INTRODUCTION TO STOCHASTIC

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 half-line . . . . . . . . . . 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 λ-systems and π-systems 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 E-valued 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 push-forward 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 E-valued random variable in (Ω, F, P). Let
moreover ϕ: E →R be a nonnegative Borel function. Then we have
_

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,
_

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

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 σ-algebra generated by all measurable rectangles
is called the product σ-algebra 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 trace-class 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 finite-dimensional
(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


_
+∞
−∞
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

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

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 infinite-dimensional 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

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

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
ε|x|
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
finite-dimensional µ is non degenerate if and only if det Q > 0.
Assume now that H is infinite-dimensional 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

_
+∞
0
e
−ρ
ρ
k−1

.
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
_

[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) =
_

e
iX(ω),h
P(dω), ∀ h ∈ H
and that
¸m(X), h) =
_

¸X(ω), h)P(dω), ∀ h ∈ H,
and
¸Q(X)h, k) =
_

¸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
) =
_

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
) =
_

(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 n-dimensional Gaussian
random variable. Then X
1
, ..., X
n
are real Gaussian random variables. In
fact if k = 1, ..., n and a ∈ R we have
_

e
iaX
k
(ω)
P(dω) =
_

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
_

ϕ
1
(X
1
(ω)) ϕ
n
(X
n
(ω))P(dω)
=
_

ϕ
1
(X
1
(ω))P(dω)
_

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

1
) ϕ
k

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
,
_

ϕ
1
(X
1
(ω)) ϕ
n
(X
n
(ω))P(dω) =
_

ψ(X(ω))P(dω)
=
_
R
n
ψ(ξ)(X
#
P)(dξ) =
_
R
ϕ
1

1
)((X
1
)
#
P)(dξ
1
)
_
R
ϕ
k

n
)((X
n
)
#
P)(dξ
n
)
=
_

ϕ
1
(X
1
(ω))P(dω)
_

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
_

X
1
X
n
dP =
_

X
1
dP
_

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
=
_

(X
i
(ω) −m
i
(X))(X
j
(ω) −m
j
(X))P(dω)
=
_

(X
i
(ω) −m
i
(X))P(dω)
_

(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) =
_

e
i(X
1
(ω)h
1
+···+X
1
(ω)h
n
)
P(dω) =
n

k=1
_

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 H-valued 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
_

[X(ω)[
p
P(dω) < +∞.
L
p
(Ω, F, P; H), endowed with the norm
|X|
L
p
(Ω,F,P;H)
=
__

[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→∞
_

¸X
n
(ω), h)P(dω) =
_

¸X(ω), h)P(dω) = ¸m(X), h)
and
lim
n→∞
¸Q(X
n
)h, k) = lim
n→∞
_

¸X
n
(ω) −m(X
n
), h) ¸X
n
(ω) −m(X
n
), k)P(dω)
=
_

¸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) =
_

e
iX(ω),h
P(dω) = lim
n→∞
_

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

1
z
j
1
+···+ξ
n
z
j
n
)
µ(dx)
= lim
j→∞
e

1
2

1
z
j
1
+···+ξ
n
z
j
n
|
2
= e

1
2

1
z
1
+···+ξ
n
z
n
|
2
= e

1
2
P
n
j,k=1
z
j
,z
k

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) =
_

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 P-a.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 P-a.s.
• X is p-mean continuous, p ≥ 1, if
(i) X(t) is p-integrable 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 p-mean 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), P-a.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


2
−η
1
)
2
2(t
2
−t
1
)
−·−

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 n-dimensional 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


2
−η
1
)
2
(t
2
−t
1
)
− −

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 p-mean 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 p-mean 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, P-a.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


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, P-a.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

_
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

_
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

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 σ-algebra 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
σ-algebra 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())] =
_

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) =
_

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


2
−ξ
1
)
2
2(t
2
−t
1
)
−···−

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 n-dimensional 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 n-dimensional Brownian motion is a n-dimensional 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 n-dimensional 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 n-dimensional
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 σ-algebra 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 σ-algebra 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 π-system). Moreover, D
is a λ-system. 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 (one-zero law) Assume that A ∈ F
0
+. Then either P(A) =
1 or P(A) = 0.
Proof. Let A ∈ F
0
+. Denote by G the σ-algebra 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 σ-algebra 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 σ-algebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ ≤ t¦ ∈ F
t
for all t ≥ 0¦.
Let us describe the σ-algebra 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 σ-algebra 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 σ-algebra 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

= 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

=
2


_
+∞
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 half-line
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) =
_

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 σ-algebra generated by C
t
and all P-null
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 P-null 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 σ-algebra, 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 σ-algebra generated by R. P is called
the σ-algebra 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 π-system. Then we set
D = ¦A ∈ P : 1l
A
∈ Λ
T
¦.
We claim that D is a λ-system, 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 σ-algebra
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 m-dimensional 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 P-null 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 d-dimensional 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 σ-algebra
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

i−1

i
)
, σ =
p

i=1
σ
i−1
1l

i−1

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


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,


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
[ ≤ 3|ϕ|
3
[b
0
[
3
N

k=1
[t
k
−t
k−1
[
3
+ 3|ϕ|
3

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
[) ≤ 3|ϕ|
3
[b
0
[
3
N

k=1
[t
k
−t
k−1
[
3
+ 3|ϕ|
3

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

(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

(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

2
(s) + 2X(s)b(s)[ds < +∞
which is clearly fulfilled. Then
E([X(t)[
2
) = [x[
2
+E
_
t
0

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

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
)

(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
)

(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 one-dimensional 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

i−1

i
)
, σ =
p

i=1
σ
i−1
1l

i−1

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 r-dimensional 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 P-null 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 well-posedness 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),

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

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),

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

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,

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 co-cycle 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 co-cycle 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,
_
¸
¸
¸
¸
_
¸
¸
¸
¸
_

h
(t, s, x) = b
x
(t, X(t, s, x)) η
h
(t, s, x)dt

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

x
(t, X(t, s, x))(ζ
h,k
(t, s, x), dB(s))

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, P-a.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
λ-systems and π-systems
Let Ω be a non empty set. A non empty family R of parts of Ω is called a
π-system if
A, B ∈ R =⇒ A ∩ B ∈ R,
a λ-system 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 π-system. Moreover, if D is a λ-system 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 π-system and let D be a λ-system 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 λ-system 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 λ-systems and π-systems
For any B ∈ D
0
we set
H (B) = ¦F ∈ D
0
: B ∩ F ∈ D
0
¦.
We claim that H (B) is a λ-system. 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 π-system. 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 π-system. Define
D = ¦B ∈ F : P
1
(B) = P
2
(B)¦.
It is easy to see that D is a λ-system 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 σ-algebra G included in F.
Let X : Ω →R be a real random variable on (Ω, F, P)
(1)
.
We say that X is G-measurable if
I ∈ B(R) ⇒ X
−1
(I) ∈ F.
It is clear that X is not G-measurable 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 Radon-Nikodym 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 G-measurable 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 σ-algebra included in F. It is obvious
that if X is G-measurable, 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, P-a.s., one has
E(X[G) ≥ 0, P-a.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 =
_

1l
A
XdP = P(A)E(X) =
_
A
E(X[G)dP.
Proposition B.3 Let H be a σ-algebra 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 G-measurable.
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 G-measurable
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 G-measurable 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 G-measurable 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
=
_

[M(t
n
)[P(dω)
_

0
1

t
1l
{S≥

t}
dt
=
_

[M(t
n
)[P(dω)
_
S
2
0
1

t
dt
= 2
_

[M(t
n
)SP(dω) ≤ 2
__

[M(t
n
)[
2
dP
_
1/2
__

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 α-H¨ 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 half-line . . . 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

