since limσ→0 Jσ = T in L2 (Ω. Since B(·. 1 Let us prove the claim. Then X(t) := (X1 (t). X1 .. Since ε is arbitrary ω cannot belong to Λ1 . Let (e1 . Xn (t)). where Q is any operator in L+ (H) such that Ker 1 Q = {0}. if n is so large that σn  < δε we have Jσn (ω) ≤ εV (B(·. such that B1 .. (ii) lim Jσn (ω) = T for all ω ∈ Λ1 . ω) < ε.. Xn are said to be independent if for any t1 . Then one can check easily that B(t) = (B1 (t)...21 Let n ∈ N and let X1 . ∀ t ≥ 0. .. . 41 so that P(Λ) = 1 because B is continuous.. ω) is continuous }. 1 (3. n→∞ We claim that VT ∩ Λ ⊂ Λc . Consequently.. en ) be the canonical basis in Rn and choose Ω = H = L2 (0. . s ∈ [0. Bn are independent Brownian motions. Rn ). T ]. Then set Bi (t) = Wei 1l[0. for any ε > 0 there exists δε > 0 such that t.. Bn (t)). . Bn (t)) is an ndimensional Brownian motion. n..7 Multidimensional Brownian motions Deﬁnition 3.. F = B(H) and P = NQ ... Example 3.21) By the claim the conclusion will follow since P(Λc ) = 0... . Let ω ∈ VT ∩ Λ. 3. t − s < δε =⇒ B(t. P).. ... The claim is proved. i = 1. . Xn be stochastic processes on a probability space (Ω.. ω)). +∞) the random variables Xi (ti ) are independent.. A ndimensional Brownian motion is a ndimensional stochastic process B(t) := (B1 (t).. +∞. ω) − B(s.. Set Λ := {ω ∈ Ω : B(·.. t ≥ 0. tn ∈ [0. . ω) is uniformly continuous in [0. F .. is called an ndimensional stochastic process... T ]. .
42 Chapter 3 Let B be a Brownian motion in Rn .25) where A∗ and C ∗ are the adjoint of A and C respectively.23) Z(t) = etA x + 0 e(t−s)A CdB(s). (ii) E[Bi (t)Bj (t)] = 0 if i = j.24 Let A. (i) If t > s. t ≥ 0. Let us check (iii). Exercise 3. Exercise 3. C ∈ L(Rd ) and set t (3. (3. t ≥ 0. Then the following properties are easily checked. (iii) We have E B(t) − B(s)2 = n(t − s). B(t) − B(s) is a Gaussian random variable with law N(t−s)In .Qt .22) E B(t) − B(s) 2 = k=1 E Bk (t) − Bk (s)2 = n(t − s). where Qt = 0 t ∗ (3. where In represents the identity in Rn . We have n (3. .23 Prove that for 0 ≤ s < t we have E B(t) − B(s)4 = (2n + n2 )(t − s)2 . Prove that the law of Z(t) in Rd is given by NetA x.24) esA CC ∗ esA ds.
tn ..··· . t ≥ 0. Q) deﬁned by W (t)(ω) = ω(t). we denote by Ft the σalgebra generated by Ct . ω ∈ C0 .. Obviously F0 = {∅. in particular the Markov and strong Markov property and the reﬂexion principle. ω(tn )) ∈ A} = {ω ∈ C0 : (W (t1 ). Moreover. This chapter is devoted to some sharp properties of the Brownian motion. B(C0 ).. the standard Brownian motion in (C0 . t)} .A = {ω ∈ C0 : (ω(t1 ). +∞) → R introduced in Chapter 3 and Q is the Wiener measure. < tn . To this purpose we shall introduce some basic concepts as ﬁltration. Q) where C0 is the complete metric space of all continuous functions ω : [0. 4.. Moreover. ∀ t ≥ 0. W (tn )) ∈ A} For any t > 0 we denote by Ct the algebra of all cylindrical sets where 0 ≤ t1 < . .. .1 Filtration Ct1 . For any t > 0 we deﬁne Ft− = σ{Ft− : 43 ∈ (0. let W (t). stopping time and transition semigroup. The family of σ–algebras (Ft )t≥0 is increasing. Ω}. it is called the natural ﬁltration of W ... tn ≤ t and A ∈ B(Rn ). B(C0 )..Chapter 4 Markov property of the Brownian motion Let us consider the probability space (C0 .
t) and Ft+ : = >0 Ft+ . that is Ft+ = Ft for all t ≥ 0. The following lemma will be frequently used. An ∈ F0+ . t ≥ 0.1 we say that the natural ﬁltration (Ft )t≥0 is left continuous. 4. Then An ∈ F1/n and A = n∈N n ∈ N.1. Due to Proposition 4.A ∈ Ft− . If tn < t then I belongs to Ft− whereas if tn = t we have I = lim Ct1 . Proposition 4. so that Ft ⊃ Ft− . It is clear that Ft ⊃ ∈(0. so that F0+ = F0 .··· .2 The ﬁltration (Ft )t≥0 is not right continuous. To prove the converse inclusion it is enough to show that Ct ⊂ Ft− . k→∞ k so that I ∈ Ft− as well. Remark 4.A ∈ Ct so that tn ≤ t. Let t > 0. Let in fact I = Ct1 .44 where σ ∈(0.1 Ft measurable random variables I ∈ B(R) ⇒ X −1 (I) ∈ Ft .tn . .tt− 1 . We say that a real random variable X is Ft measurable if In this case we say also that X depends from the story of the Brownian motion only up to t.··· .t) Ft− .t) Chapter 4 Ft− is the σalgebra generated by Ft− for ∈ (0.1 For all t > 0 we have Ft = Ft− . Notice that A = {ω ∈ Ω : ω (0) = 0}. Proof. Let for instance t = 0 and consider the sets An = {ω ∈ Ω : ω(1/n) ≤ 1/n}.
and let ϕ be a real random variable Ft –measurable.1) G = A. Then we have P(A ∩ G) = P(A)P(G). ω(tn + h) − ω(h)) ∈ I}. (4. we claim that G = B(C0 ). D contains the algebra of all cylindrical set belonging to Ct (which is a πsystem)... since it belongs to all Ft . D is a λsystem.I belongs to G ... It is enough to show that for any A ∈ Ft .I j j j = lim {ω ∈ Ω : (ω(t1 ) − ω(1/j)..5 For any t ≥ 0 denote by Ft the σalgebra generated by Ft and all null sets of Ω (called the completion of Ft ).. D = {A ∈ Ft : 1 A is independent of W (s2 ) − W (s1 )}.h.. 1 . 0 < t1 < · · · < tn . h > 0. j→∞ Since G = B(C0 ) we can set in (4.tn . Denote by G the σalgebra generated by all sets of the form Dt1 . one can show easily that ∞ n=1 An ∈ D. In fact if A ∈ D it is obvious that Ac ∈ D. Let A ∈ F0+ ..4 one can easily show that (Ft )t≥0 is both right and left continuous... I ∈ B(Rn ). but this follows from the identity j→∞ lim Dt1 − 1 .1) On the other hand.... By using Proposition 4.. . Then either P(A) = 1 or P(A) = 0.tn .tn . .I = {ω ∈ Ω : (ω(t1 + h) − ω(h). Proof.4 (onezero law) Assume that A ∈ F0+ .. ∀ G ∈ G.. so that P2 (A) = P(A) which yields P(A) equal to zero or one. It is clear that A is independent of G . W (s2 ) − W (s1 ) and 1 A are l independent.h.I .. Proposition 4.tn − 1 .. Next result shows that F0+ contains only trivial sets. Moreover. Remark 4.. Moreover. Now the claim follows from Dynkin’s theorem (Theorem A. Proof. l Since W is a process with independent increments. Then W (s2 ) − W (s1 ) and ϕ are independent. To prove the claim it is enough to show that any cylindrical set Ct1 ..1 in Appendix A). t > 0.. .Markov property 45 Lemma 4. where n ∈ N. if (An ) is a sequence in D consisting of disjoint sets. and W has independent increments..3 Let s2 > s1 ≥ t > 0. ω(tn ) − ω(1/j)) ∈ I} = Ct1 . in other words that Ft coincides with the set D deﬁned below.
Remark 4. for all t ≥ 0.. where σ(τ ) is the σalgebra generated by τ . In other words we have Fτ ⊃ σ(τ ).. B(C0 ).. In fact....I ∩ {tn < τ ≤ t} So.tn ... Moreover... To any stopping time τ we associate the σalgebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}..I = {ω ∈ Ω : tn (ω) < τ.. .. In fact (τ ) Ct1 .tn . the σalgebra generated by all Ct1 . (ω(t1 ). ω(tn )) ∈ I} = Ct1 . then {τ > t} and {τ = t} belong obviously to Ft for all t ≥ 0.. τ is Fτ measurable.I ∩ {τ ≤ t} = Ct1 .I ∩{tn < τ }.....I is Fτ measurable....tn . If τ is stopping time. Q) is called a stopping time with respect to the ﬁltration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0... We claim that Ct1 .tn . if A = {τ ≤ s} we have A ∩ {τ ≤ t} = {τ ≤ t ∧ s} ∈ Ft∧s ⊂ Ft . ..46 Chapter 4 4... +∞]) random variable τ in (C0 .tn .6 Let τ be an extended random variable such that {τ < t} ∈ Ft .2 Stopping times A nonnegative extended (that is with values in [0. but it is a stopping time with respect to the ﬁltration (Ft+ )t≥0 .tn .. For 0 < t1 < . Let us describe the σalgebra Fτ . < tn and I∈B(R) we deﬁne Ct1 ..I in included in Fτ and one can show that it coincides with Fτ . (τ ) (τ ) (τ ) Then τ is not in general a stopping time with respect to (Ft )t≥0 .. In fact ∞ {τ ≤ t} = k=1 τ ≤t+ 1 k ∈ Ft+ .
(4. (4. Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. that is that τ (Ω) = (µk )k∈N where µk is an increasing sequence of positive numbers. We want to extend several properties concerning time t to general stopping times τ . k 2n =A∩ k−1 k ≤τ < n n 2 2 ∈Fk. Proof.3) ∀ t ≥ 0. ω). Then we have A ∩ τn = so that A ∈ Fτn . Then Wτ is Fτ measurable. Moreover. .Markov property 47 Exercise 4. In fact. τ (Ω) = {tk }. ∀ k ∈ N. Proposition 4. Show that in this case Fτ is the σ–algebra Fτ : = {A ∈ F : A ∩ {τ = µk } ∈ Fµk for all k ∈ N}.8 Let τ be a stopping time. let A ∈ Fτ .2) It is clear that the sequence (τn ) is decreasing. We start by showing that Wτ is Fτ measurable. 0 < t1 < · · · < tk < · · · ω ∈ Ω. Show that τ is a stopping time if and only if {τ = µk } ∈ Fµk for all k ∈ N. Deﬁne for any n ∈ N and ω ∈ Ω τn (ω) = k 2n if k−1 k ≤ τ (ω) < n . that is A ∩ {τ ≤ t} ∈ Ft . if t = 2k with k ∈ N we have n {τn = t} = Finally. Assume ﬁrst τ discrete.9 Let τ be a stopping time and set Wτ (ω) = W (τ (ω). n 2 k k−1 ≤τ < n n 2 2 ∈ Ft . Proof. Proposition 4. n 2 2 k ∈ N.7 Assume that the nonnegative random variable τ is discrete. τn is a stopping time.
∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ Ft . k ∈ N. Since W is continuous we have n→∞ ω ∈ Ω. by Remark 4.t] {W (s) ≤ a} = {W (s) ≤ a} ∈ Ft .2) and set Wτn (ω) = W (τn (ω). the conclusion holds in this case.t]∩Q So.6. (1) We use the convention that the inﬁmum of the empty set is +∞. By the previous argument we have {Wτn ∈ I} ∩ {τn ≤ t} ∈ Ft Now the conclusion follows letting n → ∞.10 Let a ∈ R and set (1) for all I ∈ B(R). Then we have {τ ≥ t} = s∈[0. ω). Let I ∈ B(R).t]∩Q Consequently. ∞ {k∈N: tk ≤t} [{Wtk So. lim Wτn (ω) = Wτ (ω). τ is a stopping time with respect to ﬁltration {Ft+ }t≥0 . (4. let τn be deﬁned by (4.4) τa = inf{t ≥ 0 : W (t) = a}. τa is a stopping time with respect to the ﬁltration (Ft )t≥0 . Fix t ≥ 0. ω ∈ Ω. Let now τ = inf{t ≥ 0 : W (t) > a}. Then we have Wτ (ω) = W (tk )(ω). Then {Wτ ∈ I} ∩ {τ ≤ t} = = = ∞ k=1 [{Wtk ∞ k=1 [{Wτ Chapter 4 ∀ω ∈ Ak . . k ∈ N. s∈[0. s∈[0.48 and set Ak = {τ = tk }.t] {W (s) < a} = {W (s) < a} ∈ Ft . Let now τ be arbitrary. Then {τa > t} = s∈[0. Example 4.
α ∈ R. t ≥ 0.5) ∀ i ∈ N. Now (4.5) is proved. .11 Let τ be a stopping time. E eiα(W (t+τ )−W (τ )) = i=1 Ai eiα(W (t+ti )−W (ti )) dP = i=1 E 1 Ai eiα(W (t+ti )−W (ti )) . By (4. Let now τ be general and let (τn ) be the sequence of ﬁnite stoppping times deﬁned by (4. τ (Ω) = (tk ) and set Ai = {τ = ti } ∈ Fti .2). Proposition 4. Then we have ∞ ∞ 1 2 t ≥ 0. Assume ﬁrst that τ is discrete. We have just proved that E eiα(W (t+τn )−W (τn )) = e− 2 α t .5) follows letting n tend to inﬁnity. is a Brownian motion for any h > 0. Continuity of C(t) is obvious. 1 2 α ∈ R.Markov property 49 4. l Since 1 Ai and W (t + ti ) − W (ti ) are independent. Proceeding similarly one can prove that the law of C(t) − C(s) with t > s > 0 is Nt−s and that C(t) has independent increments.5) it follows that C(t) is a Gaussian random variable Nt . (4. For this it is enough to show that for any α ∈ R we have E eiαC(t) = E eiα(W (t+τ )−W (τ )) = e− 2 α t .3 The Brownian motion W (t + τ ) − W (τ ) We recall that W (t + h) − W (t). We want now to show that the same holds when h is replaced by a stopping time. Then C(t) := W (t + τ ) − W (τ ). is a Brownian motion. Proof. it follows that l ∞ E e iα(W (t+τ )−W (τ )) = i=1 P(Ai )E eiα(W (t+ti )−W (ti )) = e− 2 α 1 2t and so (4. Let us ﬁrst prove that the law of C(t) is Nt .
ξ ∈ R. Pt−s ϕ(x) = E[ϕ(W (t) − W (s) + x)]. There is a simple deterministic proof based on maximum principle and a stochastic proof.4 Transition semigroup We shall denote by Bb (R) the set of all real.6) Since the law of W (t) + x is Nx. (4. ξ2 1 e− 2t . x ∈ R.12 One can show that u(t. by an explicit computation.13 Prove that for t > s ≥ 0. ∀ x ∈ R. t > 0.9) . ∀ t > 0.t we have Pt ϕ(x) = E[ϕ(W (t) + x)] = √ 1 2πt +∞ +∞ −∞ e− 2t (x−y) ϕ(y)dy 1 2 (4. x) = Pt ϕ(x) is continuous.7) = −∞ gt (x − y)ϕ(y)dy.8) 2πt We deduce. t ≥ 0. ϕ ∈ Bb (R). s ≥ 0. t ≥ 0. x) = Pt ϕ(x). which we will present later. bounded and Borel functions and by Cb (R) the subspace of Bb (R) of those functions which are uniformly continuous and bounded on R. x) = 1 uxx (t. we deﬁne the transition semigroup Pt ϕ(x) = E[ϕ(W (t) + x)]. x ∈ R. 2 u(0. u(t. x). x ∈ R. is a semigroup of linear operators in Bb (R). Given ϕ ∈ Bb (R) we want to study the evolution in time of ϕ(W (t) + x). that is P0 = I and where gt (ξ) = √ Pt+s = Pt Ps . ∀ t.50 Chapter 4 4. ϕ ∈ Bb (H). Notice that Pt coincides with the heat semigroup in R. Remark 4. x ∈ R. o Exercise 4. inﬁnitely diﬀerentiable and fulﬁlls ut (t. (4. t ≥ 0. In fact one checks easily that if ϕ ∈ Cb (R) then the function u : [0. based on Itˆ’s formula. x) = ϕ(x). (4. +∞) × R → R. To this purpose. that Pt . is the unique solution of the Dirichlet problem above.
x) = W (t) + x. (4. Show that E[ϕ(W (t) + ηFs ] = (Pt−s ϕ(η)). (4. .3 we have E[ϕ(X(t))X(s)] = E [E[ϕ(X(t))Fs ]X(s)] = E[Pt−s ϕ(X(s))X(s)] = Pt−s ϕ(X(s)) = E[ϕ(X(t))Fs ].14 For any t > s > 0 and any ϕ ∈ Bb (H) we have E[ϕ(X(t))Fs ] = (Pt−s ϕ)(X(s)). Notice that U is Fs measurable and V is independent of Fs .5 Markov property In this section we shall use several properties of conditional expectation. So. To prove the last statement notice that by Proposition B.10) (Pt−s ϕ)(X(s))dP. η a Fs measurable random variable and ϕ ∈ Bb (R). where (recall Exercise 4. Proof. We are here concerned with the stochastic process X(t) = X(t. they are recalled in Appendix A.15 Let s > 0.11) Moreover X(·) is a Markov process. ∀ A ∈ Fs . Equivalently ϕ(X(t))dP = A A t ≥ 0.10) is proved.Markov property 51 4. (4. By Proposition B.13) h(u) = E[ϕ(u + V )] = E[ϕ(u + W (t) − W (s))] = Pt−s ϕ(u). where x ∈ R.6 it follows that E[ϕ(X(t))Fs ] = E[ϕ(U + V )Fs ] = h(U ). Exercise 4. Set X(t) = W (t) + x = (W (s) + x) + (W (t) − W (s)) =: U + V. Proposition 4.