. . 8. 123 B. . 8. . . . . . . . . .4.1 Existence of Xx (t. . . . . 97 Almost sure continuity and h¨lderianity of trajectories . . . . . . . . . . . x) with respect to s. . . . . . . . . . . . . . . . . 97 7. . . .2. . . . . . .2 The stochastic case . . . . . . . . .1. . . . . . . . . . . .1 7. . . . . . . . . . .2m (0. . . . . . . . . . .4. . . . . . . . . . . . . . . . . . s. 138 . . . . . 101 7.2 Existence of Xxx (t. . 105 7. . 8. . . . . . . 106 7. . . . . . . . . . .1 The autonomous case . . . . 113 . . . . x) . . . . . . . . . . . . 1] . . . . . . . . . . . . . . . 128 C. . 117 . . .5. . . . . . 134 .5 Examples . . . . .5 8 Kolmogorov equations 8. . . . . . .1 Introduction . . . . . s. . . . . . . . .1 The deterministic case . . . . . . . . . . . . . .2 Gˆteaux differentiable mappings . . . . . . . .4 7. . . . . x) with respect to x .1 Autonomous case . . . . . . . . . . .1 The deterministic case . . . . . .1 Continuous dependence on mean square . . . . . . . . .3 Differential stochastic equations with random coefficients 96 Continuous dependence on data . . . . . . . . 135 E Fractional Sobolev spaces and regularity of processes 137 E. . . . . . A λ-systems and π-systems . . .2 Examples . a D. . . . . .3 Basic properties of transition operators 8. . . . . . . . . . . . . . . . . . . . . .1. . . . . . . 118 121 7. 124 C Martingales 127 C. . . . . . . . . . . . . . . .2 Basic properties . . B Conditional expectation 123 B. . . 100 o Differentiability of X(t. . x) . . 101 7. 137 E. . . . . . . . . T ) . . . 114 . .1 Fractional Sobolev spaces on [0. .2 Processes belonging to W . . . . . . . . . . . . . 111 . .1. . . . . . . . . . . 107 o 111 . . 133 . .1 Definition . . . . . . . D. . . . . . . . . . 129 D Fixed points depending on parameters D. . . . . 105 o 7. . . .2 Stochastic case . . . . . . . . .1 Definitions . . . . . . . . 116 . . . . . . . . . . .2 The basic inequality for martingales . .5. . . . 127 C. . 133 . . . . . . . . . . 115 . . . . . . . . . s.2 7.3 Square integrable martingales . . . . . . 8. . . . . . . . . . . . . . .4. . . . . . . . 8. .3 Backward Itˆ’s formula . . . . . . . .3 7. . . . .4 Parabolic equations . . . . . . . . 102 Itˆ Differentiability of X(t. . . . . . . . . . . . .5. . . . . . . . . . . s. . . . . . . . . . 94 7. . . .3 The main result . . . . . . . . . .

. . . . 139 .2 E. . . . . . . . . . . . . . . . . . . . .3 Multi dimensional Sobolev spaces and regularity of random fields . . . . . . . .

y ∈ H.1 Some concepts of Probability Random variables Let (Ω. The set of all symmetric and positive elements of L(H) will be denoted by L+ (H). |x|=1 |T x|. 1.1. positive if T x. x∈H is a Banach space. Finally. Cb (H).Chapter 1 Gaussian measures in Hilbert spaces We shall denote by H a real separable Hilbert space (with inner product ·. 3 . F . we shall denote by B(E) the σ–algebra generated by all closed (or equivalently open) subsets of E. y = x. We recall that T ∈ L(H) is said to be symmetric if T x. T y for all x. we shall denote by Cb (H) the space of all functions ϕ : H → R which are continuous and bounded. and by L(H) the Banach algebra of all linear bounded operators T : H → H. P) be a probabilty space and let E be a Polish (complete separable metric) space.1 1. endowed with the norm ϕ 0: = sup |ϕ(x)|. endowed with the norm T = sup x∈H. x ≥ 0 for all x ∈ H. · and norm | · |). The elements of B(E) are called Borel sets. Next section is devoted to some basic facts from Measure Theory and Probability needed in what follows.

In this case we have ∀ ω ∈ Ω. c1 . Since any positive Borel functions is the limit of an increasing sequence of positive simple functions..1 Let X be an E-valued random variable in (Ω. The law (or image measure or push-forward measure) of X is the probability measure X# P on (E. Then we have ϕ(X(ω))P(dω) = Ω E (1) ϕ(x)(X# P)(dx).1) Proof. (1) 1 I (ω) is the characteristic function of I. . ∀ I ∈ B(E). (1. the conclusion follows from the monotone convergence theorem.. Let us prove the following basic change of variables formula.4 Chapter 1 By an E-valued random variable in (Ω. Consequently.. F .1) holds for all simple functions ϕ of the form n ϕ= i=1 ci 1 I i . . l / . ϕ(X(ω))P(dω) = P(X −1 (I)) = X# P(I) = Ω E ϕ(x)X# P(dx).. . it is equal to 1 if ω ∈ I to 0 if ω ∈ I. such that I ∈ B(E) ⇒ X −1 (I) ∈ F . l with n ∈ N. ω → X(ω). Let first ϕ = 1 I with I ∈ B(E) l ϕ(X(ω)) = 1 X −1 (I) (ω). P). In ∈ B(E).. (1. l So. B(E)) defined as (X# P)(I) = P(X −1 (I)). Sometimes we shall use the notation X# P = PX . F ) we mean a mapping X : Ω → E. Let moreover ϕ : E → R be a nonnegative Borel function. Theorem 1. cn ≥ 0 and I1 ..

. . h µ(dx). One can show that P can be uniquely extended to a probability measure on (Ω. .. is continuous since |F (h)| ≤ H |x|µ(dx) |h|. H Then the linear functional F : H → R defined as F (h) = H x. H . ∀ h ∈ H. 1.2.. We shall write m= H xµ(dx).. n. Pn . Fn .2 Product measures Let (Ωi .. A meai=1 surable rectangle of Ω is. Assume now that the second moment of µ is finite.. be probability spaces.. i = 1. F ) which is called the product probability of P1 .. B(H))... h = H x. Assume that µ has finite first momentum. ∀ h ∈ H. P2 .2 1. n. h µ(dx). a set of the form R = n Ai where i=1 Ai ∈ Fi . it is denoted by n Fi . |x|2 µ(dx) < +∞. Fi . . . by definition.. The σ-algebra generated by all measurable rectangles is called the product σ-algebra of Fi . i=1 For any R = n Ai we define i=1 n P(R) := i=1 Pi (Ai ). By the Riesz representation theorem there exists m ∈ H such that m.. ∀ h ∈ H. 2.1 Probability measures in Hilbert spaces Mean and covariance Let µ be a probability measure on (H. m is called the mean of µ. Pi ). i = 1. |x|µ(dx) < +∞.Gaussian measures 5 1.1. Set Ω = n Ωi .

A symmetric and positive operator Q ∈ L(H) is said to be of trace class if ∞ Tr Q : = k=1 Qek . Part II. but we shall not need in what follows. It is also possible to define trace-class operators which are not symmetric. N. k)| ≤ H |x − m|2 µ(dx) |h| |k|. Let us consider the bilinear form G : H × H → R defined as G(h. ∀ h. Dunford and J.6 Chapter 1 (so that the first one is finite as well). x − m µ(dx). k ∈ H. positive and of trace class. . we find that ∞ Tr Q = k=1 (2) | x − m. ek < +∞ for one (and consequently for any) complete orthonormal system (ek ). Schwartz. ∀ h.T. 1964. k) = H h. Linear Operators. x − m k. Therefore.2 The covariance operator Q of µ is symmetric. Proof. x − m k. To prove that Q is of trace class choose a complete orthonormal system (ek ) in 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. g. see e. k ∈ N. k ∈ H. ek = H | x − m. ek |2 µ(dx). k = H h. ek |2 µ(dx) = H H |x − m|2 µ(dx) < +∞. G is continuous since |G(h. k ∈ H. ∀ h. Then we have Qek . Interscience. by the monotone convergence theorem and the Parseval identity. x − m µ(dx). Q is called the covariance of µ. Symmetry and positivity of Q are clear. In order to state the next result we need the concept of trace class operator. (2) Proposition 1. Therefore there is a unique linear bounded operator Q ∈ L(H) such that Qh.

For any n ∈ N we consider the projection Pn : H → Pn (H) defined as n Pn x = k=1 x. (1. ∀ h ∈ H.h µ(dx). symmetric operators in 1 H of trace class. ek ek . x ∈ H. Thus µn is a probability measure on (Pn (H). We want now to show that µ is determined by the sequence (µn ). For any n ∈ N we consider the measure µn := (Pn )# µ defined by ϕ(Pn x)µ(dx) = H Hn ϕ(y)µn (dy). µ). ∀I ∈ B(H).3 Let µ. We finally define the Fourier transform µ of a probability measure µ setting µ(h) = H ei x. For this we first need the following result. ∀ ϕ ∈ Cb (H). 1. for all ϕ ∈ Cb (R).3) We have limn→∞ Pn x = x for all x ∈ H.2 Finite dimensional projections of measures We are given a probability measure µ ∈ P(H). Let (ek ) be a complete orthonormal system in H. Proof.Gaussian measures 7 We shall denote by L+ (H) the set of all positive. µn ).2) One checks easily that µ : H → C is continuous.2. We shall also consider µn as a probability measure on (H.4) Then µ = ν. setting µn (I) = µn (I ∩ Pn (H)). Proposition 1. (1. Let C ⊂ H be closed and let (ϕn ) ⊂ Cb (H) be such that (i) lim ϕn (x) = 1 C (x) for all x ∈ H. ν ∈ P(H) be such that ϕ(x)µ(dx) = H H ϕ(x)ν(dx). l n→∞ . (1. B(H). B(Pn (H)).

A sequence (ϕn ) ⊂ Cb (H) fulfilling (i) and (ii) is provided by. We can now prove the announced result. Then µ = ν. Proposition 1. Therefore.4 Let µ. 1 1 − n d(x. by the dominate convergence theorem it follows that lim ϕn dµ = lim H n→∞ n→∞ ϕn dν = µ(C) = ν(C). Then. Proof. H Since closed sets generate the Borel σ–algebra of H this implies that µ = ν. ν ∈ P(H) be such that µ(h) = ν(h) for all h ∈ H. C) ≤ n ϕn (x) =  1 0 if d(x. in view of Proposition 1.   1 if x ∈ C. C) if d(x. we conclude that ϕ(x)µ(dx) = H H ϕ(x)ν(dx) for all ϕ ∈ Cb (H). Pn (H) Since (Pn )# µ = (Pn )# ν by assumption. If (Pn )# µ = (Pn )# ν for any n ∈ N we have µ = ν. 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).5 Let µ. using the dominated convergence theorem and the change of variables formula. ν ∈ P(H). C) ≥ n .3 we have µ = ν.8 (ii) ϕn 0 Chapter 1 ≤ 1 for all ∈ N. Proposition 1.4 we prove that the Fourier transform of µ determines µ. . As an application of Proposition 1. Now.

µ(Pn h) = H (3) 9 .g. If q = 0 we set Nm. Therefore measures (Pn )# µ and (Pn )# ν have the same Fourier tranforms and so they coincide.3 Gaussian probability measures We first recall the definition of Gaussian measure on (R. x2 See e. Dunod e e e Universit´.q (R) = √ (3) 1 2πq +∞ e− −∞ (x−m)2 2q 1 dx = √ 2π +∞ −∞ e− 2 dx = 1.q on (R.Pn h ν(dx) = Pn (H) ei Pn ξ. Nm. where δm is the Dirac measure at m. 1. In ei x.4. We assume as granted the result when H is finite-dimensional the general case we have by (1. B(R)).1 Gaussian probability measures in R For any pair of real numbers (m.0 = δm . δm (B) =  0 if m ∈ B. defined for all B ∈ B(R) by   1 if m ∈ B. 1. 1968. then we go to the general case. B(R)) as follows. M´tivier. Notions fondamentales de la th´orie des probabilit´es.q is a probability measure since Nm.3.Pn h µ(dx) = Pn (H) ei Pn ξ. q) with m ∈ R and q ≥ 0 we define a probability measure Nm. e .Gaussian measures Proof.1) for any h ∈ H and n ∈ N.Pn h (Pn )# µ(dξ) = (Pn )# µ(Pn h) and ν(Pn h) = H ei x.q (B) = √ 2πq e− B (x−m)2 2q dx. / If q > 0 we set 1 Nm.Pn h (Pn )# ν(dξ) = (Pn )# ν(Pn h). M. for all B ∈ B(R). The conclusion follows from Proposition 1.

Then we have xµ(dx) = m.h − 2 1 Qh. z ∈ Rn . When m = 0 we shall write NQ instead of Nm. The proof of the following proposition is easy.Q = ×N k=1 n mk . B(R) and Nm.Q ..x µ(dx) = ei a.Q is given by Na.. . Moreover.h .Q (dx) = 1 (2π)d det Q e− 2 1 Q−1 (x−a).λk . Moreover the Fourier tranform of Na.5) 1. x − a µ(dx) = Qy. Rn y. Nm...Q . . Na.. n. h ∈ Rn . Q ∈ L+ (Rn ) and µ = Nm. k = 1. Let Q ∈ L+ (Rn ) and let (e1 .q . it is left to the reader.10 Chapter 1 If q > 0. B(Rn )) by setting Nm. z . Finally... its Fourier transform is given by Nm.q (dx) = √ (x−m)2 1 e− 2q dx.. 1 2 (1.Q on (Rn .Q (h) := Rn ei h. 2πq When m = 0 we shall write for short Nq instead N0.q is absolutely continuous with respect to the Lebesgue measure 1 (dx) = dx in (R. en ) be an orthonormal basis on Rn such that Qek = λk ek . Rn y.x−a dx. It is easy to see that m is the mean and q the covariance of Nm.Q for short. Proposition 1. h ∈ R. if the determinant of Q is positive.6 Let m ∈ Rn .3.q (h) := R eihx Nm.Q for any m = (m1 . . mn ) ∈ Rn and any Q ∈ L+ (Rn ). Then we define a probability measure Na.q (dx) = eimh− 2 qh .q .. Therefore m is the mean and Q the covariance operator of Na. x − a z.Q is absolutely continuous with respect to the Lebesgue measure in Rn and we have Na. .2 Gaussian probability measures in Rn We are going to define a Gaussian measure Nm. for some λk ≥ 0.

h ∈ H.6) One can show that such a measure does exist Proposition 1. Hint. G.λk .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 → ∞..g. We denote by Nm. ek ek → ( x. we shall proceed as follows.4 Computation of some Gaussian integrals To compute some integrals with respect to a Gaussian measure µ = Nm. An introduction to infinite-dimensional analysis. given µ = Nm. 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 .3. B(H)) of mean m.. ∀x∈H and identify Pn (H) with Rn through the isomorphism. Da Prato.Q (h) = ei m.3. n ∀ k ∈ N. 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 . it is unique thank’s to 1.5. (4) (1.h . x. . covariance Q and Fourier transform given by Nm.Q the probability measure on 1 (H. SpringerVerlag.h − 2 1 Qh.Q ∈ P(H). Exercise 1. e1 . n Pn (H) → R . see e. en ). x = k=1 n x. en ..7 Prove that µn = (Pn )# µ = ×N i=1 n mk . . 2006. . Pn x = k=1 x.3 Gaussian probability measures in H Let m ∈ H and Q ∈ L+ (H). For any n ∈ N we set mn := m. ek ek .Gaussian measures 11 1. Berlin. More precisely.

For any n ∈ N we have. Proposition 1. k=1 (1 − ελk ) > 0.λk (dxk ) = √ R ε 2 1 −ε e 2 1 − ελk m2 k 1−ελk . x ∈ H.m .λk (dξk ). by an elementary computation.7) Proof. Write log ∞ ∞ (1 − ελk ) k=1 = k=1 log(1 − ελk ) ∞ k=1 and show that the series is convergent since λk < +∞. .7 n e H ε |P x|2 2 n µ(dx) = Pn (H) e ε |P ξ|2 2 n µn (dξ) = k=1 R e 2 ξk Nmk . ∞ 1 −1 x. the conclusion follows from the monotone convergence theorem. taking into account Exercise 1. We have in fact. ε 2 e 2 |x| µ(dx) =  H +∞. ε 2 Since |Pn x|2 ↑ |x|2 as n → ∞ and. ek ek . k=1 Hint. (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. the linear operator 1 − εQ is invertible and (1 − εQ)−1 is bounded. if ε < 1 . otherwise. e 2 xk Nmk . as easily checked.12 Chapter 1 We shall assume (which is always true after a rearrangement) that λ1 ≥ λ2 ≥ · · · λn ≥ · · · .9 Let ε ∈ R. 1 To formulate the next result notice that for any ε < λ1 .8 Prove that ∞ n→∞ (1 − ελk ) := k=1 (1 − ελk ). Then we have  ε −1  [det(1 − εQ)]−1/2 e 2 (1−εQ) m. λ1 (1.