Let A ∈ Fτ . (4.. .1 Strong Markov property We now consider conditional expectation with respect to Fτ where τ is a stopping time.52 Chapter 4 4. (4. ∞ (Pt−τ ϕ)(W (τ ))dP = A ∞ i=1 A∩{τ =ti } (Pt−ti ϕ)(W (ti ))dP = i=1 ∞ A∩{τ =ti } E[ϕ(W (t))Fti ]dP = i=1 A∩{τ =ti } ϕ(W (t))dP = A ϕ(W (t))dP. Therefore. we can write. Assume ﬁrst that τ is of the form τ (Ω) = (tk )k∈N . Therefore.5.12) Equivalently ϕ(X(t))dP = A A (Pt−τ ϕ)(X(τ ))dP. ∀ A ∈ Fτ . Proposition 4.Then we have E[ϕ(X(t))Fτ ] = (Pt−τ ϕ)(X(τ )). i = 1.. Then we have ∞ (Pt−τ ϕ)(W (τ ))dP = A i=1 A∩{τ =ti } (Pt−τ ϕ)(W (τ ))dP ∞ = i=1 A∩{τ =ti } (Pt−ti ϕ)(W (ti ))dP. by (4. .13) is proved. n. so that X(t) = W (t).10) and taking into account that by the deﬁnition of Fτ we have A ∩ {τ = ti } ∈ Fti .. We set x = 0 for simplicity. (4.13) Proof.16 Let τ be a stopping time and let t ≥ τ and ϕ ∈ Bb (H).
15) To ﬁnd the laws of Ta with a ≥ 0 and M (t) the following lemma is useful.6 Some consequences of the strong Markov property In this section we want to determine the laws of the following important random variables. M (t) ≥ a) = P(B(t) ≥ a). and {Ta ≤ t} = {m(t) ≤ a}.16) t ≥ 0.Markov property 53 Let now τ be an arbitrary stopping time and let (τn ) be deﬁned by (4. t ≥ 0. s∈[0. a ≤ 0.14) . Property (4.8) F τ ⊂ F τn for all n ∈ N. Lemma 4. • M (t) = max B(s). a ≥ 0 (4.17 Let a ≥ 0 and t ≥ 0.t] b ∈ R. Recall that (Proposition 4. We have. s∈[0. • Tb = inf{t ≥ 0 : B(t) = b}. Let A ∈ Fτ . t ≥ 0. (4.12) is called the strong Markov property of W .13) it follows that ϕ(W (t))dP = A A (Pt−τn ϕ)(W (τn ))dP for all A ∈ Fτ . • m(t) = min B(s). Then by (4. Then we have P(B(t) ≤ a. Proof. Now the conclusion follows letting n → ∞.t] Notice that {Ta ≤ t} = {M (t) ≥ a}. taking into account that {Ta ≤ t} = {M (t) ≥ a} (4.2). 4. t ≥ 0.
M (t) ≥ a) = P(W (t) ≥ a). Ta ≤ t) = {Ta ≤t} Chapter 4 1 (−∞. l E[Pt−Ta 1 (−∞.18 (Reﬂection principle) For all a ≥ 0 we have P(M (t) ≥ a) = 2P(W (t) ≥ a).a] (a) = Ps 1 [a.+∞) (a).+∞) (a)]dP l = {Ta ≤t} E[1 [a.a] (W (t))dP l = {Ta ≤t} E[1 (−∞. M (t) ≥ a) = P(W (t) ≤ a. By the strong Markov property it follows that P(W (t) ≤ a. Ps 1 (−∞.54 P(W (t) ≤ a. a > 0. Proposition 4.a] (a)]dP. Proof. W (t) ≥ a). as easily checked. W (t) ≤ a) + P(M (t) ≥ a. (4. l On the other hand. l l Therefore P(W (t) ≤ a.a] (W (Ta ))]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞.a] (a)]dP = {Ta ≤t} E[Pt−Ta 1 [a. M (t) ≥ a) = {Ta ≤t} ∀ s > 0. Write P(M (t) ≥ a) = P(M (t) ≥ a.17) .a] (W (t))FTa ]dP. we have. M (t) ≥ a) = {Ta ≤t} E[1 (−∞.+∞) (W (t))FTa ]dP l = P(W (t) ≥ a. l since {Ta ≤ t} ∈ FTa .a] (W (t))FTa ]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞.
14) and Proposition 4. By Proposition 4. +∞)) are diﬀerent. W (t) ≤ a) = P(W (t) ≥ a).18 we have 2 P(Ta ≤ t) = P(M (t) ≥ a) = √ 2πt 2 =√ 2π Therefore +∞ at−1/2 +∞ a e− 2t dξ ξ2 e− 2 dξ. by Lemma 4.19 it follows that at ﬁxed time t the law of M (t) coincides with that of W (t). W (t) ≥ a) = P(W (t) ≥ a) so. η2 a2 d a P(Ta ≤ t) = √ e− 2t dt. 2πt (4. Moreover.19) Proof. Then we have a2 a ((Ta )# P)(dt) = √ e− 2t dt. Corollary 4. By (4.17 we have P(M (t) ≥ a. 2πt3 (4.18 we can easily deduce the expressions of the laws of M (t) and Ta for all a ∈ R. We have in fact by Proposition 4. Corollary 4. The following results can be proved similarly. the conclusion follows.+∞) (ξ)dξ. in particular M (t) is increasing whereas W (t) is not.18 for any a ≥ 0 P(M (t) ≥ a) = 2P(W (t) ≥ a) = √ 2 2πt +∞ a e− 2t dξ ξ2 = P(W (t) ≥ a).18) Proof.19 (Law of M (t)) For all t ≥ 0 we have ξ2 2 (M (t)# P)(dξ) = √ l e− 2t 1 [0. dt 2πt3 which implies the conclusion. Obviously the laws of M (·) and W (·) on C0 ([0.21 (Law of Ta ) Let a ≥ 0 and t ≥ 0.Markov property 55 Now.20 From Corollary 4. though random variables M (t) and W (t) are diﬀerent. . it is clear that P(M (t) ≥ a. Remark 4.
t ≥ 0. (4.a] (ξ)dξ. x ≥ 0.24 (Law of m(t)) For all t ≥ 0 we have (m(t)# P)(dξ) = − √ ξ2 2 e− 2t 1(−∞.22 Let a ≤ 0 and t ≥ 0. Then we have P(W (t) ≥ a. absorbed in 0 t ≥ 0. (ii) U (t) = W (t) + x. V (t) is called the Brownian motion . ∀ t ∈ [0. Chapter 4 (4. ((Ta )# P)(dt) = √ 2πt3 (4.21) Corollary 4. (i) Y (t) = W (t) + x.56 Lemma 4. Then we have a2 a e− 2t dt. m(t) ≤ a) = P(W (t) ≤ a).22) Corollary 4. U (t) is called the Brownian motion reﬂected in 0 (iii) V (t) = W (t ∧ τx ) + x. Y (t) is called the Brownian motion killed in 0.23 (Reﬂection principle) For all a ≤ 0 we have P(m(t) ≤ a) = 2P(W (t) ≤ a).23) 4. For any x ≥ 0 we set in this section Moreover we consider the following processes which take values in [0. τx ].7 Application to partial diﬀerential equations τx = inf{t ≥ 0 : W (t) + x = 0} = T−x . 2πt (4.25 (Law of Ta ) Let a ∈ R and t ≥ 0.20) Proposition 4. +∞).
x ∈ H. Proposition 4.24) We are here concerned with the process Y (t) = W (t) + x. We have u(t.1 The Dirichlet problem in the halfline ∀ t ∈ [0. x) = 1 uxx (t.26) where g is deﬁned by (4. l l where ψ(λ) = 1 t>λ l 1 2π(t − λ) R x ≥ 0. x) = E[ϕ(W (t) + x)1 t≤τx ] l = Pt ϕ(x) − E[ϕ(W (t) + x)1 t>τx ]. ξ2 λ > 0. ut (t. t > 0. t > 0 2 (4. 0) = 0. (4. τx ].7. Proof. +∞). x > 0. t ≥ 0.26 We have +∞ u(t. x) := E[ϕ(W (t) + x)1 t≤τx ]. . x) = 0 [gt (x − y) − gt (x + y)]ϕ(y)dy. u(0. (4. x) is the solution of the Dirichlet problem in [0. x) = ϕ(x). x ≥ 0.Markov property 57 4. e− 2(t−λ) ϕ(ξ)dξ. Deﬁne for any ϕ ∈ Bb ([0. l where ϕ is extended to R by setting ϕ(−x) = ϕ(x).8). x). We are going to show that u(t.25) u(t. x ≥ 0. +∞)) Ut ϕ(x) := u(t. using the strong Markov property we ﬁnd that. E[ϕ(W (t) + x)1 t>τx ] = E[1 t>τx (Pt−τx ϕ)(0)] =: E[ψ(τx )]. Write E[ϕ(W (t) + x)1 t>τx ] = E[E[1 t>τx ϕ(W (t) + x)Fτx ]] l l = E[1 t>τx E[ϕ(W (t) + x)Fτx ]] l Now. l t ≥ 0.
s ≥ 0. by a direct computation. x) = R gt (x − y)ϕ(y)dy − R gt (x + y)ϕ(y)dy. Since. recalling the law of τx (see (4. that if ϕ ∈ Cb ([0. and the conclusion follows.25). +∞)) we set Qt ϕ(x) = E[ϕ(W (t) + x)] = (2πt)−1/2 R e− x−y2 2t ϕ(y)dy. t ≥ 0. x) is the solution of the Dirichlet problem (4. It is easy to check. (x+y)2 1 ∂ Gx. x ≥ 0. Moreover U0 = I and Ut+s = U (t)U (s) for all t. +∞)).23)) it follows that t Chapter 4 E[ϕ(W (t) + x)1 t>τx ] = l 0 R t gt−s (y)ϕ(y)dy √ ∂ ∂x x 2πs3 e− 2s ds x2 = gt−s (y)ϕ(y)dy gs (x)ds 0 R = R gt (x − y)ϕ(y)dy + ∂ ∂x Gx. R where (2) t Gx. Replacing in the last integral y with −y. +∞ −r 2 e dr.y ϕ(y)dy.y = 0 gt−s (y)gs (x)ds = 1 Erfc 2 x + y √ 2t . Ut ϕ(x) = u(t.58 Next.y = − √ e− 2t = −gt (x + y) ∂x 2πt we get u(t.7. 4. We consider the process For any ϕ ∈ Bb ([0. for x > 0.2 The Neumann problem U (t) = W (t) + x. we see that +∞ Qt ϕ(x) = 0 (2) [gt (x − y) + gt (x + y)]ϕ(y). a We recall that Erfc (a) = 2 √ π .
x) = ϕ(x). ∞) and solves the following Neumann problem ut (t. t > 0. +∞)). So x y2 ϕ(0) e− 2t dy.24). ∞) × [0. Therefore Zt ϕ(x) = Ut ϕ(x) + ϕ(0) P(T−x ≤ t). t > 0. where x ≥ 0. Zt ϕ(x) = Ω ϕ ∈ Bb ([0. x ≥ 0. {t≥τx } = {t<τx } since W (τx ) + x = 0. t ≥ 0. x) = 1 uxx (t. Set Zt ϕ(x) = E[ϕ(W (t ∧ τx ) + x)]. u(0.7. Let us consider the stochastic process. x). setting u(t. x ≥ 0. 2 ux (t. [gt (x − y) − gt (x + y)]ϕ(y)dy + √ 2πt −∞ 0 If ϕ ∈ Cb ([0. 4. ut (t. x).Markov property 59 where gt is deﬁned by (4. x) = ϕ(x). +∞)) then u(t. x) = Qt ϕ(x) is continuous in [0. t ≥ 0. where Ut is deﬁned by (4. ∞). t ≥ 0 2 +∞ Zt ϕ(x) = uxx (t. ϕ(B(t ∧ τx ) + x)dP ϕ(W (t) + x)dP + ϕ(0)dP. u(0. 0) = 0. 0) = 0. x) = Zt ϕ(x) we see that u is the solution to the Ventzell problem. Now it is easy to check that if ϕ ∈ Cb ([0. Moreover Q0 = I and Qt+s = Q(t)Q(s) for all t. x ≥ 0. . inﬁnitely diﬀerentiable in (0. +∞)). So.3 The Ventzell problem V (t) = W (t ∧ τx ) + x. ∞) × [0. s ≥ 0. x ≥ 0.8). x ≥ 0. x) = 1 uxx (t.
s ≥ 0. Chapter 4 .60 Moreover Z0 = I and Zt+s = Z(t)Z(s) for all t.
t ∈ [0. for any t > 0 we denote by Ct the algebra of all cylindrical sets Ct1 .. 5.1. is adapted to the Brownian motion B if F (t) is Ft measurable for any t ∈ [0. B(tn )) ∈ A} where 0 ≤ t1 < . T ]. P). l 61 (5. P) is a stochastic process of the form n F = i=1 Fi−1 1 [ti−1 . < tn . F . We denote by (Ft )t≥0 the completion of the natural ﬁltration of B with all Pnull sets of Ω.1) ..ti ) .1 5. . F .. tn ≤ t and A ∈ B(Rn ).. it is called the natural ﬁltration of B. The family of σ–algebras (Ft )t≥0 is increasing.. Similarly as in Chapter 4.1 Let T > 0. we denote by Ft the σalgebra generated by Ct and all Pnull sets of Ω. t ≥ 0 the natural ﬁltration of B augmented with the null sets of P. Moreover.A = {ω ∈ C0 : (B(t1 ).1 Deﬁnition of Itˆ’s integral o Itˆ’s integral for elementary processes o Deﬁnition 5. We say that a stochastic process F (t).Chapter 5 The Itˆ integral o In all this chapter B represents a Brownian motion in a probability space (Ω. in (Ω.··· . t ∈ [0.tn . An elementary process F (t). T ]. T ]. We call Ft .
3). (5. We have n E[I(F )] = j=1 E[Fj−1 (B(tj ) − B(tj−1 ))].2) Obviously any elementary process is adapted. Notice now that for j < k the random variable Fj−1 Fk−1 [B(tj ) − B(tj−1 )]. Since Fj−1 is Fj−1 measurable. n − 1. Let us prove (5. T ].2 Assume that F ∈ EB (0.4) E 0 F (s)dB(s) = 0 Proof.3) (5. 0 = t0 < t1 < · · · < tn = T and Fi is Fti measurable for any i = 0. 2 Proposition 5. Then I(F ) ∈ L2 (Ω. 1. we deﬁne the Itˆ integral o setting T n I(F ) : = 0 F (s)dB(s) = i=1 Fi−1 (B(ti ) − B(ti−1 )). (5..3) is proved. For any elementary process F (t).4). t ∈ [0. This property is needed to prove some basic identities (similar to those obtained for the Wiener integral) which allow to extend the integral to more general processes. by Lemma 4. . F . Therefore we have n E[I(F )] = j=1 E[Fj−1 ]E[B(tj ) − B(tj−1 )] = 0 and (5.62 The Itˆ integral o where n ∈ N. Let us prove (5.. T ).. We have n E[I(F )2 ] = E j=1 Fj−1 2 [B(tj ) − B(tj−1 )]2 +2E j<k Fj−1 Fk−1 [B(tj ) − B(tj−1 )] [B(tk ) − B(tk−1 )] .3. P) and we have T E 0 T F (s)dB(s) 2 T =0 E(F (s)2 )ds. it is independent of B(tj )−B(tj−1 ). .
5.1.2 General deﬁnition of Itˆ’s integral o Let us denote by ZT := L2 ([0. b ∈ R. ω) → F (t. as required. ·)F1 (t. G ∈ EB (0. ·)2 dt < ∞. F1 = E 0 F (t. 2 2 2 a. T ] × Ω. It follows that E[I(F ) ] = j=1 2 n E[Fj−1 2 ](tj − tj−1 ). . dt × P) the Hilbert space of all (equivalence classes of) functions F : [0. The scalar product on Z is deﬁned by T F. ω). ·)dt. Therefore. B(0. taking the expectation. Obviously any elementary process F belongs to Z. T ) × F .Chapter 5 63 is Fk−1 –measurable and consequently is independent of B(tk ) − B(tk−1 ). (t. Hint: Use the identity ab = 1 1 1 (a + b)2 − a2 − b2 .3 Let F. T ). T ) × F and such that T F ZT := E 0 F (t. Prove that T T T E 0 F (s)dB(s) 0 G(s)dB(s) = 0 E[F (s)G(s)]ds. 2 Exercise 5. B(0. we have E [Fj−1 Fk−1 [B(tj ) − B(tj−1 )][B(tk ) − B(tk−1 )]] = E [Fj−1 Fj−1 [B(tj ) − B(tj−1 )]] E[B(tk ) − B(tk−1 )] = 0. T ] × Ω. which are measurable with respect to the product σalgebra.
2 Processes belonging to EB (0. from Exercise 5. l with F Fa measurable. We have b F (s)dB(s) in any E a F (s)dB(s) 2 = 0. the mapping T 2 EB (0.3 it follows that if F and G are predictable square integrable processes we have T T E 0 F (s)G(s)dB(s) = 0 E[F (s)G(s)]ds. T ) ⊂ ZT → L2 (Ω. T ] we have c b c F (s)dB(s) = a a F (s)dB(s) + b F (s)dB(s). T ) in ZT .6) E 0 F (s)dB(s) = 0 Moreover. b] ⊂ [0. T E 0 T F (s)dB(s) 2 T =0 E(F (s)2 )ds.b) . T ) 2 of EB (0. T ) are called predictable.7) We can deﬁne in an obvious way the Itˆ integral o interval [a. P)F → 0 The Itˆ integral o F (s)dB(s).64 In view of (5.4). Note ﬁrst that an elementary process is a linear combination of processes of the form F 1 [a. Therefore it can be uniquely extended to the closure EB (0. FT . So. for any a. T )). 2 is an isometry. T ]. t ≥ 0 and the following properties are fulﬁlled. Moreover. (5. . c ∈ [0. the Itˆ integral can be uniquely deﬁned by extension for any preo dictable square integrable process F (t). Let us now present a characterization of predictable processes (that is of 2 space EB (0. b a (5. and b b E a F (s)dB(s) = a (EF (s)2 )ds.5) (5. b.
dt × P). (5. [s. Prove that t t ϕ s F (r)dB(r) = s ϕ F (r)dB(r). it is enough to show that 1lA ∈ ΛT for any A ∈ P. Denote by ΛT the closure of EB ([0. We ﬁrst note that R is a πsystem.Chapter 5 65 In turn each F can be approximated by linear combinations of characteristic functions of Fa measurable sets. T ] × Ω. i. Fs . P. T ] × Ω. We call A × [a. dt × P) can be approximated by a monotonic sequence of simple functions. T ]) in L2 ([0. P is called the σalgebra of all predictable events. A ∈ D and (A. P.1). Let (An ) ⊂ D be mutually disjoint sets and set n φn = k=1 1 Ak . by the monotone convergence theorem.8) Exercise 5.b) . P. .5 The closure EB ([0.1)(iii) is fulﬁlled. For this we shall use the Dynkin Theorem. that it fulﬁlls (A. dt × P). T ] × Ω. T ] is a real random variable in the probability space ([0. P. φn → φ = 1lA in L2 ([0.7 Let F ∈ L2 ([0. We denote by R the family of all predictable rectangles and by P the σalgebra generated by R. b) a predictable rectangle. dt × P). 2 Proposition 5.4 A real predictable process in [0. T ]) is precisely L2 ([0. P). P.6 Let F ∈ L2 ([0. T ]×Ω. T ] and let ϕ ∈ L∞ (Ω. T ] × Ω. dt × P) where A = ∞ Ak . Since any element of L2 ([0.1. P.e. Properties (B. So. l Then.1)(i)(ii) are clear. l with A Fa measurable. Exercise 5. Now k=1 the conclusion follows by Theorem A. So. l We claim that D is a λsystem.1)(iii). 2 Proof. dt×P). it is natural to approximate a general predictable process by linear combinations of functions of the form 1 A×[a. P. T ] × Ω. 0 Show that F = 0. Deﬁnition 5. T ] × Ω. Then we set D = {A ∈ P : 1 A ∈ ΛT }. dt × P) such that T F (s)dB(s) = 0. see Appendix A. t] ⊂ [0. let us show (A.
9) σ→0 Consequently we have T σ→0 lim Iσ (F ) = 0 F (s)dB(s) in L2 (Ω.11) Let σ = {t0 . tn } ∈ Σ(0. in L2 ([0... P. F . . L2 (Ω)) the space of all stochastic processes which are mean square continuous and adapted. t → F (t). T ] × Ω. T ] → L2 (Ω. 2 2 2 . · · · . is continuous.2 Itˆ integral for mean square continuous o processes We shall denote by CB ([0.. P).8 Let us prove that T 0 1 B(t)dB(t) = (B 2 (T ) − T ). T ). (5.10) Example 5. T ) and. T ]. T ]. t1 . We recall that if F ∈ CB ([0. dt × P). T ) consider the elementary process n Fσ := j=1 F (tj−1 )1 [tj−1 . For any decomposition σ = {t0 .tj ) l and set T n Iσ (F ) := 0 Fσ (s)dB(s) = j=1 F (tj−1 )(B(tj ) − B(tj−1 )). t1 . 2 (5. (5.66 The Itˆ integral o 5. F . L2 (Ω)) then F (t) is Ft measurable for all t ∈ [0. Write B(tk−1 )(B(tk ) − B(tk−1 )) = B(tk−1 )B(tk ) − B 2 (tk−1 )) 1 1 1 1 = − B 2 (tk ) + B(tk−1 )B(tk ) − B 2 (tk−1 ) + B 2 (tk ) − B 2 (tk−1 ) 2 2 2 2 = 1 2 1 1 B (tk ) − B 2 (tk−1 ) − (B(tk ) − B(tk−1 ))2 . tn } ∈ Σ(0. 2 Clearly Fσ ∈ EB (0. using the continuity of F one can check easily that lim Fσ = F. T ] and the mapping [0. P).
X(t). T ] × Ω. We ﬁrst notice that X(t). 2 t ≥ 0. 2 Therefore the deﬁnition of the Itˆ integral depends on the particular form of o the integral sums. we deduce that T 1 B(t)dB(t) = lim Iσ (B) = (B 2 (T ) − T ).9 Prove that n σ→0 lim B(tk )(B(tk ) − B(tk−1 )) = k=1 1 (B 2 (T ) + T ). P.Chapter 5 Then we have Iσ (B) = 1 1 2 B (T ) − 2 2 n 67 (B(tk ) − B(tk−1 ))2 . F . t ∈ [0.19). is not a process with independent increments in general (unless f is deterministic). in L2 (Ω. T ]. σ→0 2 0 Exercise 5. P)) as the following result shows. P).3 The Itˆ integral as a stochastic process o t Let F ∈ L2 ([0. take for instance t X(t) = 0 B(s)dB(s) = 1 (B 2 (t) − t). Then we have E[(X(t2 ) − X(t1 ))(X(t4 ) − X(t3 ))] = 0 . has orthogonal increments (in the sense of L2 (Ω. 5.10 Let 0 ≤ t1 ≤ t2 ≤ t3 ≤ t4 ≤ T . Proposition 5. F . t ≥ 0. t ≥ 0. 2 and n σ→0 lim B k=1 tk + tk−1 2 (B(tk ) − B(tk−1 )) = 1 2 B (T ). F . P). However. in L2 (Ω. dt × P and set X(t) = 0 F (s)dB(s). k=1 Recalling that the quadratic variation of B is T (Theorem 3.
t4 ] E(F 2 (s))ds = 0. . t0 ∈ [0. Proposition 5. dt×P). Let t > s.t2 ] F (s)dB(s) l 0 1 [t3 . l l We are going to show that X(t). t ∈ [0. is a continuous process. L2 (Ω)). we have E[X(t)Fs ] = X(s) + E s t F (r)dB(r)Fs . t ≥ 0.t2 ] 1 [t3 . Since t X(t) − X(s) = s F (r)dB(r). Then X ∈ CB ([0. Proposition 5. Proof. We show now that X(t). T ]. We have in fact. taking into account (5. so that t→t0 lim E(X(t) − X(t0 )2 ) = 0. P. T ] we have t E(X(t) − X(t0 )2 ) = t0 E(F (r)2 )dr . is mean square continuous. For this we ﬁrst prove that it is a martingale with respect to the ﬁltration (Ft ) (see Appendix C).68 Proof.7) E[(X(t2 ) − X(t1 ))(X(t4 ) − X(t3 ))] t2 t4 The Itˆ integral o =E t1 T F (s)dB(s) t3 F (s)dB(s) T =E 0 T 1 [t1 . T ]×Ω. T ]. t ≥ 0. for any t. P).t4 ] F (s)dB(s) l = 0 1 [t1 . is a Ft –martingale Proof. The conclusion follows.12 X(t). T ]. We know that for any t ∈ [0. X(t) ∈ L2 (Ω. then that it is a continuous process. Ft .11 Let F ∈ L2 ([0. Moreover.
n F = i=1 Fi−1 1 [ti−1 . T ]. t ∈ [0.13) 2 Proof. since Fi−1 is Fi−1 –measurable and B(ti ) − B(ti−1 ) is independent of Fi−1 . T ]. . F . P. Theorem 5. we write t n E s n F (r)dB(r)Fs = i=1 E[Fi−1 (B(ti ) − B(ti−1 ))Fs ] = i=1 E{E[Fi−1 (B(ti ) − B(ti−1 ))Fi−1 ]Fs } = 0. tn = t and Fi−1 ∈ L2 (Ω. Then X has a continuous version and T E sup X(t)2 ≤ 4 t∈[0.12) when F is an elementary process. dt × P) and let t X(t) = 0 F (s)dB(s). n ∈ N.13 Let F ∈ L2 ([0. T ] × Ω.12) Notice that this is not obvious since s F (r)dB(r) is not independent of Fs in general (1) . t ∈ [0. P). dt × P) t Fn (s)dB(s). · · · . It is enough to prove (5. l where s = t1 . it remains to prove that t 69 E s F (r)dB(r)Fs = 0.T ] 0 EF (s)2 ds. because F (r) contains in general the “story” of the Brownian motion from 0 to r. Let (Fn ) ⊂ EB (0. T ) such that Fn → F and set Xn (t) = 0 (1) in L2 ([0. t (5. P. taking into account that Fs ⊂ Fi−1 . So.12) is proved and the conclusion follows. T ] × Ω. We are now ready to prove the continuity of X. (5. (5. In this case.ti ) .Chapter 5 So.
4. t ∈ [0. Consequently (Xn )(ω) is Cauchy in C([0.2.6 it follows that for any n.1 Itˆ integral with stopping times o Stopping times We proceed here as in Section 4. t ≥ 0 is a Brownian motion in (Ω. P). m ∈ N E sup Xn (t) − Xm (t)2 t∈[0. T ]) for almost all ω and its limit.14 Let τ be a stopping time.12 we see that X(t). Proposition 5. is a continuous Ft –martingale. Taking into account Proposition 5. Then W (τ ) is Fτ measurable and W (t + τ ) − W (τ ).4 5.8. Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. F. F. . The proofs of the two following propositions are completely similar to that of Proposition 4. To any stopping time τ we associate the σalgebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}. which coincides with X(ω) is continuous. Proposition 5. So. T ]. P) is called a stopping time with respect to the ﬁltration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0. A nonnegative extended random variable τ in (Ω.T ] T ≤ 4E(Xn (T ) − Xm (T )2 ) = 4E 0 Fn (s) − Fm (s)2 ds . 5.70 The Itˆ integral o Since B(t) is continuous it is clear that Xn (t) is continuous for all n ∈ N. Then by Corollary C.15 Let τ be a stopping time and set W (τ )(ω) = W (τ (ω))(ω).8 and 4. they will be omitted. ω ∈ Ω.
n. t1 ). t2 ) we have h(s)(ω) = 1 if ω ∈ A2 ∪ · · · ∪ An . λ × P) and set X(t) = 0 F (s)dB(s). t ∈ [0. Let moreover τ ≤ T be a stopping time... t2 . one can see that X(τ ) is Fτ –measurable.2 Itˆ’s integral with stopping times o t Let F ∈ L2 ([0. . T ] × Ω. Set Ai := {τ = ti }. ω ∈ Ω. dt × P) and let τ ≤ T be a stopping time. T ].14) Proof. ω) = X(τ (ω)..16 Let F ∈ L2 ([0. with 0 < t1 < t2 < · · · < tn ≤ T .4. l (5. l We have h(s) = 1. ω). ... Then we have τ T F (s)dB(s) = 0 0 1 {s<τ } F (s)dB(s). Deﬁne τ F (s)dB(s) : = X(τ ). T ]. n. P. s ∈ [0... i = 1.. The following result reduces a Itˆ’s integral with a stopping time to a o usual one between 0 to T . tn ). Then Ai ∈ Fti . ..15 and using the fact that X(t). It is enough to prove the result when τ is of the form. Arguing as in Proposition 5. t ∈ [0. T ] × Ω. i = 1. . τ (Ω) = (t1 .Chapter 5 71 5. has a continuous version. ¯ Consider now the stochastic process h(s) = 1 {s≤τ } . T ]. P. 0 where X(τ. Proposition 5. If s ∈ [t1 . s ∈ [0.
17 Let f. Lemma 5. We shall deﬁne the Itˆ integral for predictable processes with values o in L(Rm .72 so that h(s) = 1 A2 ∪···∪An = 1 Ac . L(Rm .T ] be the natural ﬁltration of B (augmented with all Pnull sets of Ω) . i. l Then h is predictable and T t1 t2 The Itˆ integral o 1 {t<τ } F (s)dB(s) = l 0 0 F (s)dB(s) + 1 (A1 )c l t1 tn F (s)dB(s) + · · · + 1 (A1 ∪A2 ∪···∪An−1 l )c tn−1 F (s)dB(s) = X(t1 ) + 1 (A1 )c (X(t2 ) − X(t1 )) l + · · · + 1 (A1 ∪A2 ∪···∪An−1 )c (X(tn ) − X(tn−1 ) = X(τ ). P. First we need a lemma whose simple proof is left to the reader. P. l l 1 Similarly. Rd ) (that is such that any matrix element belongs to L2 ([0. dt×P... Rd ))). m..j (t)dBj (t). .5 Multidimensional Itˆ integrals o B(t) = (B1 (t). dt×P)).. Bm (t)). We shall denote this space by L2 ([0.. dt × P).. d. dt × P. t≥0 Let m ∈ N be ﬁxed and consider a standard mdimensional Brownian motion in the probability space (Ω.15) Let now F ∈ L2 ([0. F . . i = 1. Then we have T T T E 0 f (s)dBi (s) 0 g(s)dBj (s) = δi. Let (Ft )t∈[0.. P).j 0 E[f (s)g(s)]ds.. T ] × Ω. j = 1. T ] × Ω. l 5. if s ∈ [tk−1 . g ∈ L2 ([0... tk ) with k ≤ n we have h(s) = 1 (Ak ∪. P.. . Rd )). We deﬁne the Itˆ o integral of F as the ddimensional process T m T F (t)dB(t) 0 i = j=1 0 Fi.∪An )c . T ] × Ω. L(Rm . . P. (5. T ]×Ω.
Rm ) is isomorphic to Rm and F becomes a vector F = (F1 .18 Let F ∈ L2 ([0. Proof. d m 0 T EI(F ) = i=1 j=1 2 E[Fi. (5. T ] × Ω. It follows that d m T 2 EI(F )2 = i=1 E j=1 0 Fi. i = 1.. · · · .16) reduces to T 2 T E 0 F (t).j (t)2 ]dt. Then we have T 2 T E 0 F (t)dB(t) = 0 E[Tr (F (t)F ∗ (t))]dt. taking into account (5. Then we have m T (I(F ))i = j=1 0 Fi. .. Set I(F ) = T 0 F (t)dB(t). d.Chapter 5 73 Proposition 5.15).j (t)dBj (t).j (t)dBj (t) and.. Remark 5.16) where Tr denotes the trace. P.17) .19 Assume that d = 1 so that L(Rd . (5. dt × P. dB(t) = 0 EF (t)2 dt. Fm ). L(Rm . dB(s) 0 and formula (5. In this case we shall write the Itˆ integral of F as o T F (s). Rd )). which yields (5.16).
74 The Itˆ integral o .
T ] × Ω. We are given two stochastic processes b. x∈R and k ϕ k = ϕ 0 + j=1 sup Dj ϕ(x).1 Introduction Let (Ω.1) where x ∈ R. (6. P. We set dX(t) = b(t)dt + σ(t)dB(t) and call dX(t) the Itˆ diﬀerential of X. X is adapted. B a real Brownian motion. (Ft )t≥0 the natural ﬁltration of B augmented with the null sets of P and P the σalgebra of all predictable events (also augmented with the null sets of P). P) be a probability space. dt × P) and consider the stochastic process t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s). we are going to give a meaning to the Itˆ’s diﬀerential ϕ (X(t)). t ≥ 0. continuous and continuous in mean square. If ϕ ∈ Cb (R) we set ϕ 0 = sup ϕ(x).Chapter 6 The Itˆ formula o 6. F . x∈R 75 . For any k ∈ N we denote by Cb (R) the linear space of all real mappings which are uniformly continuous and bounded tok gether with their derivatives of order less or equal to k. o k We need some notations. o Given a regular real function ϕ. σ ∈ L2 ([0.
F . T ]. also as ϕ (X(t)) = ϕ (X(t))dX(t) + 1 2 σ (t)ϕ (X(t))dt.2 below. 2 (6. Tthe following result on quadratic sums of a process is a generalization of Theorem 3. F . L2 (Ω.2) 1 2 σ (s)ϕ (X(s)) + b(s)ϕ (X(s)) ds.76 We shall prove the following Itˆ’s formula. Then we have n η→0 T lim F (tk−1 )(B(tk ) − B(tk−1 )) = k=1 0 2 F (s)ds in L2 (Ω. setting ϕ (X(t)) = ϕ (X(t))σ(t)dB(t). Writing (dB)2 = dt is justiﬁed by Lemma 6. Set Jη := n F (tk−1 )(B(tk ) − B(tk−1 ))2 .1 One can deduce formally Itˆ’s formula by proceeding as folo lows. 2 + 0 t ≥ 0. Lemma 6.4) 1 2 σ (t)ϕ (X(t)) + b(t)ϕ (X(t)) dt.2) in the diﬀerential form. P)) and let η = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. + or. that is terms with (dt)2 and dt dB(t). (6. o t Chapter 6 ϕ(X(t)) = ϕ(x) + 0 t ϕ (X(s))σ(s)dB(s) (6. Put (dB)2 = dt and neglet the terms of order greater than dt. We shall write (6.5) Proof. k=1 .19. P) (6.3) t ≥ 0.2 Let F ∈ CB ([0. Remark 6. 2 t ≥ 0. T ). Write dX = b(t)dt + σ(t)dB and dϕ(X) = ϕ(X + dX) − ϕ(X) = ϕ (X)dX + = ϕ (X)dX + 1 2 1 2 ϕ (X)(dX)2 ϕ (X)b2 (t)(dt)2 + 2b(t)σ(t)dt dB + σ 2 (t)(dB)2 .