Gaussian measures Exercise 1.10 Prove that for all m ∈ N Jm :=
H

13

|x|2m 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 ≤ e|x| |h| ≤ eε|x| 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 finite-dimensional µ is non degenerate if and only if det Q > 0. Assume now that H is infinite-dimensional 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 .

k P(dω).1 Notations Let (Ω. Definition 2. and Q(X)h.1 We say that X# P is a Gaussian random variable if X# P is a Gaussian measure. In this case we call m(X) the mean and Q(X) the covariance of X. ∀ h ∈ H. ∀ h.h e− 2 1 Q(X)h. H a separable Hilbert 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). that is if X# P(h) = ei m(X). P) be a probability space. by m(X) the mean of X# P and by Q(X) the covariance of X# P.h P(dω). ∀ h ∈ H. h P(dω). h X(ω) − m(X). 17 . F . Ω We denote by X# P the law of X. k ∈ H. h = Ω X(ω). k = Ω X(ω) − m(X).h . ∀h∈H and that m(X).Chapter 2 Gaussian random variables 2. X : Ω → H a random variable such that |X(ω)|2 P(dω) < ∞.

More precisely..2 Independence In this section we introduce the basic concept of independence. i. In particular.. ek = Ω (Xj (ω) − mj (Xj ))(Xk (ω) − mk (Xk ))P(dω).. n... en ) be the canonical basis in Rn . m(X) is a vector of Rn denoted by (m(X)1 . Xn be real random variables in (Ω.. n we have Q(X)j.k = Q(X)ej ..18 Chapter 2 Example 2.. . .. m(X)n ) and Q(X) is a n × n matrix denoted Q(X)i.. .. . Xn are real Gaussian random variables. F . .. k = 1.. F . j = 1. n and a ∈ R we have eiaXk (ω) P(dω) = Ω Ω 1 ei aek . .X(ω) P(dω) = eiam(Xk ) e− 2 a 1 2 Q(X ) k = ei aek .. if j = k we find Q(X)k.4 Let n ∈ N and let X1 .. n we have m(X)k = m(X).... P). ek = Ω Xk (ω)P(dω) = m(Xk ) and for any j.. .. . . Xn be real random variables on (Ω.... Xn are real Gaussian random variables... . So...... 2.3 Assume that X = (X1 . ω ∈ Ω.. Then X1 . Then for any k = 1.... In fact if k = 1. Xn ) is a Rn -valued random variable.2 Let n ∈ N. .k = Q(Xk ).. ... n. if conversely X1 . Example 2. Xn (ω)).ek . Xn ) is not necessarily Gaussian.. then X = (X1 . Notice that.. . ... 2.. Consider the Rn -valued random variable X(ω) = (X1 (ω). P).. k = 1. Xn ) is a n-dimensional Gaussian random variable..j . let (e1 . X1 ..1 Independent real variables Definition 2.2. . Then X = (X1 . .m(X) e− 2 a2 Q(X)ek .

. In ∈ B(R).1) ϕi = 1 Ii . . . Xn .. A necessary and sufficient condition for the independence is provided by the following proposition. Set X = (X1 ..... . if (2. taking into account the independence of X1 ... Proposition 2. ϕn .. . Proof.. .... .. ϕn be Borel positive functions. n ∈ N.. ξn ) ∈ Rn . . . Xin are independent for any choice of n and of positive integers i1 < i2 < · · · < in .. . Then by the change of variable formula we have... .. Xn it is enough to show that (X# P)(I1 × · · · × In ) = ((X1 )# P)(I1 ) · · · ((Xn )# P)(In ). .1) = Ω ϕ1 (X1 (ω))P(dω) · · · Ω ϕn (Xn (ω))P(dω). be real independent random variables in (Ω.. Conversely. Xn are independent if X# P = 19 ×(X ) j=1 n j # P. ξn ) = ϕ1 (ξ1 ) · · · ϕk (ξn ). .1) holds for any choice of positive Borel functions ϕ1 . Then we have ϕ1 (X1 (ω)) · · · ϕn (Xn (ω))P(dω) Ω (2. .... 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)..... . But this follows immediately setting in (2. Xn ) and let ψ : Rn → R be defined as ψ(ξ1 . To prove independence of X1 . ϕn positive Borel.5 Let X1 .. .. Let moreover ϕ1 .. n.random variables We say that X1 . then X1 . P). F . ∀ I1 .. ... Xn are independent. They are called independent if Xi1 ... Xn .1) holds for any choice of functions ϕ1 ... .. (ξ1 . Assume conversely that (2. l i = 1... Let (Xi ) be a sequence of real random variables.

. Ω = Ω (Xi (ω) − mi (X))P(dω) The converse of Proposition 2.. . Xn ). n Q(X)i. P). The following useful result is left to the reader as an exercise... n and k different positive integer j1 .6) for i. Proposition 2. hn ) ∈ Rn . . l l Exercise 2.7 Let X1 . Definition 2.. P) and let X = (X1 .. . An are independent if the random variables 1 A1 .9 Show that sets A1 ...6 Let X1 . Show that X1 · · · Xn dP = Ω Ω X1 dP × · · · × Ω Xn dP and V (X1 + · · · + Xn ) = V (X1 ) + · · · + V (Xn ). F ... Then the covariance matrix Q(X) is diagonal. ... Xn be real random variables in (Ω.. j = 1. Proposition 2. . ... . ∀ h = (h1 .. . F . Xn are independent if and only if n X# P(h) = k=1 (Xk )# P(hk )... ... ... P) and let X = (X1 .. Xn be real independent random variables in (Ω. An ∈ F ... ..10 does not hold in general... . Xn be real independent random variables in (Ω.20 Chapter 2 Exercise 2. Then X1 ..8 Let (Ω.. for all k = 1. F .... Proof..... Xn ). jk less or equal to n. P) be a probability space and A1 . 1 An are so. We have in fact (by Exercise 2. We say that the sets A1 .j = Ω (Xi (ω) − mi (X))(Xj (ω) − mj (X))P(dω) (Xj (ω) − mj (X))P(dω) = 0... ..10 Let X1 . .. An are independent if and only if P(Aj1 ∩ · · · ∩ Ajk ) = P(Aj1 ) × · · · × P(Ajk ). F .. .

Then X = (X1 ..2 Independent Gaussian random variables Let X1 .. . Xn ) is Gaussian. B(H). Then.. ..12 Assume that X1 . hn ) ∈ Rn . Xn are real random variables and that X = (X1 ..Q with m ∈ H and Q ∈ L+ (H). 1 2 Proposition 2. In fact. . P) coincides with (H. Proof.random variables 21 2... By Proposition 2. .11...... F . Xn ).. Xn ).. Xn are independent the conclusion follows from Proposition 2.3 Gaussian random variables defined in a Hilbert space We now consider the case when (Ω... let h = (h1 . Xn be real random variables in (Ω. Proposition 2.2.. Proof. where H is a separable Hilbert space and µ = Nm.h = ei m(X). for each h = (h1 .h e− 2 n 1 Pn k=1 Q(X)k... If X1 . . ... . We have in fact X# P(h) = ei m(X).. 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 ) . P) and let X = (X1 . Xn ) is Gaussian.h 1 Q(X)h.. µ)... . ..11 Assume that X1 ..7 it is enough to show that n X# P(h) = i=1 (Xk )# P(h).... Xn are independent Gaussian random variables. F . .. Xn are independent if and only if Q(X) is diagonal. . 1 . hn ) ∈ H. Then X1 ... Assume now that Q(X) is diagonal.h e− 2 =e i m(X).k h2 k e 1 −2 Pn k=1 Q(Xk )h2 k = i=1 (Xk )# P(h). taking into account the independence of (X1 .

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 H-valued 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) < +∞.

Lp (Ω, F , P; H), endowed with the norm
1/p

X

Lp (Ω,F ,P;H)

=

|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

Xn (ω) − m(Xn ), k P(dω)

=

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)

= lim ei m(Xn ),h e− 2
n→∞

Q(Xn )h,h

Q(X)h,h

.