6) lim E Jη − k=1 F (tk−1 )(tk − tk−1 ) since. obviously n η→0 T lim F (tk−1 )(tk − tk−1 ) = k=1 0 F (s)ds in L2 (Ω. P). . (6.The Itˆ formula o It is enough to prove that η→0 77 n 2 = 0. the last sum vanishes. F . so that n 2 E Jη − k=1 n F (tk−1 )(tk − tk−1 ) = k=1 n E F (tk−1 )2 B(tk ) − B(tk−1 )2 − (tk − tk−1 ) 2 (6.6) write E Jη − n 2 2 F (tk−1 )(tk − tk−1 ) k=1 = E n F (tk−1 ) B(tk ) − B(tk−1 )2 − (tk − tk−1 ) k=1 n = k=1 E F (tk−1 )2 B(tk ) − B(tk−1 )2 − (tk − tk−1 ) n 2 +2 j<k=1 E F (tj−1 )[B(tj ) − B(tj−1 )2 − (tj − tj−1 )] F (tk−1 )[B(tk ) − B(tk−1 )2 − (tk − tk−1 )] Since the Brownian motion has independent increments.7) = k=1 EF (tk−1 )2 E B(tk ) − B(tk−1 )2 − (tk − tk−1 ) 2 . To prove (6.
as η → 0. p p b= i=1 bi−1 1 [λi−1 . We start by proving (6. t ∈ [0. .8) where p ∈ N. p − 1.λi ) . Now we are in position to prove Itˆ’s formula. we have E Jη − k=1 n n 2 Chapter 6 F (tk−1 )(tk − tk−1 ) =2 k=1 E[F (tk−1 )2 ](tk − tk−1 )2 n ≤ 2η k=1 E[F (tk−1 )2 (tk − tk−1 )] → 0.. E[B(tk ) − B(tk−1 )4 ] = 3(tk − tk−1 )2 . . l (6. 3 2 Proof. Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]. 0 = λ0 < λ1 < · · · < λp and bi . σ(t) = σ0 .2) in [0.1).78 since F (tk−1 ) and B(tk ) − B(tk−1 ) are independent. First we assume that b o and σ are elementary processes.8) and X by (6. Since Cb (R) is dense in Cb (R) it is enough to show (6. t ∈ [0.2) when 3 ϕ ∈ Cb (R). x ∈ R. σi are Fti measurable for any i = 0.2) holds. 1. In this case we have b(t) = b0 . Now.λi ) . l σ= i=1 σi−1 1 [λi−1 . The conclusion follows. taking into account that E[B(tk ) − B(tk−1 )2 ] = (tk − tk−1 ).3 Let ϕ ∈ Cb (R). λ1 ].. b and σ given by (6. λ1 ] and X(t) = b0 t + σ0 B(t). Then identity (6. Let η = {t0 = 0 < t1 < · · · < tN = t}. t] with t ≤ λ1 .. 2 Lemma 6.
1 = lim I2.1 + I2.3 . P) η→0 η→0 (6.9) Concerning I1 we have N I1 = k=1 ϕ (X(tk−1 ))(b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 )).The Itˆ formula o On the other hand. P). (6. F . using Taylor’s formula we can write N 79 ϕ(X(t)) − ϕ(x) = 1 2 k=1 N ϕ (X(tk−1 ))(X(tk ) − X(tk−1 )) ϕ (X(tk−1 ))(X(tk ) − X(tk−1 ))2 + Rη k=1 + =: I1 + I2 + I3 . t η→0 t lim I1 = 0 ϕ (X(s))b(s)ds + 0 ϕ (X(s))σ(s)dB(s) in L2 (Ω.11) It is easy to check that lim I2. F .2 + I2. (6. So. (6.10) Concerning I2 we write N 2I2 = k=1 ϕ (X(tk−1 ))b2 (tk − tk−1 )2 0 N +2 k=1 N ϕ (X(tk−1 ))b0 σ0 (tk −k−1 )(B(tk ) − B(tk−1 )) + k=1 2 ϕ (X(tk−1 ))σ0 (B(tk ) − B(tk−1 ))2 =: I2.1  ≤ 1 ϕ 2 b0 2 (tk − tk−1 )2 → 0 as η → 0 2 k=1 N .12) In fact I2.2 = 0 in L1 (Ω.
ϕ (ξk ) − ϕ (X(tk−1 )) ≤ ϕ 0 (1 − ξ)X(tk ) − X(tk−1 ).13) So. (6. N Rη  ≤ 3 ϕ 3 b0 3 k=1 (1) tk − tk−1 3 + 3 ϕ 3 σ0 3 k=1 B(tk ) − B(tk−1 )3 since EB(t) ≤ [EB 2 (t)]1/2 = t1/2 . P). Moreover. N Rη  ≤ ϕ Consequently N 3 k=1 X(tk ) − X(tk−1 )3 . where ξk = (1 − ξ)X(tk−1 ) + ξX(tk ). by Lemma 6. the conclusion will follow provided η→0 lim ERη  = 0. (6.80 and (1) N Chapter 6 EI2. so that. F .2 it follows that t η→0 lim 2I2.2  ≤ ϕ 2 b0  σ0  k=1 N (tk − tk−1 )EB(tk ) − B(tk−1 ) ≤ ϕ 2 b0  σ0  k=1 (tk − tk−1 )3/2 → 0 as η → 0.14). . we deduce setting 1 − ξ ≤ 1. 3 Since ϕ ∈ Cb (R) we have by the mean value theorem. We have N 1 Rη = k=1 0 (1 − ξ)[ϕ (ξk ) − ϕ (X(tk−1 ))](X(tk ) − X(tk−1 ))2 dξ.3 = 0 ϕ (X(s))σ 2 (s)ds in L2 (Ω.14) Let us prove (6.
Then identity (6.10)) j→∞ lim Xj = X in CB ([0. as η → 0.4 Let x ∈ R. T ] × Ω. Taking expectation in the Itˆ formula we ﬁnd a useful identity which o allows to estimate the expectation of ϕ(X(t)). Moreover by (6.15) Then we have (see (5. s ∈ [0.The Itˆ formula o and so (2) 81 . T ]. L2 (Ω)). t t Xj (t) = x + 0 bj (s)ds + 0 σj (s)dB(s). (6. N 3 k=1 E(Rη ) ≤ 3 ϕ 3 b0  tk − tk−1  + 3 ϕ 3 σ0  3 3 √ N 15 k=1 tk − tk−1 3/2 → 0. The general case can be treated in the same way taking into account that bk−1 and σk−1 are independent of B(tk ) − B(tk−1 ). T ]. T ]. dt × P). Let (bj ) and (σj ) be sequences of elementary processes such that j→∞ lim bj = b. The proof is complete when t ≤ λ1 .2) we have t ϕ(Xj (t)) = ϕ(x) + 0 t ϕ (Xj (s))σj (s)dB(s). Set. b. P. We ﬁnally prove 2 Theorem 6.2) holds for all t ∈ [0. σ ∈ L2 ([0. 2 + 0 Now the conclusion follows by the dominated convergence theorem letting j → ∞. P. T ] × Ω. j→∞ lim σj = σ in L2 ([0. dt × P) and ϕ ∈ Cb (R). Proof. (6.16) 1 σj (s)ϕ (Xj (s)) + bj (s)ϕ (Xj (s)) ds. . (2) Since EB(t)3 ) ≤ [E(B(t)6 )]1/2 = √ 15. for any j ∈ N.
19) Then E[ϕ(X(t))] < +∞ and (6.6. Then condition (6. P. 0 (6. Then t E(X(t)2 ) = x2 + E 0 (σ 2 (s) + 2X(s)b(s))ds. For any R > 0 consider a function ϕR ∈ such that ϕ(x) if x ≤ R. 2 Cb (R) Proof of Proposition 6. provided the integrand in the right hand side is summable.17) also holds without the assumption that ϕ is bounded. b. Then E[ϕ(X(t))] = ϕ(x) + 1 E 2 t [ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)]ds. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s).7 Take ϕ(x) = x2 . Let t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s).5 Assume that x ∈ R. t ∈ [0. T ]. dt × P) and ϕ ∈ C 2 (R).18) and assume in addition that t E 0 ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)ds < +∞. dt × P) and 2 ϕ ∈ Cb (R). Proposition 6.1. P.17) holds. T ] × Ω. σ ∈ L2 ([0.6 Assume that x ∈ R.17) 6. T ]. (6. (6. t ∈ [0. b.82 Chapter 6 Proposition 6. T ] × Ω. ϕR (x) = 0 if x ≥ R + 1. . σ ∈ L2 ([0. Example 6.1 The Itˆ formula for unbounded functions o We want now to show that formula (6.19) becomes t E 0 σ 2 (s) + 2X(s)b(s)ds < +∞ which is clearly fulﬁlled.
. For such a ω. yields for any R > 0 o ϕR (X(t)) − ϕ(x) = 1 2 + 0 t 83 [ϕR (X(s))σ 2 (s) + 2ϕR (X(s)b(s)]ds 0 (6. by the assumption (6. As an application of Proposition 6. applying Itˆ’s formula (6. (6.21) and the dominated convergence theorem. m > 1.19). ω) is continuous for almost all ω ∈ Ω. t∈[0. X(·. T ] : X(t) ≥ R} if sup X(t) ≥ R. R→∞ lim τR = T P–a. say M (ω).22) Taking expectation we obtain E[ϕ(X(t ∧ τR ))] − ϕ(x) 1 = E 2 t (6. T 0 2m F (s)dB(s) . Let now τR be the stopping time inf{t ∈ [0.T ] τR = It is clear that τR is increasing and bounded by T . l 2 0 Now.T ] T if sup X(t) < R. we can let R → ∞ obtaining the conclusion. in view of Proposition 5.6 let us estimate E where F is predictable and m ∈ N. Then we have τR (ω) = T for all R > M (ω). So.23) 1 s<(t∧τR ) [ϕ (X(s))σ (s) + 2ϕ (X(s)b(s)]ds.s. l (6.20) t ϕR (X(s)))σ(s)dB(s).16 we can write ϕ(X(t ∧ τR )) − ϕ(x) = 1 2 + 0 t 1 s<(t∧τR ) [ϕ (X(s))σ 2 (s) + 2ϕ (X(s)b(s)]ds l 0 t 1 s<(t∧τR ) ϕ (X(s)))σ(s)dB(s). (6.2) to ϕR (X(t)).21) Now. We know that X(·. t∈[0.The Itˆ formula o Then. ω) attains the maximum.
25) Integrating between 0 and T . T ] × Ω.6 we have t E[X(t)4 ] = 6E 0 X(s)2 F (s)2 ds . Then X ∈ L2m ([0. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dW (s). P. dt × P)). dt × P) is dense in L2m ([0. (6. T ] × Ω. T ] × Ω. t ∈ [0.24) when F is bounded (because L∞ ([0.84 Chapter 6 Proposition 6. t ∈ [0. 6. (6. b ∈ L2 ([0. We can now easily iterate the previous argument taking successively m = 3.24) Proof.8 Assume that F ∈ L2m ([0. P. dt × P. It is enough to prove (6. m ∈ N. dt × P. by Proposition 6. Rd ) and σ ∈ L2 ([0. P. and set t X(t) = 0 F (s)dB(s). L(Rm . T ] × Ω. 4 and so on. setting ϕ(x) = x4 . P. So. dt × P) and we have T E[X(T ) 2m ] ≤ [m(2m − 1)] T m m−1 0 E F (t)2m dt. P. Then (6. Substituting this in (6. T ] × Ω. (6.24) is proved for m = 2. P.26) From which 0 EX(t)4 dt ≤ 36T 2 0 EF (t)4 dt. Assume that x ∈ Rd .25) yields T E[X(t)4 ] ≤ 36T E 0 F (t)4 dt. dt × P).19) holds so that. T ] . T ]. (6. Rd )). We start from the case m = 2. m ∈ N. yields T T 1/2 T 1/2 EX(t) dt ≤ 6T E 0 0 T 4 X(t) dt T 4 E 0 F (t) dt 4 . By H¨lder’s inequality it follows that o t 1/2 t 1/2 E[X(t)4 ] ≤ 6 E 0 X(s)4 ds E 0 F (s)4 ds . T ] × Ω.2 Itˆ’ formula for a vector valued process o Let d.
The Itˆ formula o We are going to prove the following Itˆ’s formula. Let us start with a preliminary lemma. (6.27) for all t ∈ [0.j )2 ] = E h.k=1 f (th−1 )f (tk−1 )(Bi (th ) − Bi (th−1 ))(Bj (th ) − Bj (th−1 )) × (Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )) n =E h=1 f 2 (th−1 )(Bi (th ) − Bi (th−1 ))2 (Bj (th ) − Bj (th−1 ))2 n = h=1 E(f 2 (th−1 ))(th − th−1 )2 → 0.. Lemma 6.j 0 Proof. m}.29) f (s)ds. (6. t ≥ 0.. T ]. So. Then we have n σ→0 lim f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )) k=1 T (6. Let η = {0 = t0 < t1 < · · · < tn = T } be a decomposition of [0. T ]. Let i = j and set n η Ii. σ(s)dB(s) . L2 (Ω)) and let i.28) The proof is similar to that of the onedimensional case seen before. j ∈ {1. = δi. we shall only sketch some points of the proof. σ(t)dB(t) + 1 Tr[(σσ ∗ )(t)D2 ϕ(X(t))] + b(t). P). (6.j := k=1 f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )). in L2 (Ω.9 Let f ∈ CB ([0.29) follows from Lemma 6.27) in the diﬀerential form ϕ (X(t)) = Dϕ(X(t)). Then we have n σ E[(Ii. If i = j. . o t 85 ϕ(X(t)) = ϕ(x) + 0 t Dϕ(X(s)).. We shall write (6.2. 1 Tr[(σσ ∗ )(s)D2 ϕ(X(s))] + b(s). 2. Dϕ(X(s)) 2 + 0 ds. T ]. F . Dϕ(X(t)) 2 dt.
0 = λ0 < λ1 < · · · < λp bi ∈ L2 (Ω. h and D2 ϕ(x)(h. k ∈ Rd .λi ) . Let η = {t0 = 0 < t1 < · · · < tN = t}. Rd ) and σi ∈ L2 (Ω.10 Let ϕ ∈ Cb (Rd ). 3 Proof. λ1 ].λi ) . We have b(t) = b0 . L(Rm . X(tk ) − X(tk−1 ) + 1 2 N D2 ϕ(X(tk−1 ))(X(tk ) − X(tk−1 )). Rd )) i = 0. taking ϕ ∈ Cb (Rd ) and proving (6. We use the notations Dϕ(x)h = Dϕ(x).30). Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))].30) where p ∈ N. P. X(t) = b0 t + σ0 B(t). Fti . k for all x. (3) On the other hand. (6. t] with t ≤ λ1 . p − 1. x ∈ Rd and let b and σ given by (6. λ1 ] t ∈ [0. b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 ) ..31) Concerning I1 we have N I1 = k=1 (3) Dϕ(X(tk−1 )). o p p b= i=1 bi−1 1 [λi−1 . . t ∈ [0. Then identity (6..3. Fti . 1.27) holds. Now we prove Itˆ’s formula when b and σ are elementary processes as. P. k) = D2 ϕ(x)h.. h. . l σ= i=1 σi−1 1 [λi−1 . by Taylor’s formula we can write N ϕ(X(t)) − ϕ(x) = k=1 Dϕ(X(tk−1 )). and σ(t) = σ0 . 2 Lemma 6. l (6.86 Chapter 6 as σ → 0. We proceed as in the proof of Lemma 6.6) in [0. X(tk ) − X(tk−1 ) + Rη k=1 =: I1 + I2 + I3 .
σ0 (B(tk )−B(tk−1 )) =: I2.35) .9 we have t η→0 d m 2 Di.j=1 α.3 . (6. P). b0 (tk − tk−1 )2 N +2 k=1 N D2 ϕ(X(tk−1 ))b0 . (6. P) η→0 (6.3 = = D2 ϕ(X(tk−1 ))(σ(B(tk ) − B(tk−1 ))).1 = lim I2.β (s)ds 0 i.32) Concerning I2 we write N 2I2 = k=1 D2 ϕ(X(tk−1 ))b0 .3 = = 0 Tr [D2 ϕ(X(s))(σσ ∗ (s))]ds.The Itˆ formula o So. σ(B(tk ) − B(tk−1 )) k=1 N d m 2 Di. Now.34) Moreover.j ϕ(X(s)) σi.β=1 Therefore. F . b(s) ds+ 0 Dϕ(X(s)).33) It is easy to check that η→0 lim I2. taking into account Lemma 6. we have N 2I2. F .2 +I2.β (Bβ (tk ) − Bβ (tk−1 )). t η→0 t 87 lim I1 = 0 Dϕ(X(s)). σ(s)dB(s) in L2 (Ω. proceeding as before.j=1 α=1 t lim 2I2. k=1 i.j ϕ σi. we see that η→0 lim ERη  = 0.2 = 0 in L1 (Ω. σ0 (B(tk ) − B(tk−1 )) (tk − tk−1 ) + k=1 D2 ϕ(X(tk−1 ))σ0 (B(tk )−B(tk−1 )).1 +I2.α (Bα (tk ) − Bα (tk−1 )) σi.α (s)σi. (6.
2 (6. 2 = .. σ ∈ L2 ([0. dX(t) + 1 D2 ϕ(X(t))σ(t). dt × P). . Prove that dϕ(X(t)) = Dϕ(X(t)).. Then identity (6. P. 2.. The general case can be treated in the same way taking into account that bk−1 and σk−1 are independent of B(tk ) − B(tk−1 ). 2 (6. Rd )). . k = 1. d.. x ∈ Rd and ϕ ∈ Cb (Rd ). σi ∈ L2 ([0.4 we obtain the result Theorem 6... m. i = 1. T ] × 2 Ω. i = 1.37) . T ] × Ω.12 Let d = 1. .27) holds for any t ∈ [0. proceeding as we did for the proof of Theorem 6. Prove that 1 ϕ (X(t))σ(t)2 dt.13 Let d ∈ N. σm (t)). dt × P : L(Rm . P. b.36) dϕ(X(t)) = ϕ (X(t))dX(t) + where σ(t) = (σ1 (t). T ] × Ω. σk ∈ L2 ([0. Set m t t X(t) = 0 b(s)ds + k=1 0 σk (s)dBk (s). P. Let moreover ϕ ∈ Cb (Rd ).. dt × P : Rd ). m = 1 bi .... 2 where σ = (σ1 . Exercise 6. Let ϕ ∈ 2 Cb (R). σd ). T ] × Ω.. P. σ(t) dt. dt × P). Finally. Set X(t) = b(t)dt + σdB(t).11 Let b ∈ L2 ([0. Exercise 6.. m ∈ N.88 Chapter 6 The proof is complete when t ≤ λ1 . T ].
for all G ∈ CB ([0. setting S and to write b HS : = [Tr(SS ∗ )]1/2 .1).1) on the interval [s. η ∈ L2 (Ω. 2 b S ∈ L(Rr . based on the identity b 2 b E a G(t)dB(t) 2 r = a d E [Tr (G(t)G∗ (t))] dt. Rd ) G(t) 2 HS E a G(t)dB(t) = a E dt. (7. T ] × Rd → Rd and σ : [0. t ∈ [s.1) we shall use a ﬁxed point argument. L (Ω. T ].2) X(s) = η. X(u))du + s σ(u. Fs . X(t))dt + σ(t.Chapter 7 Stochastic evolution equations We are given two positive integers r. X(u))dB(u). (7. P. Rd ) with the Hilbert–Schmidt norm. Let us consider the following integral equation t t X(t) = η + s b(u. We denote by (Ft )t≥0 the natural ﬁltration of B(t) (augmented with all Pnull sets of Ω). Rd ). T ] we mean a function X ∈ CB ([s. In order to solve (7. d and an rdimensional standard Brownian motion B(t).3) 89 . b : [0. We shall write (7. Rd ). Rd )) that fulﬁlls equation (7. in a probability space (Ω. (7. T ]. T ). R ))) and 0 ≤ a < b ≤ T. t ≥ 0. P). L2 (Ω. X(t))dB(t). T ] × Rd → L(Rr . F .1) in diﬀerential form as dX(t) = b(t.1) where s ∈ [0. This suggests to endow L(Rr . b is called the drift and σ the diﬀusion coeﬃcient of the equation. By a solution of equation (7. T ]. L(R .
We are going to solve (7. x) − σ(t.1) is equivalent to the following. Rd )). after possibly changing the constant M . y ∈ Rd . P.5) Notice that.4) ≤ M 2 (1 + x2 ). (7. L2 (Ω. (ii) There exists M > 0 such that for all t ∈ [0. x. X ∈ CB .4). y) and b(t. Then equation (7.1) by a ﬁxed point argument in the space CB := CB ([s.1) are the following. T ]. t ∈ [s. L2 (Ω. x) − b(t. Rd ). Step 1. X = η + γ1 (X) + γ2 (X) = γ(X). T ] γ2 (X)(t) := and set γ(X) := η + γ1 (X) + γ2 (X). T ] × Rd .1 (i) b and σ are continuous on [0. Proof. t ∈ [s. Theorem 7. σ(u. s X ∈ CB . we have b(t. T ]. Rd )).1 holds and let s ∈ [0. (7.1) has a unique solution X ∈ CB ([s. T ]. x) 2 HS 2 HS ≤ M 2 x − y2 (7. Then problem (7.6) . Hypothesis 7. X(u))dB(u).1 Existence and uniqueness The standard assumptions for the wellposedness of problem (7. Fs . x)2 + σ(t. X ∈ CB . (7. T ). γ1 and γ2 map CB into itself. X(u))du.5) is a consequence of (7. η ∈ L2 (Ω.90 Chapter 7 7.1 Assume that Hypothesis 7. y)2 + σ(t. Deﬁne γ1 (X)(t) := s t t b(u. T ].
Y ∈ CB (7. ≤ M 2 (t − s) X − Y . t γ1 (X)(t) − γ1 (Y )(t)2 ≤ (t − s) s t 2 s b(u. X(u)) 2 HS )du ≤ M2 s (1 + X(u)2 )du ≤ M 2 (t − s)(1 + X 2 CB ) So. We have. X(u)) − b(u.5). using again the H¨lder inequality and taking o into account (7.3) and (7. Let X. X. (1 + X(u)2 )du ≤ M 2 (t − s)2 (1 + X Since γ1 (X)(t) is Ft –measurable for all t ∈ [s.4). γ1 maps CB into itself and γ1 (X) CB ≤ M (t − s)(1 + X CB ). Concerning γ2 we have taking into account (7. γ is Lipschitz continuous. Step 2. t t γ1 (X)(t)2 ≤ (t − s) s b(u. X(u))2 du ≤ M 2 (t − s) s 2 CB ). X(u)) − σ(u. Y (u)) 2 HS )du 2 CB . using the H¨lder inequality and taking into aco count (7. we see that γ2 maps CB into itself. Y (u))2 du ≤ (t − s)M Consequently X(u) − Y (u)2 du ≤ (t − s)2 M 2 X − Y 2 CB du.7) t Eγ2 (X)(t) − γ2 (Y )(t)2 = s E( σ(u.Stochastic evolution equations 91 Concerning γ1 we have. Y ∈ CB . γ1 (X) − γ1 (Y ) Furthermore CB ≤ M (T − s) X − Y CB . t Eγ2 (X)(t) = s t 2 E( σ(u.5). T ].
Y ∈ CB . C([s.2 By Theorem 5. .8) By (7. η) = X(t. T ])) and so it is a continuous process. η) the solution of problem (7. Then X(t. Z(t))dt + σ(t. s. T ]. γ2 (X) − γ2 (Y ) CB Chapter 7 ≤M √ T −s X −Y CB . s. η). Z(t))dB(t). s. r.9) does not hold we choose T1 ∈ (s.3 Assume that Hypothesis 7.92 and so. Let us prove the cocycle law. η) = X(t.1) on [s. Fs . t ∈ [s. X. X(r. as required. s. s. (7.1 it follows that Z(t) = X(t. Then Z solves the problem dZ(t) = b(t. In the following we shall denote by X(·. By the uniqueness part of Theorem 7. 0 ≤ s ≤ r ≤ t ≤ T. s. T1 ]. η)). Rd ). η) which belongs to L2 (Ω. Z(r) = X(r. η). (7.8) it follows that γ maps CB into itself and √ γ(X) − γ(Y ) CB ≤ M (T − s + T − s ) X − Y  for all X. Now we repeat the proof with T1 replacing s and in a ﬁnite number of steps we arrive to the conclusion.7) and (7. s. Remark 7.1 holds and let η ∈ L2 (Ω. and so. s. η)). Deﬁne Z(t) = X(t. Whe shall use greek letters for stochastic initial data and latin letters for deterministic ones. CB . X(r. r. If (7. Then by the previous argument there is a unique solution to (7. Y ∈ CB . (7. P. Proposition 7. Now if T − s is such that √ M T − s + T − s ≤ 1/2. it possesses a unique ﬁxed point.10) Proof.1). T ] such that M T1 − s + T1 − s ≤ 1/2.13 it follows that there exists a version of the solution X(·.9) γ is a 1/2–contraction on CB .
Then we have b(u. η) of problem (7. . k = 1. s..14) Proof. (7. η) = n X(t.. Proposition 7. n. xn ∈ Rd . We claim that n XN (t. Fs . . s. s.15) Once (7. the conclusion follows letting N tend to inﬁnity. Then we have X(t. XN (u. and A1 . s. . Let XN be deﬁned by (7. which as we shall see plays an important rˆle in proving that o X(·.. s.. l (7. XN (u. Rd )). XN (u. XN (u. η))dB(u). s..12) Next result.. η). (7. . n. s. σ(u. s. η) = k=1 XN (t. η) in CB ([s. n.. xk )) in Ak . s. l ∀ N ∈ N. η)) = σ(u.. gives some information about the relationship between X(t. L2 (Ω. l k=1 (7. (7. Let us proceed by recurrence. s....13) where x1 . s. η) = X(·. s. deﬁne X0 (t. η ∈ L2 (Ω. t t XN +1 (t. P. x ∈ Rd . η))du + s σ(u. Equality (7. Assume that it holds for a given N ∈ N.15) is clear for N = 0. xk ) in Ak . η) = η and for any N ∈ N. s.11). η)) = b(u. .11) Then we have N →∞ lim XN (·. η) = η + s b(u. s. More precisely. k = 1.15) is proved. xk )1 Ak . XN (u.. x).1 holds and that n η= k=1 xk 1 Ak . so that XN (t. s. k = 1. XN (u. T ]... s. η) = XN (t. Rd ) and X(t. s. . xk )1 Ak . s.5 Assume that Hypothesis 7.Stochastic evolution equations 93 Remark 7. xk )) in Ak . s. s. An are mutually disjoints sets in Fs such that n Ω= k=1 Ak .4 By the contraction principle it follows that the solution X(t. x) is a Markov process..1) can be obtained as a limit of successive approximations.
XN (u. using inequality (6. η)) = k=1 1 Ak σ(u. s. T ].8.2 Examples Example 7. In particular X(·. s. η ∈ L2m (Ω.15) holds for N + 1. xk )). T ]. We proceed as in the proof of Theorem 7. Then problem (7. Theorem 7. x) ∈ CB ([s. 7. Rd )). XN (u. xk ) + l t b(u. s. ∀ x ∈ Rd . l Consequently n t XN +1 (t. XN (u. L2m (Ω. T ).94 so that b(u. Rd )). Rd )). η) = k=1 1 Ak X0 (t. (7. XN (u. xk )). Proof. P. η) ∈ CB ([s. L2m (Ω. L2m (Ω. C ∈ L(Rr . s.1 holds and let m ∈ N. Rd )). T ]. X(0) = x. s. Fs . Rd ) and x ∈ Rd . L2m (Ω. xk ) l and (7. s. s. xk )du s n + s σ(u. T ]. Rd ). xk ))dB(u) = k=1 1 Ak XN +1 (t.1) has a unique solution X(·.1 Solution of the stochastic diﬀerential equation in the space CB ([s. η)) = k=1 n Chapter 7 n 1 Ak b(u. s. XN (u. where A ∈ L(Rd ). the conclusion follows.1.24) proved in Proposition 6. 7.7 Consider the stochastic diﬀerential equation dX = AXdt + CdB(t). s. s.1. So. s.16) .1 by a ﬁxed point argument in the space m CB := CB ([s.6 Assume that Hypothesis 7. l σ(u. XN (u. s ∈ [0.
Write X(t) = eF (t) where F (t) = t a − 1 c2 + cB(t).Stochastic evolution equations 95 Clearly Theorem 7. (7.12. We want to show that the solution of (7. we ﬁnd X(t) = e x + 0 tA e(t−s)A CdB(s).17) yields t X(t) = A 0 e(t−s)A (x + CB(s))ds + x + CB(t).1 applies. x ∈ R. We obtain t Y (t) = 0 e(t−s)A (x + CB(s))ds.19).8 Let r = d = 1 and consider the stochastic diﬀerential equation dX = aXdt + cXdB(t). Y fulﬁlls the equation Y (t) = AY (t) + x + CB(t). T ].16) has a unique solution X(t) which fulﬁlls the integral equation t X(t) = x + A 0 X(s)ds + CB(t). Again Theorem 7.20) For this we check that X(t) given by (7.17) Setting t Y (t) = 0 X(s)ds. Y (0) = 0. which can be easily solved by the method of variation of constants.19) is given by 1 2 X(t) = et(a− 2 c ) ecB(t) x. T ].20) solves (7. T ]. X(0) = x. By substituting Y (t) in (7. Taking into account that.19) where a. t ∈ [0. c. (7. t ∈ [0. t ∈ [0. thanks to Proposition 3.1 applies so that (7.18) Example 7. t ≥ 0. (7. t t e(t−s)A CdB(s) = CB(t) + A 0 0 t e(t−s)A CB(s)ds. Then we have 2 dF (t) = a− 1 2 c dt + cdB(t) 2 . (7.
The following result can be proved as Theorem 7. L2 (Ω. V (t.24) ≤ M 2 (1 + x2 ). by Itˆ’s formula. T ] × L(Rr . T ].22) 7.25) (ii) For any Y ∈ CB ([0. ω) − σ(t. T ]. ω) and b(t.3 Diﬀerential stochastic equations with random coeﬃcients In some situations (see Subsections 7. (7. (7. y. ω) − b(t. Rd )) we have U ∈ CB ([0. x.4) one deals with stochastic diﬀerential equations having random coeﬃcients. ω ∈ Ω b(t. t t X(t. x. ω) 2 HS 2 HS ≤ M 2 x − y2 (7. X(u.3 and 7.96 and. ω)2 + σ(t. ω ∈ Ω. ω) = η(ω) + s b(u. L2 (Ω. o dX(t) = eF (t) dF (t) + = eF (t) Chapter 7 1 2 F (t) c e dt 2 1 1 a − c2 dt + cdB(t) + c2 eF (t) dt 2 2 = aX(t)dt + cX(t)dB(t). ω)dB(u). Y (t. C ∈ L(Rd ). ω) = b(t. T ]. x. x. T ]. U (t. ω). T ]. for all t ∈ [0. Y (t. x. ω) = σ(t. X(0) = x. ω)). b : [0. Show that the solution of (7. (7.21) is given by 2 X(t) = et(A−C /2) eCB(t) x. ω). . ω). Rd ).2 (i) There exists M > 0 such that for all t ∈ [0.21) where A. Rd ))) where. X(u. ω)du + s σ(u. Rd )) and V ∈ CB ([0. T ] × Rd × Ω → Rd and σ : [0. L2 (Ω. L(Rr . Fs . y ∈ Rd . y. ω)2 + σ(t.9 Let r = 1 and consider the diﬀerential stochastic equation dX = AXdt + CXdB(t). Exercise 7. Rd ) × Ω → Rd are such that: Hypothesis 7. ω).1. x ∈ Rd and AC = CA.1. (7.23) Here η ∈ L2 (Ω. ω)).
2 Now by Itˆ’s formula we ﬁnd o dX(t) = eH(t) dH(t) + 1 2 1 2 t t F (s)2 ds + 0 0 F (s). (7. Example 7. Rd ).2 holds.26) X(0) = x. T ) and η ∈ L2 (Ω.2. L2 (Ω. Fs .23) has a unique solution X ∈ CB ([s.1) is H¨lder continuous on t. T ]. T .11 Let d = 1 and consider the stochastic diﬀerential equation dX(t) = X(t) F (t). Let us show that X(t) = e− 2 1 Rt 0 Rt F (s)2 ds+ 0 F (s). dB(t) = X(t) F (t).27) solves (7. t ≥ 0. We are going to prove that the solution X(t. dB(t) .26). s. η)2 is bounded. η) to (7. Rd )). (7. . s and Lipschitz o continuous on η in mean square.27) For this we check that X(t) given by (7. dB(t) . Now it is easy to check that Theorem 7.1 holds.1 Continuous dependence on data Continuous dependence on mean square We assume here that Hypothesis 7.Stochastic evolution equations 97 Theorem 7. dB(t) . dB(s) . t ≥ 0. L∞ (Ω. where F ∈ CB (0. First we show that EX(t.10 Assume that Hypothesis 7.26). Let s ∈ [0. So. Rd )).2 7.10 applies and so there exists a solution X of (7. Write X(t) = eH(t) where H(t) = − Then we have 1 dH(t) = − F (t)2 dt + F (t). s. = eH(t) F (t). T ].27) is proved. (7. 7. Then problem (7. eH(t) F (t)2 dt t ≥ 0. t ∈ [0.dB(s) x.
13 Assume that Hypothesis 7. s.29) We start with the regularity of X(t. η) − X(t1 . Proposition 7. P. We now study the regularity of X(t.1(ii) and the H¨lder inequality we deduce that o t E (X(t)2 ) ≤ 3E(η2 ) + 3M 2 (t − s) s t (1 + E X(u)2 )du +3M 2 s (1 + E X(u)2 )du. (7. s.12.98 Chapter 7 Lemma 7.1 holds. 0 ≤ s < t ≤ T. Fs . s. We note that.1 holds. by Lemma 7. η) with respect to t. E(η2 ))(t − t1 ). Then there exists a constant C1 (T. T ] and η ∈ L2 (Ω. there exists a constant C(T. η)2 ≤ C1 (T. η) with respect to t. η)2 ≤ 3[E(η2 ) + M 2 ((T − s)2 + (T − s)]e3M Proof.28) E (X(t) ) ≤ 3E(η ) + 3E s t 2 2 b(u. Fs . s. Consequently E (X(t)2 ) ≤ 3E(η2 ) + 3M 2 ((T − s)2 + (T − s)) t +3M ((T − s) + 1) s 2 E X(u)2 du. E(η2 )) such that E X(t. Rd ) we have E X(t. Then for all s ∈ [0. X(u)) 2 HS )du. The conclusion follows from the Gronwall lemma. we have t 2 2 (T −s+1) . s. η. (7. E(η2 )) such that we have E X(t. s. Writing for short X(t. E(η2 )). Rd ). s.30) . Let 0 ≤ s ≤ t1 < t ≤ T and η ∈ L2 (Ω. η) = X(t). By Hypothesis 7. s. (7. X(u))du +3 s E( σ(u.12 Assume that Hypothesis 7. η)2 ≤ C(T.