Wz (x) = Q−1/2 x. x. Let us define a mapping W : Q1/2 (H) → C(H). We have in fact Wz1 (x)Wz2 (x)µ(dx) = H H x. Q−1/2 z2 µ(dx) = QQ−1/2 z1 . x ∈ Q1/2 (H). z → Wz (2. ∀ x ∈ H. where Wz (x) = x.4. β ∈ R we have Wf (αx + βy) = αWf (x) + βWf (y). Remark 2.2 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}). z2 . y µ a. z2 ∈ Q1/2 (H) we have Wz1 (x)Wz2 (x)µ(dx) = z1 . However this definition is meaningless because µ(Q1/2 (H)) = 0. the mapping W can be uniquely extended as a mapping from H into L2 (H. µ) which we denote still by W and call the white noise function.18 Given z ∈ H (not belonging to Q1/2 (H)) it would be tempting to define the random variable Wz by setting. Here Q1/2 (H) is the Cameron–Martin space and C(H) the space of all real continuous functions on H. Q−1/2 z1 x. z2 . Wf is linear in the sense that for all α. Since Q1/2 (H) is dense in H. by Proposition 1. Lemma 2. 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 . QQ−1/2 z2 = z1 ..e. Q−1/2 z . H k ∈ N. z .13 .17 For all z1 .random variables 25 2.3) Proof.

.. So.k = zh . .. (zj ) be n sequences in Q1/2 (H) convergent respectively to z1 . zk . The following generalization of Proposition 2.. k = 1.... Proof. (2.. .x µ(dx) = lim e− 2 η n→∞ 1 2 |z n| 2 = e− 2 η 1 2 |z|2 . zn in H. zn are mutually orthogonal. Then.... Then (Wz1 . that ei(ξ1 Wz1 (x)+···+ξn Wzn (x)) µ(dx) = lim H j→∞ ei(ξ1 H j j Q−1/2 z1 . Let (zn ) ⊂ Q1/2 (H) be a sequence such that zn → z in H..19 Let z ∈ H. .x +···+ξn Q−1/2 zn .x ) µ(dx) = lim j→∞ ei x.20 Let n ∈ N.4) The random variables Wz1 . Wzn ) is an ndimensional Gaussian random variable with mean 0 and covariance operator Qz given by (Qz )h. Wzn are independent if and only if z1 .19 is important. Let (zj ).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. Then Wz is a real Gaussian random variable with mean 0 and covariance |z|2 . z1 .. Then we have by the dominated convergence theorem. h.. Proposition 2.. n.k=1 zj . the conclusion follows. by the dominated convergence theorem.. . ..zk |ξj ξk . . We have to show that eiηWz (x) µ(dx) = e− 2 η H 1 2 |z|2 . . zn ∈ H.. ..26 Chapter 2 Proposition 2. we have eiηWz (x) µ(dx) = lim H n→∞ eiη Q H −1/2 z n .. n 1 Proof.. ∀ η ∈ R.

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 ) =

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 P-a.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 P-a.s. • X is p-mean continuous, p ≥ 1, if (i) X(t) is p-integrable 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 p-mean 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), P-a.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 )).

. Moreover. Then B is p-mean square continuous for all p ≥ 1.11 it follows that X is a n-dimensional Gaussian random variable with mean 0 and covariance operator Q(X) = diag (t1 . Exercise 3.. we have (Q(Z)) η. Let t > t0 ≥ 0. . m!2m Therefore lim E(|B(t) − B(t0 )|2m ) = 0 t→0 and the conclusion follows...... B(t2 ) − B(t1 ). .30 Chapter 3 Since random variables B(t1 ). m ∈ N.. It is enough to show the result for p = 2m. xn ) ∈ Rn . T (x1 . It remain to show (3. T −1 and so..13 Z is Gaussian with mean 0 and covariance Q(Z) = T Q(X)T ∗ where T ∗ is the transpose of T . . η2 − η1 .. F . t2 − t1 . by Proposition 2. x1 + x2 . Since B(t) − B(t0 ) is a Gaussian random variable Nt−t0 . . the conclusion follows.η dη. 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.. Now. . Prove that the following are Brownian motions. B(tn ) − B(tn−1 ) are independent. we have det Q(Z) = det Q(X) = t1 (t2 − t1 ) × · · · × (tn − tn−1 ). P). as easily checked. Proof. since T −1 η = (η1 .. . F . Since det T = det T ∗ = 1. ∀ (x1 . consider the linear mapping T ∈ L(Rn ) defined by. Therefore by Proposition 2.6 Let B(t) be a Brownian motion in a probability space (Ω. tn − tn−1 ).5 Let B(t).. η = Q T −1 −1 −1 2 (ηn − ηn−1 )2 η1 (η2 − η1 )2 − ··· − − η = t1 (t2 − t1 ) (tn − tn−1 ) η.. we have E(|B(t) − B(t0 )|2m ) = R |ξ|2m Nt−t0 (dξ) = (2m)! (t − t0 )m .. Proposition 3. be a Brownian motion on (Ω.4). . ηn − ηn−1 )... x1 + · · · + xn ). t ≥ 0. P). xn ) = (x1 .. It is clear that Z = T (X).

Let 0 = t0 < t1 < · · · < tn = T .6) Proof. l Then define T n f (s)dB(s) := 0 j=1 ftj−1 (B(tj ) − B(tj−1 )). . fn−1 ∈ R and set n f= j=1 tj−1 1 (tj −tj−1 ] .5) is obvious.7) +2E j<k f (tj−1 )f (tk−1 )[B(tj ) − B(tj−1 )][B(tk ) − B(tk−1 )] . Let us prove (3.3 Wiener integral Let B(t). Lemma 3.6). be a Brownian motion in (Ω. t ≥ 0. P) and let f ∈ L2 (0. (ii) B2 (t) = αB(α−2 t). t > 0. T ) with T > 0. 31 3.. .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. F . f0 . t ≥ 0. t ≥ 0. where h > 0 is given. (3. Identity (3. B3 (0) = 0. (iv) B4 (t) = −B(t).Brownian motion (i) B1 (t) = B(t + h) − B(h). t ≥ 0.7 We have T E 0 f (s)dB(s) =0 (3. where α > 0 is given.. (iii) B3 (t) = tB(1/t). We have n E(|Iσ (f )| ) = E j=1 n 2 |f (tj−1 )|2 [B(tj ) − B(tj−1 )]2 (3. 0 We start with step functions. f1 . We want to define the stochastic integral: T f (s)dB(s). Let us prove two basic identities..

b We define in an obvious way the Wiener integral a f (s)dB(s) for any a. T ) is dense in L2 (0. (3. Show that T T T E 0 f (s)dB(s) 0 g(s)dB(s) = 0 f (s)g(s)ds. By (3. We still denote by I(f ) = 0 f (s)dB(s) this estension. It is enough to prove the result for f of the form n f= i=1 fti−1 (ti − ti−1 ). f → I(f ) = 0 f (s)dB(s). T ]. b ≥ 0. Proposition 3.6) it follows that the linear mapping I T S(0. T ).9 Let f ∈ L2 (0. is continuous. . T ) → L2 (Ω. c ≥ 0 we have b c c f (s)dB(s) + a b f (s)dB(s) = a f (s)dB(s). It is easy to see that if a. It is clear that for any f ∈ L2 (0. F . Denote by S(0. Exercise 3. T ). which belongs to L2 (Ω. Then I(f ) = T Gaussian random variable Nq with q = 0 |f (s)|2 ds.8 Let f. (3. is called the Wiener integral of f in [0. b. P). T ) ⊂ L2 (0. Since S(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. g ∈ L2 (0. F . T ) it can be uniquely extended T to the whole L2 (0.9) The random variable (more precisely. T 0 f (s)dB(s) is a real Proof. T ) we have T E 0 f (s)dB(s) 2 = 0. T ) the linear space of all step functions. T ).8) and T t E 0 f (s)dB(s) = 0 f 2 (s)ds. the equivalence class of random T variables) 0 f (s)dB(s). P).

k=1 Let f : [0. so that n 33 I(f ) = i=1 fti−1 (B(ti ) − B(ti−1 )). t ≥ 0 is p-mean continuous for any p ≥ 1. (3. ∞) → R such that it is integrable in all interval [0. Since random variables B(t1 ). B(tn ) − B(tn−1 ).10 We use here notations of Section 3. < tn−1 = T . B(t2 ) − B(t1 ).10) It is enough to show (3.. are independent. Then we have ∞ Wf = 0 f (s)dB(s).11 The process F (t).10) when n f= k=1 l ftk−1 1 (tk−1 .1.tk ] = WPn ftk−1 1l(tk−1 . ∀ t ≥ 0. we have that I(f ) is a real Gaussian random variable Nq with n q= i=1 f 2 (ti−1 )(ti − ti−1 ).Brownian motion where n ∈ N. T ]. Proposition 3. Example 3. Let f ∈ L2 (0. T 0.tk ] . . where 0 ≤ t0 < · · · < tn . We now show a relation between the white noise function and the Wiener integral. In this case we have in fact ∞ n f (s)dB(s) = 0 k=1 ftk−1 W1l(tk−1 .. ∞).tk ] = Wf .2. · · · . Let us introduce a stochastic process setting t F (t) = 0 f (s)ds. 0 = t0 < t1 < .

where αk are suitable numbers in the interval [tk−1 . We note finally. T ]) we have T T f (s)dB(s) = f (T )B(T ) − 0 0 f (s)B(s)ds. P-a.. tn } ∈ Σ. P-a. k = 1..s.34 Chapter 3 Proof. 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 ). t→t0 f 2 (s)ds.12 If f ∈ C 1 ([0. Then by Proposition 3. Proposition 3. ..11) Proof. Let σ = {t0 . · · · . Let p = 2m. tk ].e. It follows that T |σ|→0 lim Iσ (f ) = f (T )B(T ) − 0 f (s)dB(s)ds. m!2m t0 so that lim E|F (t) − F (t0 )|2m = 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 E|F (t) − F (t0 )| = f (s)ds . ω ∈ Ω.. n. (3. that if f ∈ C 1 ([0. t1 . m ∈ N and t > t0 ≥ 0. 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. .

Theorem 3. Proof. F . 0 (3. 1).14) where α ∈ (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). To check (3.13 For any α ∈ (0.12) (σ − s)−α dB(s). F . We start from the following elementary identity which is valid for any α ∈ (0. (3. t (t − σ)α−1 (σ − s)−α dσ = s π . 1 − α) = 0 π . 1). t ≥ 0. .Brownian motion 35 3.13) Notice that the Wiener integral Yα is meaningful since α ∈ (0. (3. be a Brownian motion on a probability space (Ω. Exchanging integrals . sin πα Now since. To this purpose we shall use a representation formula for B proved in the next proposition. P).14) becomes 1 (1 − r)α−1 r−α dr = β(α. We are going to show that B possesses a continuous version. obviously. Then B possesses a continuous version. t ≥ 0.14) it is enough to set σ = r(t − s) + s so that (3. P). 1/2) we have B(t) = where Yα (σ) = 0 sin πα π σ t (t − σ)α−1 Yα (σ)dσ. 1/2). sin πα 0 ≤ s ≤ σ ≤ t.4 Continuity of Brownian motion Let B(t). Proposition 3. (1) This requires a proof which is left to the reader.14 Let B(t). be a Brownian motion on a probability space (Ω. We can now prove the result. yields t σ sin πα B(t) = π dξ(t − σ) 0 α−1 0 (σ − s)−α dB(s) .

π 0 Then B(·. 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. 1]. using again H¨lder’s inequalo ity.15) 2m (Notice that (α − 1) 2m−1 > −1. ω) = (t − σ)α−1 Yα (σ.H) . T ). 0 Fε is obviously continuous on [ t2 . T ] for any t0 ∈ (0.5 The standard Brownian motion Let us consider a Brownian motion B(t). Then F ∈ C([0. T . where C0 = {η ∈ C([0.T . F . ω) is continuous for all ω ∈ Ω. we find |F (t) − Fε (t)| ≤ M 2m − 1 2mα − 1 2m−1 2m εα− 2m |f |L2m (0. 1 0 Thus limε→0 Fε (t) = F (t).16 Prove that B possesses an H¨lder continuous version with o any exponent β < 1/2. T ]. H) and F is con0 tinuous at 0. (3. ω) is a continuous version of B thanks to the following analytic lemma. m ∈ N with 2m > 1/α and f ∈ L2m (0. 1/2). in a probability space (Ω.) Therefore F ∈ L∞ (0. Lemma 3. +∞)) : η(0) = 0}. t ≥ 0. ω → B(·. ω). T ].15 Let α ∈ (0. Moreover. t−ε Fε (t) = 0 (t − σ)α−1 f (σ)dσ. This is possible in view of Proposition 3.36 Chapter 3 Proof. Set t F (t) = 0 (t − σ)α−1 f (σ)dσ.T . t ∈ [0. t ∈ [0. P) such that B(·. Let us prove that F is continuous on [ t2 . . We denote by B the mapping B : Ω → C0 . Now set t sin πα B(t. ω)dσ. T ]. H). uniformly on [ t2 . T ].H) . T ]. Choose a version Yα (·.11. Proof. t0 Let us set for ε < 2 . 3. ω) of the stochastic process Yα which is 2mintegrable with 2m > 1/α. and F is continuous as required. ∀ t ≥ 0. Exercise 3.

. endowed with the metric... . for any nonnegative Borel mapping F : C0 → R.. η k = sup{|η(t)| : t ∈ [0.. Moreover.A×Rk .. For n ∈ N.. + η1 − η2 k ) is a complete metric space.t2 .. We have set for any k ∈ N. Note that Ct1 .tn+k . ∀ η ∈ C0 . Q is called the Wiener measure on (C0 .5.tn . η → F (η). we have E[F (B(·))] = Ω F (B(·.. So. B(C0 )). ω))P(dω) = C0 F (η)Q(dη).. ω → B(·.A := {η ∈ C0 : (η(t1 )..tn ..t2 .t2 . k]}. d(η1 . . k.. as easily checked.A = Ct1 . Using this identity one can easily see that C is an algebra.tn .1 Some properties of C0 ∞ First we notice that. It is important to notice that B(C0 ) is generated by the cylindrical subsets of C0 that we shall introduce now. C0 ... η(tn )) ∈ A} . B(C0 )). (3. η2 ) := k=1 2k (1 η1 − η2 k . 3..tn+1 .Brownian motion 37 3. n ∈ N.2 The Wiener measure and the standard Brownian motion B : Ω → C0 .5.16) Some examples of mappings F are the following. 0 < t1 < · · · < tn and A ∈ B(Rn ) we define Ct1 . Let us now consider the σ-algebra B(C0 ).. the σ-algebra generated by C coincides with B(C0 ) since any ball (with respect to the metric of C0 ) is a countable intersection of cylindrical sets. ω) We come back to the mapping B and we denote by Q its law (which is a probability measure on (C0 ...

is given by e− 2 (t−s)h .tn ... Then we have Q(Ct1 .A be a cylindrical set.ω)−B(s.16) we have ei(η(t)−η(s))h Q(dη) = C0 Ω 1 2 ei(B(t.. In fact by (3... η ∈ C0 . B(C0 ).A ) = P((B(t1 ).. t ≥ 0. . Q)..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. called the standard Brownian motion.. We simply note that.16). t ≥ 0.. t ≥ 0. . The proof is straightforward... h ∈ R. .ω))h P(dω) = E[ei(B(t)−B(s)) ] = e− 2 (t−s)h . Proof.. we have Q(Ct1 . Let us show for instance that for t > s ≥ 0. Q) setting W (t)(η) = η(t)..t2 .38 Chapter 3 (i) F (η) = g(η(t0 )). (ii) F (η) = G(η(t1 ).1] |η(t)|. In an analogous way one can prove that W (t). Proposition 3. for all η ∈ C0 ..17 W is a Brownian motion in (C0 . B(C0 ). h ∈ R.tn . where G : Rn → R is nonnegative Borel and t1 . (iii) F (η) = supt∈[0.t2 .. W (t) − W (s) is a Gaussian random variable Nt−s . η(tn )). B(tn )) ∈ A). for all η ∈ C0 .. thanks to (3. so that the conclusion follows from Proposition 3. for all η ∈ C0 . tn > 0 are given.tn . 1 2 h ∈ R.t2 . Now we define a stochastic process W (t). .4.. Let us compute the Wiener measure of a cylindrical set. Proposition 3.. has independent increments..18 Let Ct1 .. in (C0 .. Proof. where g : R → R is nonnegative Borel and t0 > 0 is given. 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).