We ﬁnally study the regularity of X(t. ζ)2 du and the conclusion follows from the Gronwall lemma. η) − b(u. Let us study the regularity of X(t. s. η) − X(t. X(u. Rd ). ζ)2 ≤ 3η − ζ2 t 2 2 (T −s+1)(t−s) E(η − ζ2 ). s. s. s. s1 . (7.Stochastic evolution equations Proof. X(u. E X(t.1 holds. s. η) − X(t. η) − X(t1 . Taking expectation and using (7. (1 + E X(u. Proposition 7. Then E X(t. Rd ). X(u. η) − X(t1 . η) − X(t. η) with respect to η. η)2 ≤ 2M 2 ((t − t1 )2 + t − t1 )(1 + C 2 (T. s. s. (7.1 holds. η)2 ≤ 2M 2 (t − t1 ) t1 (1 + E X(u. s. ζ))dB(u) . s. s. η) − σ(u. s. η) − X(t. η) with respect to s. ζ ∈ L2 (Ω. Proposition 7. η)2 du t 2 t1 + 2M Consequently. E(η2 ))) and the conclusion follows.32) . Fs . We have X(t.η s − s1 . s.4) we obtain E (X(t. s. P. X(u. s. Fs .14 Assume that Hypothesis 7. s. η)2 )du. s. s. We have t 99 E X(t. and η ∈ L2 (Ω. s. Then there exists a constant CT. s.31) +3 s (b(u.15 Assume that Hypothesis 7. η)2 ≤ CT. let 0 ≤ s < t ≤ T and η. η) − X(u. s.η > 0 such that E X(t. ζ)2 ) ≤ 3E(η − ζ2 ) + 3M 2 (T − s + 1) t × s E X(u. ζ))du t 2 +3 s (σ(u. ζ)2 ≤ 3e3M Proof. s. let 0 < s < s1 < t ≤ T.
x ∈ Rd and m ∈ N. Lemma 7.16 Assume that Hypothesis 7. η) − X(s. Then we have E X(·. s. η) − X(t.1 it follows that Proposition 7. 0 ≤ s ≤ t ≤ T . η) − X(t. m ∈ N and ∈ (0. Then there is a constant C(T ) > 0 such that E X(t. η) = X(t. x)2m < +∞.30). η). whose deﬁnition is recalled in Appendix E below. s.10). X(s1 . η)2 ) ≤ CT E (X(s1 . we can write Chapter 7 X(t. x) belongs to C −1/(2m) (7. Finally.24). s. s. let 0 ≤ s < t ≤ T and x.18 Assume that Hypothesis 7. x) − X(t. arguing as in the proof of Proposition 7. X(·.1 holds.14 we have Lemma 7. Let x ∈ Rd . 1/2). s. s1 . η)) − X(t. y)2m ≤ C(T )x − y2m . The conclusion follows now from (7.3 and the Sobolev embedding theorem E.17 Assume that Hypothesis 7. First we need a lemma. η) − η2 ) 2 = CT E (X(s1 . First. ·). s. which can be proved as Proposition 7. x)2m ≤ C1 (T. (7. Then the Sobolev embedding theorem (also stated in Appendix E) will imply that X(·. s. x2 ))(t − t1 )m .1 holds. s. s1 . we consider almost sure regularity of X(t. s. s.33) Now from Proposition E. η)2 ) .35) . s. . x) is H¨lder o continuous almost surely. Then there exists a constant C1 (T. s. s1 . y ∈ Rd . s. By (7. x) such that E X(t.31) there exists CT > 0 such that 2 E (X(t.3 Almost sure continuity and h¨lderianity o of trajectories In this section we show that X(·. Let 0 ≤ s ≤ t1 < t ≤ T.100 Proof. 7.1 holds. s. s. T ]) almost surely.2m Moreover. Taking into account the cocycle law (7. x) − X(t1 . x) belongs to a suitable Sobolev space. (7.34) ([s.13 using (6. s1 .
x → X(·.39) +σx (t. x) = bx (t. x)dt (7.4. (ii) We have (1) sup ([b(t.4 Diﬀerentiability of X(t. . X(t. 1]d ) almost surely. ·)]2 ) < ∞. x).3 it follows that 101 Proposition 7. s. X(t. dB(t)) h η (s. (7. s. 1]d . y ∈ [0. x) with respect to x In this section we assume.1 Existence of Xx (t. s. .1 and 7. x) · h = η h (t.3 hold. that Hypothesis 7. 7. x) Theorem 7. s. s. s. x) is the solution to the stochastic diﬀerential equation with random coeﬃcients. T ].2m Moreover. s. T ] × Rd . besides Hypothesis 7. 7.19 Assume that Hypothesis 7. s. s. s. let 0 ≤ s < t ≤ T and x.36) ([0. Dx b. L2 (Ω. s. (1) Recall the notations given at the beginning of Chapter 6.1 holds.3 2 2 (i) Dx b. T ]) =: CB ([s. h dη (t. ·)2m < +∞.37) We set CB = CB ([s. s. ·)]2 + [σ(t. h ∈ Rd . t∈[0. x.T ] (7.38) where η h (t. x). x))(η h (t.1. 1) we have E X(t. x). Dx σ and Dx σ are continuous on [0. x)) · η h (t. s. T ] the mapping Rd → CB . Rd )). X(t. ·) belongs to C −d/(2m) (7. is continuously Gateaux diﬀerentiable and its Gateaux derivative is given by Xx (t.Stochastic evolution equations Now from Proposition E. Then for any m > 1 and ∈ (0.20 Assume that Hypotheses 7. Then for any s ∈ [0. s. x) = h.
so it possesses a unique solution by Theorem 7. X)·Y ](t) = s bx (r. x ∈ Rd . t ∈ [s.6 from Appendix D (with Λ = Rd and E = CB ). s. Theorem 7. Then the mapping Rd → CB .21 Assume that Hypotheses 7. (the straightforward proof is left to the reader) and that for each x ∈ Rd . t ∈ [s. X2 ) CB ≤ (7. 1 X1 − X2 2 CB for all X1 .3.40) where T1 > s is chosen such that F (x. k) in Rd . s. x. x) with respect to x. Note that the coeﬃcients of equation (7. x) We now prove the existence of the second derivative of X(t. x). X. x)(h.2). X(r))Y (r)dr+ s σx (r.3 hold. s.41) Then F fulﬁlls Hypothesis D. X(r))Y (r)dB(r). Moreover.102 Chapter 7 Proof. k) = ζ h. the conclusion follows from Theorem D. which depends continuously on x. X)](t) : = x + s b(r. X(r))dr + s σ(r. T1 ]. t t [FX (x.2 Existence of Xxx (t. We set CB = CB ([s. To prove the theorem we use Theorem D.10. (7. X(x)) = X(x).39) fulﬁll Hypothesis 7. s. x).1 so that it possesses a unique ﬁxed point X(x) ∈ CB . X(r))dB(r). T1 ]) and deﬁne a mapping F : Rd × CB → CB . s. X(x) coincides with the solution X(·. setting Xxx (t. that is F (x. x ∈ Rd . T1 ]. h ∈ Rd . x) of (7. setting t t [F (x. x → X(·. s. So. X2 ∈ CB . It is not diﬃcult to check that F is Gateaux continuously diﬀerentiable. Y ∈ CB we have Fx (x.k (t. 7. is twice diﬀerentiable with respect to x in any couple of directions (h.4. X1 ) − F (x.1 and 7.42) . (7. X) = I.6.
s.Stochastic evolution equations 103 ζ h. dB(t)) h. s. s. s. x))dt +σx (t.k (t.43) We shall prove the theorem when n = r = 1 for simplicity. x))η(r. Lemma 7. T ). s. s. x ∈ Rd . s. x)dB(r).k ζ (s. We have. x))η(r. T ]. s. s. s. x))η(r. s. X(t. X(r. L2 (Ω)) be the solution of the equation t η(t. s. X(r. x) ∈ CB ([s. s.22 Let η(·. s. s. By using (7. . X(t. η k (t.k (t. x)dr (7. s. x). x) 4 ≤ 27 + 27 s t bx (r. η k (t. x)dt +bxx (t. Then η(·. X(r. x))η(r. s. s. X(t.k d ζ (t. L4 (Ω)) and there exists C > 0 such that Eη(·. s. s. s. t 4 ∀ s ∈ [0. x) = 1 + s t bx (r. dB(s)) +σxx (t. s. x)) · ζ h. x)) · (η h (t.37) and the H¨lder inequality we see that there exists a constant o C1 such that t η(t. We ﬁrst prove a lemma. s. (7. x). x) = 0. x)4 ≤ C. Proof. x) is the solution to the stochastic diﬀerential equation (with random coeﬃcients) h. x)4 ≤ 27 + C1 s t η(r. s. x)dr 4 +27 s σx (r. x))(η h (t. X(r. x) = bx (t. s. x)4 dr 4 +C1 s σx (r. x)dB(r) . x). x) ∈ CB ([s. (7.44) + s σx (r. s. X(r. x). x))(ζ h. s. s. x)dB(r) .45) η(t. s. T ]. s. x))η(r. X(t.k (t.
Thus the solution of (7.48) is given by η(·. x) belongs to CB and fulﬁlls equation (7.20 we know that X(t.8. We choose T1 as in (7. since η(·. x) = (1 − T (x))−1 (T (x)η(·.41) it follows that T (x) L(CB ) (7. s. X(r.44). s.44) as η(·. T (x)Z is diﬀerentiable with respect to x for any Z ∈ CB ([s. s. x)dr (7. 0 ≤ s ≤ t ≤ T. s. T1 ]) as before. s. x). X(r. x)4 dr).50) . s. x) = Xx (·. L4 (Ω)) and it results t (T (x)Z)(t) = − s t bxx (r. x))Z(r)η(·. where C2 is another constant. s. Proof of Theorem 7. We have in fact.48) ≤ 1/2. x) = (1 − T (x))−1 (1). The conclusion follows from the Gronwall lemma. s. s. x) := ζ(·. By Theorem 7. x ∈ R. x) ∈ CB ([s. x))Z(r)η(·. s. s. taking expectation on both sides of this inequality and using Corollary 6. (7. r. X(r. ∀ x ∈ R. s.41) and CB = CB ([s. t t (T (x)Z)(t) = − s bx (r. x)dB(r). r. s. x) By (7. x))Z(r)dB(r). Now we write equation (7. For any x ∈ R we deﬁne a linear bounded operator T (x) from CB into CB setting for all t ∈ [s. x))Z(r)dr − s 4 σx (r. x)4 ≤ C2 (1 + s Eη(r. X(r.46) Notice that. by a straightforward computation ηx (·. x) = 1 + T (x)η(·. (7.47) − s σxx (r. T ]. s. x)).21.49) From this identity it is easy to show the existence of ηx (·. (7. L (Ω)). we ﬁnd that t Eη(t.104 Chapter 7 Now. s. T ]. s. s. x) is diﬀerentiable with respect to x and that its derivative η(·. T1 ].
x)dr t + s σxx (r. . x)dB(r). x)dB(r). s.Stochastic evolution equations where t 105 T (x)η(·. Write X(t. s.53) with respect to r yields 0 = Xs (t. X(r. x))η 2 (·. s. s. s. s. X(r. x)dr (7. s. and the conclusion follows. s. s. s. Now by (7. s. s. s. x) − T (x)ηx (·. X(r.51) t + s σxx (r. r. Setting r = s we ﬁnd Xs (t. x)). s. X(r. x) with reo spect to s.3 with σ = 0. under Hypotheses 7. x)(t) = s bxx (r. X(r. x)b(s. x)) + Xx (t.1 and 7. X(r. 7. x))η 2 (·. s. s. x) is C 1 in all variables). x))η 2 (·. X(t)). x)(t) = s bxx (r. s.1 The deterministic case t ∈ [s. s. s. r. s. t ≥ r ≥ s. It is useful to recall ﬁrst some results in the deterministic case. x).5.53) Diﬀerentiating (7. 7. x)) · Xt (r. T ]. x))η 2 (·. x) (it is well known that X(t. x) = −Xx (t. s. r. X(r.52). Denote by X(t. Let us compute Xs (t. X(s) = x. (7. x).50) it follows that t ηx (t. x) = X(t. s. (7.52) Let us consider the problem X (t) = b(t. x) the solution of (7.5 Itˆ Diﬀerentiability of X(t.
P).2 The stochastic case Here we want to study the diﬀerentiability of X(t.3. 7.. s. Proposition 7. Then X1 (t. Then X(t. x) of (7. x)(B(tk ) − B(tk−1 )). . x) is not adapted.23 Assume that Hypotheses 7. The family (Fs+ )s∈[0. X(t. x)du + s σ(u. 0 ≤ s ≤ t ≤ T. x) is Fs+ –measurable. x) is Fs+ measurable. then X1 (t. . s. < sn ≤ T and A ∈ B(Rn ). We have in fact t t X1 (t.5.T ] is called the future ﬁltration of B. s. and let ϕ ∈ L2 (Ω. because X(t. x)b(r. x)dB(u). k=1 where η = {s = t0 < t1 < · · · < tn = t}.... s. s. Now we introduce the backward Itˆ integral for a process wich is adapted o to the future ﬁltration.11). (7.2). x) is not Fs measurable.106 which is equivalent to t Chapter 7 X(t.54) In the next subsection we are going to generalize this formula for the solution X(t.24 Let t1 < t2 ≤ s. x)dr. r. x) is measurable with respect to the σ–algebra Fs+ generated by all sets of the form {ω ∈ Ω : (B(s1 (ω)) − B(s(ω)). Fs+ . that for any s ∈ [0. N ∈ N. Then B(t2 )−B(t1 ) and ϕ are independent. however. s ∈ [0. A diﬃculty arises since the process s → X(t. x)dB(u) = lim η→0 σ(tk−1 . Since s t n σ(u. x) with respect to s in a sense to be precised. For this we need the following result which can be proved as Lemma 4. Let XN (t. s. x) = x + s b(u.. It happens. s. Lemma 7. s. where n ∈ N. B(sn (ω)) − B(s(ω))) ∈ A} . Proof. T ]. Let x ∈ Rd . T ]. s.1 holds. x) be deﬁned by (7. s. x) = x + s Xx (t. s. 0 ≤ s ≤ s1 < . We end the proof by recurrence. x) is Fs+ measurable.
(7. σ(r. Prove that t B(r)dB(r) = s 1 (B(t)2 − B(s)2 + (t − s)). L(Rr . dB(r)) . Rd )) are called stochastic processes adapted to the future ﬁltration (Ft+ ) and continuous in quadratic mean. x) · b(r. x) − x = s Xx (t.3 hold.3 Backward Itˆ’s formula o t Theorem 7.Stochastic evolution equations 107 We deﬁne CB + ([0. x)(σ(r. s. Moreover we have T E 0 F (s)dB(s) = 0. x)dr t 1 + 2 t TR [Xxx (t. x))]dr s (7. r. Rd ))) by a straightforward generalization of the space CB ([0.1 and 7. L(Rr . x). . o Exercise 7. 2 7. r. r. L(Rr . L2 (Ω. 2 T (7. T ]. (7. L2 (Ω. The elements of CB + ([0. L2 (Ω. L2 (Ω. T ]. T ]. T ]. Rd ))) deﬁned in Chapter 5. x).26 Let t > s. Then we have X(t.56) and T E 0 T 0 F (s)dB(s) = 0 E F (s) 2 HS ds.5.58) + s Xx (t. L(Rr .25 For any F ∈ CB + ([0. L(Rr . Rd ))).10). T ]. Theorem 7. For any η ∈ Σ with η = {0 = s0 < s1 < · · · < sn = T } we set n Iσ (F ) = k=1 F (tk )(B(tk ) − B(tk−1 )) The proof of next theorem is completely similar to that of equation (5.55) in L2 (Ω). Let F ∈ CB + ([0. Rd ))) there exists the limit T σ→0 lim Iσ (F ) =: 0 F (s)dB(s).27 Assume that Hypotheses 7. T ]. L2 (Ω. x)(σ(r.57) F (s)dB(s) is called the backward Itˆ integral of the function F in [0.
108 where d Chapter 7 TR [Xxx (t. For any η ∈ Σ(s. x)(B(sk ) − B(sk−1 )) + o(sk − sk−1 ). sk . s. x)] =− k=1 n [X(t.60) + sk−1 σ(r. sk−1 . x))] = k=1 Xxx (t. X(r. x) − x = − k=1 n [X(t.s.n If η ∈ Σ(s. X(sk . sk−1 .59) =− k=1 n Xx (t. On the other hand we have sk X(sk . sk . x))dB(r) = b(sk . x) − X(t.. σ(r. x)(σ(r. sk . Proof. r. x)) − 1 2 Xxx (t. x)(x − X(sk . x)(σ(r. that η→0 lim o(η) = 0. x) − X(t. sk . k=1 Arguing as in the proof of Itˆ’s formula one can show. X(r. sk−1 . sk−1 . sk−1 . sk−1 .. sk . t) we set η = max (tk − tk−1 ).. x). x)ek . x)(x − X(sk . k=1.. We take d = r = 1 for simplicity. x)(sk − sk−1 ) + σ(sk . σ(r. x) − x = sk−1 sk b(r. x))dr (7. r. after some tedious but o straighforward computations. x)ek ) and (ek ) is any orthonormal basis in Rd . t) we have n X(t. .. x))2 + o(η). sk−1 . x))] (7. Pa.
x)) − ϕ(x) = s Dx [ϕ(X(t. x)σ(r. x) where ξk is any point in [sk−1 .) Substituting (7. Therefore we have t η→0 lim I2 (η) = s Xx (r. r. x))]. In a similar way one can prove the following backward Itˆ formula. o 2 Theorem 7. x)dr. Obviously t η→0 lim I1 (η) = s Xx (r. . sk . x)dB(r). since b is deterministic. x)(sk − sk−1 ) + k=1 Xx (t. s. x) − x = k=1 n Xx (t. x)b(sk . we note that it is an integral sum corresponding to the backward Itˆ integral since Xx (t. x)σ(sk . x)(B(sk ) − B(sk−1 ))2 k=1 +I1 (η) + I2 (η) + I3 (η) + o1 (η). r. x)σ ∗ (r.59) we ﬁnd that n X(t.Stochastic evolution equations 109 (Notice that.28 Let ϕ ∈ Cb (Rd ).62) + s Dx [ϕ(X(t.60) in (7. sk . x) is Fs+ measurable by Proposition o k 7.61) n 1 + 2 Xxx (t. σ(r. x)(B(sk ) − B(sk−1 )) (7. sk . we have t ϕ(X(t. one can replace in (7. x))]. x) dr 1 + 2 t t 2 Tr [Dx [ϕ(X(t. Then for any 0 ≤ s < t ≤ T. x)dB(r). x)]dr s (7. s.23.60) b(sk . Concerning I2 (η). sk ]. sk . The other terms I3 (η) and o1 (η) can be handled as in the proof of Itˆ’s o formula. x))]σ(r. r. x) with b(ξk . b(r. x)σ 2 (sk . x)b(r.
110 Chapter 7 .
under Hypothesis 8. s. y ∈ Rn . t ∈ [0. t ∈ [0. 0 ≤ s ≤ t ≤ T. T ]. (8. T ] × Rn → Rn fulﬁlls the following hypothesis. x)). x. X(t)).t . T ) and b : [0. s. s. 111 x ∈ Rn . x) · b(s. x ∈ Rn .Chapter 8 Kolmogorov equations 8.3) Of great interest for the applications is the transition evolution operator Ps. y) ≤ M x − y. T ] × Rn .1 The deterministic case t ∈ [s. x) = 0. x) + Xx (t. T ].1 (i) b is continuous on [0. T ]. (8. and it holds X(t. deﬁned on the space Cb (Rn ) by Ps. As well known. Rn ). (iii) b is diﬀerentiable with respect to x and bx is continuous on [0. s. where s ∈ [0.4) . x) − b(t.1) has a unique solution X(·) = X(·. Hypothesis 8. (8. T ].t ϕ(x) = ϕ(X(t.2) Morever.1) We consider here the problem X (t) = b(t. X(u. (ii) There exists M > 0 such that b(t. diﬀerentiating (8. s. s. T ] × Rn .2) with respect to u and setting u = s we ﬁnd Xs (t. x ∈ Rn . T ]. 0 ≤ s ≤ u ≤ t ≤ T.1 problem (8. u. x) ∈ C 1 ([s. X(s) = x ∈ Rn . x)). x) = X(t. s. s. t ∈ [0. (8.