F . Since Btk −Btk−1 is a real Gaussian random variable with law Ntk −tk−1 .Brownian motion 39 3. we have E(Jσ ) = T. For any T > 0 we denote by Σ(0. Let us now introduce the quadratic variation of Brownian motion B in [0.n − 1}. and so. T ) we set |σ| := min{tk − tk−1 : k = 1. setting σ1 ≤ σ2 if and only if |σ1 | ≤ |σ2 |. .6 Quadratic variation of the Brownian motion In this section we are given a real continuous Brownian motion B(t). For any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. 2 2 E(|Jσ − T |2 ) = E(Jσ ) − 2T E(Jσ ) + T 2 = E(Jσ ) − T 2 . t ≥ 0.17) Moreover n 2 E|Jσ |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 E|B(th ) − B(th−1 )|2 |B(tk ) − B(tk−1 )|2 . Then we prove Theorem 3. P). . (3. We introduce a partial ordering on Σ(0. T ) the set of all decompositions of [0. T ). F .. P). Then for any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. on a probability space (Ω. Proof. T ].19 We have |σ|→0 lim Jσ = T in L2 (Ω. T ]. T ) we define n Jσ := k=1 |B(tk ) − B(tk−1 )|2 . T ] σ = {0 = t0 < t1 < · · · < tn = T }.. We say that T is the quadratic variation of B in [0.

T ] → R of finite variation. Let f : [0. BV (0.19) Therefore n n E|Jσ |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 ) . T ] → R. h<k=1 (3. (3. substituting (3. 2 =2 k=1 (tk − tk−1 )2 → 0. In fact the following result holds.20) = 2 k=1 (tk − tk−1 )2 + T 2 . since B(th ) − B(th−1 ) and B(tk ) − B(tk−1 ) are independent. V (f ) is called the variation of f . Proposition 3. we have n n E|B(th ) − B(th−1 )| |B(tk ) − B(tk−1 )| = h<k=1 2 2 (th − th−1 )(tk − tk−1 ).19 is that almost all trajectories of the Brownian motion B have not bounded variation (2) .17).40 But we have n n Chapter 3 E k=1 |B(tk ) − B(tk−1 )|4 = 3 k=1 (tk − tk−1 )2 . T )} has outer probability zero. An important consequence of Theorem 3. ω) ∈ BV (0.20) on (3. (3.. Then for any σ = {0 = t0 < t1 < · · · < . we obtain n E |Jσ − T | as |σ| → 0.. tn = T } ∈ Σ(0. T ) we n set Vσ (f ) = k=1 |f (tk ) − f (tk−1 )| and define V (f ) := supσ∈Σ Vσ (f ). Now. In other terms the set VT := {ω ∈ Ω : B(·. (2) . T ) is the set of all functions f : [0.20 We have P∗ (VT ) = 0.18) and..

Then X(t) := (X1 (t).. Xn be stochastic processes on a probability space (Ω. Set Λ := {ω ∈ Ω : B(·.21) By the claim the conclusion will follow since P(Λc ) = 0...22 Let us construct an n-dimensional Brownian motion. s ∈ [0. Rn ). |t − s| < δε =⇒ |B(t. 3. F = B(H) and P = NQ . t ≥ 0. n. en ) be the canonical basis in Rn and choose Ω = H = L2 (0... (ii) lim Jσn (ω) = T for all ω ∈ Λ1 . . . . P). if n is so large that |σn | < δε we have Jσn (ω) ≤ εV (B(·. 1 Let us prove the claim. ω) is continuous }. F . Xn are said to be independent if for any t1 .. ω)| < ε. where Q is any operator in L+ (H) such that Ker 1 Q = {0}. Bn (t)) is an n-dimensional Brownian motion.. The claim is proved. T ]. . ω) − B(s... 1 (3. Since ε is arbitrary ω cannot belong to Λ1 ... . . . Since lim|σ|→0 Jσ = T in L2 (Ω. . n→∞ We claim that VT ∩ Λ ⊂ Λc . A n-dimensional Brownian motion is a n-dimensional stochastic process B(t) := (B1 (t).. Let (e1 . ∀ t ≥ 0. T ) such that |σn | → 0 and a set Λ1 ⊂ F such that (i) P(Λ1 ) = 1. F .Brownian motion Proof.......21 Let n ∈ N and let X1 . . is called an n-dimensional stochastic process. Then set Bi (t) = Wei 1l[0... tn ∈ [0. t ≥ 0. .t] . Bn (t)). i = 1. +∞. P) there exists a sequence (σn ) ⊂ Σ(0. Xn (t)). ω) is uniformly continuous in [0. for any ε > 0 there exists δε > 0 such that t.7 Multidimensional Brownian motions Definition 3.. X1 . +∞) the random variables Xi (ti ) are independent.... 41 so that P(Λ) = 1 because B is continuous.. T ]. Consequently. Bn are independent Brownian motions.. Let ω ∈ VT ∩ Λ. Since B(·. Example 3. Then one can check easily that B(t) = (B1 (t).. such that B1 . ω)).

23 Prove that for 0 ≤ s < t we have E |B(t) − B(s)|4 = (2n + n2 )(t − s)2 . (i) If t > s. Let us check (iii).24 Let A. Then the following properties are easily checked. C ∈ L(Rd ) and set t (3. t ≥ 0. Exercise 3. We have n (3.25) where A∗ and C ∗ are the adjoint of A and C respectively.22) E |B(t) − B(s)| 2 = k=1 E |Bk (t) − Bk (s)|2 = n(t − s). B(t) − B(s) is a Gaussian random variable with law N(t−s)In .23) Z(t) = etA x + 0 e(t−s)A CdB(s). Prove that the law of Z(t) in Rd is given by NetA x. t ≥ 0.Qt . . where Qt = 0 t ∗ (3. Exercise 3. (iii) We have E |B(t) − B(s)|2 = n(t − s).24) esA CC ∗ esA ds. where In represents the identity in Rn . (3. (ii) E[Bi (t)Bj (t)] = 0 if i = j.42 Chapter 3 Let B be a Brownian motion in Rn .

it is called the natural filtration of W .. To this purpose we shall introduce some basic concepts as filtration. stopping time and transition semigroup. t)} . ω ∈ C0 . Moreover. Q) defined by W (t)(ω) = ω(t). +∞) → R introduced in Chapter 3 and Q is the Wiener measure.. ω(tn )) ∈ A} = {ω ∈ C0 : (W (t1 )... in particular the Markov and strong Markov property and the reflexion principle. t ≥ 0. let W (t). B(C0 )..··· . the standard Brownian motion in (C0 .A = {ω ∈ C0 : (ω(t1 ).tn . B(C0 ). Q) where C0 is the complete metric space of all continuous functions ω : [0. Ω}. The family of σ–algebras (Ft )t≥0 is increasing.1 Filtration Ct1 . Moreover. For any t > 0 we define Ft− = σ{Ft− : 43 ∈ (0. Obviously F0 = {∅. ∀ t ≥ 0. < tn .Chapter 4 Markov property of the Brownian motion Let us consider the probability space (C0 .. 4. . This chapter is devoted to some sharp properties of the Brownian motion. we denote by Ft the σ-algebra generated by Ct . W (tn )) ∈ A} For any t > 0 we denote by Ct the algebra of all cylindrical sets where 0 ≤ t1 < . tn ≤ t and A ∈ B(Rn )... .

Notice that A = {ω ∈ Ω : |ω (0)| = 0}. 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. . Let for instance t = 0 and consider the sets An = {ω ∈ Ω : |ω(1/n)| ≤ 1/n}.44 where σ ∈(0. To prove the converse inclusion it is enough to show that Ct ⊂ Ft− .1.1 Ft -measurable random variables I ∈ B(R) ⇒ X −1 (I) ∈ Ft . The following lemma will be frequently used. k→∞ k so that I ∈ Ft− as well.tt− 1 . 4. so that Ft ⊃ Ft− .A ∈ Ft− .··· . that is Ft+ = Ft for all t ≥ 0.1 For all t > 0 we have Ft = Ft− . An ∈ F0+ . Let t > 0.t) Chapter 4 Ft− is the σ-algebra generated by Ft− for ∈ (0. It is clear that Ft ⊃ ∈(0. t) and Ft+ : = >0 Ft+ . Proof.tn .2 The filtration (Ft )t≥0 is not right continuous. so that F0+ = F0 .··· .t) Ft− . t ≥ 0. Remark 4. If tn < t then I belongs to Ft− whereas if tn = t we have I = lim Ct1 . Let in fact I = Ct1 . Due to Proposition 4. Then An ∈ F1/n and A = n∈N n ∈ N.1 we say that the natural filtration (Ft )t≥0 is left continuous.A ∈ Ct so that tn ≤ t. Proposition 4.