Ps. T ] × Rn → Rn . From (8. 1 where ϕ ∈ Cb (Rn ) and T > 0 is ﬁxed. x ∈ Rn . s. (8. s. We have t≥s (8. x)) dt dt and Ps. s. ϕx (X(t. t. d d Ps.t ϕ(x) = ϕ(X(t. Xx (t.1 For any ϕ ∈ Cb (Rn ) we have d Ps. ϕx (X(t.8) where 1 ϕ ∈ Cb (Rn ). Let us now consider the following partial diﬀerential equation called transport equation zs (s.6) t ≥ s. x) · b(s. x) + b(s.7). Moreover for any ϕ ∈ Cb (Rn ) the mapping [0. s.t ϕ(x) = ϕ(X(t. T ] (8. ds L(t)ϕ(x) = b(t. T ] × [0.2) it follows immediately the cocycle property Ps.7) (8. is continuous.t ϕ = Ps.9) z(T. Let us prove (8.t ϕ(x).t = Ps. u ∈ [0. X(t. x)).6) follows.112 Kolmogorov equations As easily checked. x)) .t ϕ = −L(s)Ps. x) ds ds = −L(s)Ps. x). Proof. s ∈ [0. dt and d Ps. We have. taking into acccount (8. s. s.t L(t)ϕ. s.t is a linear bounded operator on Cb (Rn ).t . t. x). ϕx (x) . x)). x)) = b(t. zx (s. x) = 0. .t ϕ.5) 1 Proposition 8. x) → Ps. d d Ps. T ].t ϕ(x). x) = ϕ(x). (8. x)). so that (8. (s. s. X(t. x)) = − ϕx (X(t.u Pu.t L(t)ϕ(x) = b(t.3). s.
x)).3 For any ϕ ∈ Cb (Rn ) we have Dt Pt ϕ = Pt Lϕ = LPt ϕ. X(s. X(s. x)) = z(u. u. x) = b(x) and consider the problem X (t) = b(X(t)). t.1. u.Chapter 8 113 Theorem 8. x)) ds = zt (s. x)). Therefore z(s.14) (8.t−s .10). Deﬁne Pt ϕ(x) = ϕ(X(t. x)) + zx (s. x). s ≥ 0.1 we deduce 1 Proposition 8.6). ϕx (x) . u. ϕ ∈ Cb (Rn ).9) we have d z(s. x ∈ Rn .13) Pt is called the transition semigroup associated with (8. z is given by z(s. t ≥ 0. t ≥ 0. X(u. Setting s = T and s = u we ﬁnd that z(T. given by (8. 8. x ∈ Rn . u. X(0) = x ∈ R . x)) + zx (s. x) = Ps. x) = ϕ(X(T. (8. (8.T ϕ(x) = ϕ(X(T. If z is a solution of problem (8. x)) is constant in s. u. It is enough to notice that z. X(T. x) = zt (s. X(s. x)). where Lϕ(x) = b(x). u. x)) = 0. u. x)) as required. u.11). Then problem (8. u. Xt (s.5) it follows the semigroup law Pt+s = Pt Ps . x)).12) so that by (8.9) by (8. Uniqueness. By Proposition 8. u.1 The autonomous case We assume here that b(t. b(s.2 Assume that b : [0.10) Proof Existence. . T ] × Rn → Rn fulﬁlls Hypothesis 8. X(s.9) has a unique solution z. s. X(s. x ∈ Rn . T ]. (8. we have Ps.11) whose solution we denote by X(·.15) 1 ϕ ∈ Cb (Rn ).t = P0. n (8. x)) which implies z(u. In this case it is easy to check that for any t > s ≥ 0. is a solution of (8. s ∈ [0.1 and 1 let ϕ ∈ Cb (Rn ). X(s. t≥0 (8. X(s. s.
x) → Ps. (8. y) HS ≤ M x−y. T ] × Rn . s. 0 ≤ s ≤ t ≤ T. y ∈ Rn . x))]. s. t ∈ [0. t. Hypothesis 8.18). By Chapter 6 we know that the mapping (s. (ii) There exists M > 0 such that b(t. t ≥ 0.t ϕ(x). x ∈ Rn (8. T ] × Rn → L(Rr .18) and assume that the following hypothesis holds.17) 8. x ∈ Rn . has a unique solution given by u(t. x ∈ Rn . x)).t is a linear bounded operator on Cb (Rn ). Rn ) are continuous. . t ≥ 0. T ]. x) = b(x). x)−b(t. x) . x)−σ(t. x) = ϕ(x).114 Finally. X(t))dB(t) X(s) = x ∈ Rd (8. x.16) u(0.t . ux (t.2 (i) b : [0. 0 < s ≤ t ≤ T. X(t))dt + σ(t. is called the transition evolution operator associated with (8. Ps. (8. x) = Pt ϕ(x) = ϕ(X(t. x) the solution of (8. T ] × Rn → Rn and σ : [0.2 we have Kolmogorov equations 1 1 Theorem 8. by Theorem 8. y)+ σ(t. We denote as before by X(·.19) As easily checked.2 Stochastic case We consider the stochastic evolution equation dX(t) = b(t. x ∈ Rn .4 Assume that b ∈ Cb (Rn ) and let ϕ ∈ Cb (R). Ps. Then problem ut (t. s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ Cb (Rn ) we set Ps.t ϕ(x) = E[ϕ(X(t. is continuous for all ϕ ∈ Cb (Rn ). For all t.18) corresponding to η = x ∈ Rn . (iii) b and σ have ﬁrst and second partial derivatives with respect to x continuous and bounded in [0.
20) The ﬁrst basic identity is the following.t ϕ = Ps. which yields (8. ϕx (x) .Chapter 8 115 8.t L(t)ϕ. 2 Proposition 8.22) Proof. . x)σ ∗ (s.t ϕ(x) − ϕ(x) = s L(r)Ps. Taking expectation in the backward Itˆ formula (7. x))]dr.r ϕ(x)dr.t ϕ(x) = ϕ(x) + s t Pr. (8. Then Ps. dt Proof. which coincides with (8.t (L(r)ϕ)(x)dr. σ(t. s. x).21) dt ϕ(X(t. x)). ds t ≥ 0.t ϕ. yields t E[ϕ(X(t.22).2 holds and let ϕ ∈ Cb (Rn ).21).t ϕ is diﬀerentiable in s and we have d Ps. By the Itˆ formula we have that o t ≥ 0.62) we ﬁnd o t Ps.t ϕ = −L(s)Ps.5 Assume that Hypothesis 8. x)) + ϕx (X(t. Integrating with respect to t and taking expectation. s. s.3 Basic properties of transition operators 1 Tr [ϕxx (x)σ(s. (8. x))dB(t) . The second basic identity is the following.2 holds and let ϕ ∈ Cb (Rn ).6 Assume that Hypothesis 8. s. x))] = ϕ(x) + s E[(L(r)ϕ)(X(r. x)] + b(s. 2 Let us introduce the Kolmogorov operator (L(s)ϕ)(x) = 2 ϕ ∈ Cb (Rn ). 2 Proposition 8.t ϕ is diﬀerentiable in t and we have d Ps. x)) = (L(t)ϕ)(X(t. s. s. Then Ps. X(t. that is Ps. (8.
x))dB(s) .7 Assume that Hypothesis 8. σ(s. u. x)) = zs (s. and fulﬁlls (8.23).23). x)) = ϕ(X(t. x))σ(s. zx . zxx . u. u. = u zx (s. X(s. x)). x) = E[ϕ(X(T. u. X(s. x) = E[ϕ(X(t.4 Parabolic equations 0 ≤ s < T. s. x) = ϕ(x). By (8.r Pr.t = Ps. ·)))(x) = 0. x ∈ Rn . x) + (L(s)(z(s. Now. u. and let 0 ≤ u ≤ s ≤ T.22) it follows that z(s. 2 0 < s ≤ T. Integrating in s between u and T yields z(T. Uniqueness.8 Prove the cocycle law Ps. (8. x)).24) Proof. x ∈ R . Existence. X(s. x))dB(s) = zx (s. Let z be a solution to (8. X(s. since z fulﬁlls (8. X(s. x))dB(s).23) if z is continuous and bounded together with its partial derivatives zt . Let us compute the Itˆ diﬀerential of z(s. n We say that a function z : [0. X(s.23). u. σ(s. u. x))ds + (L(s)z(s.23). u. ·)))(x) + zx (s. u. X(s. x) = Ps. x)).2 holds and let ϕ ∈ Cb (Rn ). T ] × Rn → R is a solution to (8. X(s.25) . (8. u. T ]. x))]. X(u. Then there exists a unique solution z of problem (8. x) t s ∈ [0. u.116 Kolmogorov equations 8. x)) − z(u.t for 0 ≤ s ≤ t ≤ t ≤ T. u.23).T ϕ(x). u. z is given by z(s. taking expectation we ﬁnd z(u.23) We consider here the parabolic equation zs (s. x)) − z(u. z(T. We have o ds z(s. Exercise 8. x))]. 2 Theorem 8. u. X(T. fulﬁlls (8. ϕ ∈ Cb (Rn ). (8. X(s. X(s.
Proof. problem (8. s + a.1 Autonomous case b(t.25)it follows that. ϕ ∈ Cb (Rn ). x ∈ Rn . x) coincide. Setting v(s. x) and X(t + a. x) = u(t. x) be the solution of the stochastic evolution equation dX(t) = b(X(t))dt + σ(X(t))dB(t) (8. s ≥ 0.7 we ﬁnd the result . By the proposition and the cocycle law (8.26) X(s) = x ∈ Rn . x). t − s. Setting B1 (t) = B(t + a) − B(a) we see that Y (t) fulﬁlls equation (8. Set Y (t) = X(t + a. s. x))dr + s+a σ(X(r. t]. t. s.26) but with the Brownian motion B(t) replaced by B1 (t).27) Then by Theorem 8. we have Pt+s = Pt Ps . Assume that b and σ are independent of t : Then we have L(s) = L where 1 2 Tr [ϕxx (x)σ(x)σ ∗ (x)] + b(x). t]. s+a.9 Let X(t. x ∈ Rn . x ∈ R (8.t . x ∈ Rn . x) = ϕ(x). x) = x+ s+a b(X(r. s ∈ [0. ϕx (x) . v(0. s ∈ [0.Chapter 8 117 8. x). t ≥ 0 is a semgroup of linear operators in Cb (Rd ). Now the conclusion follows. σ(t. The we have t+a t+a X(t+a.23) becomes vs (s. t ≥ 0. setting Pt = P0. s + a. 2 Proposition 8. s+a. Lϕ(x) = Then for any and a > 0 the laws of X(t. x). P0 = 1. Setting r − a = ρ yields t t Y (t) = x + s b(Y (ρ))dρ + s σ(Y (ρ))d[B(ρ + a) − B(a)].4. x) = b(x). t ≥ 0. x))dB(r). Thus Pt . x) = Lv(s. s+a. x) = σ(x).
29) is given by u(t. (8.Qt . Q is symmetric and Qx. P) taking values in Rn . (8. where Qt = 0 t (8.33) where A∗ is the adjoint of A.32) esA QesA ds.30) where B is a standard Brownian motion in a probability space (Ω. s ∈ [0. The corresponding stochastic diﬀerential equation is √ dX(t) = AX(t)dt + Q dB(t).10 Assume that b. the solution of (8. x) = ϕ(x).34) So. G . x) is given by X(t. x)] + Ax + ux (t. ∗ t ≥ 0. Q ∈ L(Rn ). t]. for any ϕ ∈ Cb (R). Consequently.29) where A.11 Consider the parabolic equation in Rn 1 ut (t.30) is given by the variation of constants formula t X(t. (8. x ∈ R. X(0) = x.27) has a unique solution given by v(s.t ϕ(x) = Pt ϕ(x). x) = e x + 0 tA e(t−s)A QdB(s). σ : R → R are Lipschitz continuous and of 2 class C 2 .5 Examples Example 8. x) = Pt−s. x) = Pt ϕ(x). x ≥ 0 for all x ∈ Rn . x)# P = NetA x. Then.118 Kolmogorov equations Theorem 8.28) 8. x) u(0. . (8. (8. the transition semigroup Pt looks like Pt ϕ(x) = Rn ϕ(y)NetA x. The solution of (8. (8. t ≥ 0. x) = 2 Tr [Quxx (t.31) Therefore the law of X(t.Qt (dy). problem (8.
36) where q > 0 and a ∈ R.35) Example 8. x) = (2π)−n/2 [det Qt ]−1/2 Rn 119 e− 2 1 Q−1 (y−etA x).(y−etA x) t ϕ(y)dy. (8.37) is given by X(t.38) e− 2t ϕ(e(a−q/2)t+ y2 √ qy x)dy. in particular.Chapter 8 If. (8. (8. x) = 1 qx2 uxx (t. P).12 Consider the parabolic equation in R ut (t. F . det Qt > 0 we have u(t. x) = ϕ(x). x) 2 u(0.39) . (8. The solution of (8. x) = e(a−q/2)t+ Therefore 1 Pt ϕ(x) = √ 2πt +∞ −∞ √ q B(t) x.37) where B is a real Brownian motion in is a real Brownian motion in some probability space (Ω. (8. The corresponding stochastic diﬀerential equation is √ dX(t) = aX(t)dt + q X(t)dB(t). x) + axux (t. X(0) = x.
120 Kolmogorov equations .
(ii) A ∈ D =⇒ Ac ∈ D. Proof. Theorem A. 121 (A. B ∈ D0 =⇒ A ∩ B ∈ D0 .1) ∞ i=1 Ai ∈ D. B ∈ D =⇒ A ∩ B ∈ D then it is σ–algebra. Moreover. ∅ ∈ D. Let D0 be the minimal λsystem including R. which will imply the theorem. if D is a λsystem such that A. Then we have σ(R) ⊂ D.2) . Obviously any algebra is a πsystem. (iii) (Ai ) ⊂ D mutually disjoint =⇒ (A. D ⊂ σ(R) we have σ(R) = D.1 Let R be a πsystem and let D be a λsystem including R. where σ(R) is the σ algebra generated by R. In fact if (Ai ) is a sequence in D of not necessarily disjoint sets we have ∞ Ai = A1 ∪ (A2 \ A1 ) ∪ (A3 \ A2 \ A1 ) ∪ · · · ∈ D i=1 and so ∞ Ai ∈ D by (ii) and (iii). If in particular. A non empty family R of parts of Ω is called a πsystem if A. i=1 Let us prove the following Dynkin theorem. B ∈ R =⇒ A ∩ B ∈ R. For this it is enough to show. a λsystem if (i) Ω. We are going to show that D0 is a σ–algebra. as remarked before.Appendix A λsystems and πsystems Let Ω be a non empty set. that the following inclusion holds A.
Using the Dynkin theorem we can show that P1 = P2 . It remains to show that if F ∩ B ∈ D0 then F c ∩ B ∈ D0 or. ∀B ∈ D0 (A. It is easy to see that D is a λsystem which contains D.2) is proved. F ) such that P1 (I) = P2 (I). We claim that H (B) is a λsystem. . Example A. Therefore H (R) = D0 by the minimality of D0 . that F ∪ B c ∈ D0 .1 it follows that P1 = P2 . since F ∪ B c = (F \ B c ) ∪ B c = (F ∩ B) ∪ B c and F ∩ B and B c are disjoint. In fact.2 Let A be an algebra of subsets of Ω and let F be the σalgebra generated by A .122 For any B ∈ D0 we set λsystems and πsystems H (B) = {F ∈ D0 : B ∩ F ∈ D0 }. Let P1 and P2 be probability measures on (Ω. Deﬁne D = {B ∈ F : P1 (B) = P2 (B)}. If we show that H (B) ⊃ R. B ∈ D0 ⇒ R ∩ B ∈ D0 . Consequently.3) is fulﬁlled. ∀ I ∈ A . In fact properties (i) and (iii) are clear. the following implication holds R ∈ R. we have that F ∪ B c ∈ D0 as required.3) then we conclude that H (B) = D0 by the minimality of D0 and (A. by Corollary A. On the other hand it is clear that if R ∈ R we have R ⊂ H (R) since R is a πsystem. equivalently. It is clear in fact that A is a πsystem. So. which yields R ⊂ H (B) and (A.
F . ∀ G ∈ G. P) such that µ(G) = G XdP = G Y dP. (B. F . it is denoted by E(XG ).1 Deﬁnition We are given a probability space (Ω. P) of L2 (Ω. by the RadonNikodym Theorem there exists a unique Y ∈ L1 (Ω. P). (B. P) and a σalgebra G included in F . It is clear that X is not G measurable in general. G .1) The G measurable random variable Y is called the conditional expectation of X given G .1 Assume that X ∈ L2 (Ω. Let X : Ω → R be a real random variable on (Ω. We say that X is G measurable if I ∈ B(R) ⇒ X −1 (I) ∈ F .2) Exercise B.1) E(XG ) is characterized by XdP = G G E(XG )dP. F . G ∈ G. Therefore. G . P). In all this appendix by random variable we mean an equivalence class of random variables with respect to the usual equivalence relation. Let us consider the signed measure µ(G) = G XdP. In view of (B. Show that E(XG ) coincides with the orthogonal projection of X into the closed subspace L2 (Ω. F .Appendix B Conditional expectation B. (1) 123 . P) (1) . ∀ G ∈ G. It is clear that µ is absolutely continuous with respect to the restriction of P to G .
9) So.6) 1 A XdP = P(A)E(X) = l A E(XG )dP. comparing (B. Then we have E(XG ) = E(X).3 Let H be a σalgebra included in G .10) . P). (B. Then we have E(XH ) = E E(XG ) H .7) E(XH )dP (B. XY ∈ L1 (Ω. P) and let G be σalgebra included in F . one can check easily the linearity of conditional expectation.9) we see that E(XH )dP = A A XdP = A E E(XG ) H dP. Let A ∈ G .124 Conditional expectation B.. Setting G = Ω in (B.2) yields E[E(XG )] = E(X).4) for all α. Pa. Y ∈ L1 (Ω. P).s.4 Let X. Also if X ≥ 0. (B.8) and XdP = A A E(XG )dP = A E E(XG ) H dP. one has E(XG ) ≥ 0.s.3) Moreover. F . Then we have E(XY G ) = XE(Y G ).2 Assume that X is independent of G . Proposition B. Then we have XdP = A A (B. F . Assume that X is G measurable. Y. (B. F .8) and (B. Y ∈ L1 (Ω. Let A ∈ H . Proof. Proof. β ∈ R and all X. Proposition B. E(αX + βY G ) = αE(XG ) + βE(Y G ). Then 1 A and X are independent so that l XdP = A Ω (B. Proposition B. (B. Pa. It is obvious that if X is G measurable.5) (B. we have E(XG ) = X.2 Basic properties Let X. From this one deduces the inequality E(XG ) ≤ E(X G ).
Recalling Proposition B. then since G ∩ A ∈ G we have E(1 A Y G )dP = l G G 1 A Y dP = l G∩A Y dP = G∩A E(Y G )dP = G 1 A E(Y G )dP. P). G .11) x ∈ R. Y )dP = G G (B. ∀Z ∈ L1 (Ω.Appendix B 125 Proof. Z) with values in R3 µ = (X.13) h(X)dP.15) . (B. (B.5 Let X. Y )) = E(Zh(X)). dz). Let us prove now a useful generalization of this Corollary. Z)# P. (B.2 we ﬁnd. Then we have E(XY G ) = XE(Y ). Let now G ∈ G . P) and let φ : R2 → R be bounded and Borel. Corollary B. dy. (B. y)µ(dx. Then we have E(φ(X. P). Y )) = R3 zφ(x. l for any G ∈ G .10) for X = 1lA where A ∈ G . XY ∈ L1 (Ω. Y )]. Y )G ) = h(X).14) Denote by µ the law of the random variable (X. F . Y. Y. It is enough to show (B. Y.12) where h(x) = E[φ(x. ∀ G ∈ G. So. E(Zφ(X. This is clearly equivalent to E(Zφ(X. F .6 Let X. We have to show that φ(X. Assume that X is G measurable and Y is independent of G . Proposition B. Assume that X is G measurable and that Y is independent of G . Proof. Y ∈ L1 (Ω.
126 Conditional expectation Since X and Z are G measurable and Y is independent of G . dz)λ(dy). P) and Z = E(HG ). dy. Prove the Jensen inequality E(g(F )G ) ≥ g(E(F G )). F . G . y)λ(dy) ν(dx.15) as E(Zφ(X. Z)# P(dx. zφ(x. (B. where ν(dx. dz).17) . F H ∈ L1 (Ω. dz) = ν(dx. Z) and Y are independent so that µ(dx. Exercise B. the random variables (X. dz) = R2 zh(x)ν(dx. g(F ) ∈ L1 (Ω. P). Using the Fubini Theorem we get ﬁnally E(Zφ(X. (B. dz) = (X. H. Prove that E(F H) = E(F Z). y)ν(dx.16) Exercise B. Y )) = R2 z R φ(x. Therefore we can write (B.8 Let g : R → R be convex and let F. dz)λ(dy).7 Let F. as required. dz) = E(Zh(X)). Y )) = R3 λ(dy) = Y# P(dy).
a submartingale if and only if M (s)dP ≥ A A M (t)dP. ∀ 0 ≤ s < t ≤ T.1 Deﬁnitions Let (Ω. ∀ 0 ≤ s < t ≤ T. and a supermartingale if and only if M (s)dP ≤ A A M (t)dP. (M (t))t∈[0. Thus (M (t))t∈[0. A ∈ Fs . ∀ 0 ≤ s < t ≤ T. a submartingale if E[M (t)Fs ] ≥ M (s). P).Appendix C Martingales C. ∀ 0 ≤ s < t ≤ T. F . A ∈ Fs . T ].T ] is a martingale if and only if M (s)dP = A A M (t)dP. a supermartingale if E[M (t)Fs ] ≤ M (s). Ft . t ∈ [0.T ] with M (t) ∈ L1 (Ω. 127 . ∀ 0 ≤ s < t ≤ T. A ∈ Fs . (Ft )t≥0 an increasing family of σalgebras included in F and (M (t))t∈[0.T ] is said to be a martingale (with respect to the ﬁltration (Ft )t≥0 ) if E[M (t)Fs ] = M (s). a stochastic process. ∀ 0 ≤ s < t ≤ T. P) be a probability space.
4 For all λ > 0 we have P(S ≥ λ) ≤ 1 λ M (tn )dP. let t > s and A ∈ Fs . A ∈ Fs .1 If M is a martingale then M  is a submartingale. Proof.2 The basic inequality for martingales S = sup M (ti ).3 Using Jensen’s inequality prove that any convex function of a martingale is a submartingale. This shows that M  is a submartingale. C. let 0 < t1 < t2 < . (See Exercise B. Let 0 ≤ s < t ≤ T.1) . In fact. l A so that B(t)dP = A A B(s)dP.. Example C. Exercise C. {S≥λ} (C.128 Martingales Proposition C.2 The Brownian motion B is a martingale. < tn ≤ T and set We are going to prove an important estimate (due to Kolmogorov) of S in terms of M (tn ). Clearly A+ and A− belong to Fs . Since B(t) − B(s) and 1 A are independent we have l (B(t) − B(s))dP = E(1 A (B(t) − B(s))) = 0. Proposition C. Set A+ = {ω ∈ Ω : M (s)(ω) > 0}. Consequently we have M (s)dP = A A+ M (s)dP − A− M (s)dP = A+ M (t)dP − A− M (t)dP ≤ A M (t)dP. 1≤i≤n Let M (t) be a martingale.. A− = {ω ∈ Ω : M (s)(ω) ≤ 0}.8).
. . i = 1. An are mutually disjoint.. An Now we estimate martingale. T ]. An−1 X(tn )dP. .. Let us estimate {S≥λ} M (tn )dP. P) for all t ∈ [0. and we have n {S ≥ λ} = i=1 Ai ..Appendix C Proof... M (t2 ) ≥ λ}. M (tn ) ≥ λ}. (C. 1≤i≤n We are going to estimate of E[S 2 ] in terms of E[M 2 (tn )]. recalling that M (t) is a sub– λP(An−1 ) ≤ An−1 M (tn−1 )dP ≤ An−1 M (tn )dP.3 Square integrable martingales In this section we are given a martingale M (t) such that M (t) ∈ L2 (Ω. < tn ≤ T and set as before S = sup M (ti ). A2 = {M (t1 ) < λ... We have obviously M (tn )dP ≥ λP(An ).. An−1 Proceeding in a similar way we obtain M (tn )dP ≥ λP(Ak ). n. . . . .. sets A1 .. C.. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·· An = {M (t1 ) < λ. 129 Clearly. Set A1 = {M (t1 ) ≥ λ}. Let 0 < t1 < t2 < .2) Summing up on k from 1 to n the conclusion follows. . We have. n. F . Moreover Ai ∈ Fti . Ak k = 1. Therefore M (tn )dP ≥ λP(An−1 ).
5) . Now the conclusion follows easily. Corollary C. Set F (t) = P(S > t). So. 1 t M (tn )dP.5 We have E Proof. By (C. (C. t∈[0. by (C.1) and the Fubini Theorem we have ∞ E(S ) ≤ 0 2 1 √ t √ {S≥ t} M (tn )dP dt = [0.6 Let M be a square integrable continuous martingale.+∞)×Ω 1 √ M (tn )1 {S≥√t} P(dω)dt l t ∞ = Ω M (tn )P(dω) 0 S2 1 √ 1 {S≥√t} dt l t 1 √ dt t 1/2 1/2 = Ω M (tn )P(dω) 0 =2 Ω M (tn )SP(dω) ≤ 2 Ω M (tn )2 dP Ω S 2 dP .T ] E (C.4) E(S 2 ) = 0 P(S 2 > t)dt = 0 P(S > √ t)dt. {S≥t} (C.1) we have F (t) ≤ Consequently ∞ ∞ Martingales sup M (ti )2 1≤i≤n ≤ 4E(M (tn )2 ). Then for any T > 0 we have sup M (t)2 ≤ 4E[M 2 (T )].3) t ≥ 0.130 Proposition C.
.5 it follows that E sup M (si )2 ≤ 4E M (T )2 . . 1≤i≤m Since M is continuous it follows. By Proposition C. . s∈[0. that E as required.Appendix C 131 Proof.T ] . . s2 . sm . sup M (s)2 ≤ 4E M (T )2 . by the arbitrariness of the sequence s1 . Let 0 < s1 < s2 < · · · < sm = T.
132 Martingales .
E be Banach spaces (norms  · ). We are given a continuous mapping The following result (contraction principle) is classical. Theorem D. ∀ λ ∈ Λ. (D. There exists a unique continuous mapping x : Λ → E.1) (ii). x(λ)). y ∈ E. 1) such that F (λ. then x is of class C 1 and x (λ) = Fλ (λ. (λ. ∀ λ ∈ Λ.1 There exists κ ∈ [0.Appendix D Fixed points depending on parameters D. (D. x. Let Λ. x) → F (λ. If in addition F is of class C 1 . y) ≤ κx − y. We want to generalize the second part of this result to mappings F (λ. x) which are only continuously Gˆteaux diﬀerentiable. x(λ))x (λ). x) and assume that Hypothesis D. x) − F (λ.1 Introduction F : Λ × E → E.1 (i). x(λ)) + Fx (λ. a 133 .2) λ → x(λ). such that x(λ) = F (λ.
∀ x.2 Gˆteaux diﬀerentiable mappings a Let A and B be Banach spaces and let Φ : A → B be a continuous mapping from A into B. a → DΦ(a)c is continuous we say that Φ is continuously Gˆteaux diﬀerentiable. a Remark D. B). One also says that Φ is Fr´chet diﬀerentiable. 1) and Φ(x) = sin x. such that ξ→0 lim 1 (Φ(a + ξc) − Φ(a)) = DΦ(a)c. (D. Then one can check easily that Φ is continuously Gˆteaux diﬀerentiable and a DΦ(x)y = y cos x. 1). B = L2 (0. y ∈ L2 (0. a → DΦ(a) is continuous then Φ is diﬀerentiable.3 It is well known that if the mapping A → L(A. We shall need the following result. a → DΦ(a).2 We say that Φ is Gˆteaux diﬀerentiable if there exists a a mapping DΦ : A → L(A. (1) ξ ∈ [0. c ∈ A. a Then the following identity holds 1 Φ(c) − Φ(a) = 0 DΦ((1 − ξ)a + ξc)(c − a)dξ. B). ξ ∀ a. Then we have F (ξ) = DΦ((1 − ξ)a + ξc)(c − a)dξ. e .3) Proof.134 Fixed points D.4 Let A. However. 1].5 Let Φ : A → B be continuously Gˆteaux diﬀerentiable. Proposition D. (as one can see) Φ is not diﬀerentiable in any point. If in addition for all c ∈ A the mapping A → B. (1) Example D. Deﬁnition D. and the conclusion follows just integrating this identity between 0 and 1. Set F (ξ) = Φ((1 − ξ)a + ξc).
x(λ)). From (D.6 Assume that Hypotheses D. x(λ)) · µ. Then G ∈ L(E) and by Hypothesis D.4) λ → x(λ). (D. Let λ. equivalently x (λ) · µ = Fλ (λ.3) it follows that x(λ + hµ) − x(λ) = F (λ + hµ.Appendix D 135 D. x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ + 0 Fx (λ + ξhµ.1 is fulﬁlled and denote by x the mapping x : Λ → E. such that x(λ) = F (λ. .1 Gz ≤ κz.1 is fulﬁlled and that F is continuously Gˆteaux diﬀerentiable. ∀ z ∈ E. x. Proof. x(λ) + ξ(x(λ + hµ) − x(λ))) · (x(λ + hµ) − x(λ))dξ.6) =h 0 1 Fλ (λ + ξhµ.3 The main result We can back to the notations of the introduction and consider two Banach spaces Λ and E and a continuous mapping F : Λ × E → E. x) → F (λ. x(λ)))−1 Fλ (λ. x(λ))(x (λ) · µ). x(λ + hµ)) − F (λ. We assume that Hypothesis D. h)z = Gz := 0 Fx (λ+ξhµ. x(λ)) · µ + Fx (λ. z ∈ E. µ ∈ Λ and h ∈ R.7) Set now 1 G(λ. (D. x(λ)+ξ(x(λ+hµ)−x(λ)))·zdξ. x(λ)) 1 (D. µ.5) (D. ∀ λ ∈ Λ. Theorem D. x). (λ.4) and (D. Then x(·) is continuously Gˆteaux diﬀerena a tiable as well and we have x (λ) · µ = (1 − Fx (λ.
x(λ)))−1 Fλ (λ. which implies 1 x(λ + hµ) − x(λ)) = (1 − G(λ.7) we have (1 − G(λ. µ. x(λ)). x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ. µ. x. Therefore x (λ) · µ − Fx (λ. h))−1 h 1 × 0 Fλ (λ + ξhµ. x(λ))(x (λ) · µ) = Fλ (λ. x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ. . Letting h → 0 we ﬁnd x (λ) · µ = (1 − Fx (λ. x.136 Then from equation (D. h))(x(λ + hµ) − x(λ)) 1 Fixed points =h 0 Fλ (λ + ξhµ. x(λ)).
p ) = E [0.1 (Sobolev embedding) Assume that > 1/(2m).1) Example E. T ) or not.1 Fractional Sobolev spaces on [0. Then the following inclusion holds with continuous embedding. T ]).Appendix E Fractional Sobolev spaces and regularity of processes E.T ]2 B(t) − B(s)p dt ds t − s1+p Take for simplicity p = 2m.2m E =E [0. 1).T ]2 = cm [0.2 (The Brownian motion) Let > 0 and let p ≥ 1.T ]2 f (t) − f (s)2m dt ds t − s1+2m .2m W . T ) ⊂ C −1/(2m) ([0.T ]2 B(t) − B(s)2m dt ds t − s1+2m t − sm−1−2m dt ds [0. T ] → R such that f +∞. T ) is by deﬁnition the space of all f : [0. (E. W . m ∈ N. < Theorem E.T ]2 t − sm dt ds = cm t − s1+2m 137 .2m (0.p (0. Deﬁne f := [0. 1] 2m .2m Let ∈ (0. Let us compute E( B p W .2m (0. then B 2m W . We ask the question whether B(·) belongs to W .
P) be probability space and let X(t). a (E. T ) for < 2 .3.2 (0. T ). T ]. s ∈ [0. 1 But if we take m = 2 we have B(·) ∈ W .2m (0. Remark E. The last statement follows from the Sobolev embedding theorem. be a real stochastic process on (Ω.138 Fractional Sobolev spaces The integral is ﬁnite if and only if < 1 .2) This estimate (provided m > 1) allows us to conclude that trajectories of X are H¨lder continuous almost surely.3) ([0. T ]. Therefore 1 if 1 < < 1 we conclude by the Sobolev embedding that B(·) ∈ C − 4 (0. as the next proposition shows. t ∈ [0. T ) Let (Ω. Then we have E X2m < +∞. We have in fact E X 2m . o Proposition E. One situation often encountered is when the following estimate holds for some m > 1.2m −1/(2m) ∈ (0. .2 Processes belonging to W . This does not imply that B(·) is continuous.4 (0. F . 1+b . T ]) for almost ω ∈ Ω. P). 2 1 For instance taking m = 1 we conclude that B(·) ∈ W . b > 0 such that E[X(t) − X(s)1+a ] ≤ cm t − s1+b ∀ t. F . ω) belongs to C Proof.T ]2 t − sm−1−2m dt ds < ∞. and cm > 0 E[X(t) − X(s)2m ] ≤ cm t − sm . (E. such that (E. ∈ (0. Assume that there is a > 0. since ∈ (0. 4 2 Arguing similarly taking larger m we conclude that B(·) ∈ C α (0. 1/2).3 Assume that there is m > 1. T ]. 1/2).4) Then X has αH¨lder continuous trajectories with α < o . 1/2). T ) again for < 2 .2) is fulﬁlled. X(·. ∀ t.2m Moreover. E. 1/2) and m − 1 − 2m > −1. and cm > 0 (E. ≤ cm [0.4 Kolomogorov test It is a generalization Proposition E. T ) for any α ∈ (0. s ∈ [0.
T ]d → R such that .5) Let (Ω.T ]2d ([0.6) This estimate implies that almost all trajectories of X are H¨lder continuous o almost surely. T ]. (E. Theorem E. Then the following inclusion holds with continuous embedding. T ]d ). . x ∈ [0. T ]d ) is by deﬁnition the space of all f : [0. x − yd+2m Let ∈ (0.2m ([0. T ]d . and cm > 0 such (E.2m := [0.7) ([0. Deﬁne f W f .3 Multi dimensional Sobolev spaces and regularity of random ﬁelds f (x) − f (y)2m dx dy.2m Moreover. F . 1/2) and m − 1 − 2m > −1. ∈ (0. (E. since ∈ (0. Proposition E.2) is fulﬁlled. 1). d ∈ N.5 (Sobolev embedding) Assume that > d/(2m). Then we have E X2m < +∞. W . X(·. We have in fact E( X 2m . T ]) for almost ω ∈ Ω. m ∈ N. ≤ cm [0. ω) belongs to C Proof. The last statement follows from the Sobolev embedding theorem. Assume that there is m > 1. 1).6 Assume that there is m > 1.2m 2m . be a random ﬁeld on (Ω. s ∈ [0. T ]d ) ⊂ C −d/(2m) ([0. P). . that (E.2m ) −d/(2m) ∈ (0. F . and cm > 0 E[X(x) − X(y)2m ] ≤ cm t − s2m . P) be probability space and let X(x).T ]2 t − sm−1−2m dt ds < ∞. 1).Appendix F 139 E. ∀ t.2m < +∞.
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