. one can show easily that ∞ n=1 An ∈ D. Then we have P(A ∩ G) = P(A)P(G). Moreover. so that P2 (A) = P(A) which yields P(A) equal to zero or one......3 Let s2 > s1 ≥ t > 0. Proposition 4..h. D = {A ∈ Ft : 1 A is independent of W (s2 ) − W (s1 )}. and let ϕ be a real random variable Ft –measurable. l Since W is a process with independent increments. In fact if A ∈ D it is obvious that Ac ∈ D. if (An ) is a sequence in D consisting of disjoint sets. j→∞ Since G = B(C0 ) we can set in (4..I j j j = lim {ω ∈ Ω : (ω(t1 ) − ω(1/j). but this follows from the identity j→∞ lim Dt1 − 1 .tn .1) On the other hand.tn . Proof.. It is clear that A is independent of G .. (4. Then either P(A) = 1 or P(A) = 0. h > 0.. Remark 4. It is enough to show that for any A ∈ Ft . W (s2 ) − W (s1 ) and 1 A are l independent. Moreover. Now the claim follows from Dynkin’s theorem (Theorem A.. D contains the algebra of all cylindrical set belonging to Ct (which is a π-system).. . To prove the claim it is enough to show that any cylindrical set Ct1 .I belongs to G .tn . I ∈ B(Rn ). ω(tn ) − ω(1/j)) ∈ I} = Ct1 .. Then W (s2 ) − W (s1 ) and ϕ are independent.I .Markov property 45 Lemma 4. t > 0. By using Proposition 4. . . ∀ G ∈ G...tn − 1 . Next result shows that F0+ contains only trivial sets. Let A ∈ F0+ .5 For any t ≥ 0 denote by Ft the σ-algebra generated by Ft and all null sets of Ω (called the completion of Ft ). Denote by G the σ-algebra generated by all sets of the form Dt1 . in other words that Ft coincides with the set D defined below. D is a λ-system. where n ∈ N.I = {ω ∈ Ω : (ω(t1 + h) − ω(h). Proof. 1 ..4 one can easily show that (Ft )t≥0 is both right and left continuous. and W has independent increments. ω(tn + h) − ω(h)) ∈ I}. we claim that G = B(C0 )..h.1 in Appendix A).. 0 < t1 < · · · < tn .4 (one-zero law) Assume that A ∈ F0+ .1) G = A.. since it belongs to all Ft ...

. then {τ > t} and {τ = t} belong obviously to Ft for all t ≥ 0.I = {ω ∈ Ω : tn (ω) < τ..I ∩{tn < τ }.tn ..I is Fτ -measurable. For 0 < t1 < . Remark 4.... Q) is called a stopping time with respect to the filtration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0.. (τ ) (τ ) (τ ) Then τ is not in general a stopping time with respect to (Ft )t≥0 .I ∩ {tn < τ ≤ t} So.tn . but it is a stopping time with respect to the filtration (Ft+ )t≥0 . In fact (τ ) Ct1 . Let us describe the σ-algebra Fτ .... for all t ≥ 0.tn . the σ-algebra generated by all Ct1 ..tn .I in included in Fτ and one can show that it coincides with Fτ . If τ is stopping time..tn . where σ(τ ) is the σ-algebra generated by τ . We claim that Ct1 .. (ω(t1 ).2 Stopping times A nonnegative extended (that is with values in [0.... Moreover. < tn and I∈B(R) we define Ct1 . In other words we have Fτ ⊃ σ(τ ). B(C0 ). In fact..tn .. ω(tn )) ∈ I} = Ct1 .. if A = {τ ≤ s} we have A ∩ {τ ≤ t} = {τ ≤ t ∧ s} ∈ Ft∧s ⊂ Ft .. To any stopping time τ we associate the σ-algebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}......46 Chapter 4 4. +∞]) random variable τ in (C0 . τ is Fτ -measurable....6 Let τ be an extended random variable such that {τ < t} ∈ Ft . . In fact ∞ {τ ≤ t} = k=1 τ ≤t+ 1 k ∈ Ft+ ..I ∩ {τ ≤ t} = Ct1 . .

Show that in this case Fτ is the σ–algebra Fτ : = {A ∈ F : A ∩ {τ = µk } ∈ Fµk for all k ∈ N}. ∀ k ∈ N.3) ∀ t ≥ 0. Assume first τ discrete. Show that τ is a stopping time if and only if {τ = µk } ∈ Fµk for all k ∈ N. that is A ∩ {τ ≤ t} ∈ Ft . k 2n =A∩ k−1 k ≤τ < n n 2 2 ∈Fk.7 Assume that the nonnegative random variable τ is discrete. We want to extend several properties concerning time t to general stopping times τ . Moreover. that is that τ (Ω) = (µk )k∈N where µk is an increasing sequence of positive numbers. let A ∈ Fτ . 0 < t1 < · · · < tk < · · · ω ∈ Ω.2) It is clear that the sequence (τn ) is decreasing. Proposition 4. n 2 2 k ∈ N. Proposition 4. Then we have A ∩ τn = so that A ∈ Fτn . n 2 k k−1 ≤τ < n n 2 2 ∈ Ft . (4.9 Let τ be a stopping time and set Wτ (ω) = W (τ (ω). Proof. Proof. .8 Let τ be a stopping time.Markov property 47 Exercise 4. Then Wτ is Fτ -measurable. τn is a stopping time. (4. Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. ω). τ (Ω) = {tk }. In fact. if t = 2k with k ∈ N we have n {τn = t} = Finally. Define for any n ∈ N and ω ∈ Ω τn (ω) = k 2n if k−1 k ≤ τ (ω) < n . We start by showing that Wτ is Fτ -measurable.

6. (4. Let now τ = inf{t ≥ 0 : W (t) > a}. (1) We use the convention that the infimum of the empty set is +∞.2) and set Wτn (ω) = W (τn (ω). Let I ∈ B(R). Then we have Wτ (ω) = W (tk )(ω). the conclusion holds in this case.10 Let a ∈ R and set (1) for all I ∈ B(R). Then {τa > t} = s∈[0.4) τa = inf{t ≥ 0 : W (t) = a}. ∞ {k∈N: tk ≤t} [{Wtk So. k ∈ N. By the previous argument we have {Wτn ∈ I} ∩ {τn ≤ t} ∈ Ft Now the conclusion follows letting n → ∞. ω ∈ Ω.t] {W (s) ≤ a} = {W (s) ≤ a} ∈ Ft . let τn be defined by (4. Fix t ≥ 0. Example 4. Then {Wτ ∈ I} ∩ {τ ≤ t} = = = ∞ k=1 [{Wtk ∞ k=1 [{Wτ Chapter 4 ∀ω ∈ Ak . τa is a stopping time with respect to the filtration (Ft )t≥0 . s∈[0. by Remark 4. ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ Ft .t]∩Q So. . Let now τ be arbitrary. τ is a stopping time with respect to filtration {Ft+ }t≥0 . Since W is continuous we have n→∞ ω ∈ Ω.t]∩Q Consequently. lim Wτn (ω) = Wτ (ω). ω).t] {W (s) < a} = {W (s) < a} ∈ Ft . k ∈ N.48 and set Ak = {τ = tk }. Then we have {τ ≥ t} = s∈[0. s∈[0.

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. Proposition 4. l Since 1 Ai and W (t + ti ) − W (ti ) are independent. We have just proved that E eiα(W (t+τn )−W (τn )) = e− 2 α t . Let now τ be general and let (τn ) be the sequence of finite stoppping times defined by (4.5) it follows that C(t) is a Gaussian random variable Nt . Then we have ∞ ∞ 1 2 t ≥ 0. α ∈ R. is a Brownian motion.Markov property 49 4. t ≥ 0. Proof. 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 . 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 )) . Let us first prove that the law of C(t) is Nt .5) ∀ i ∈ N.2). Continuity of C(t) is obvious. Then C(t) := W (t + τ ) − W (τ ). 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. Now (4. 1 2 α ∈ R.11 Let τ be a stopping time.5) follows letting n tend to infinity. We want now to show that the same holds when h is replaced by a stopping time. τ (Ω) = (tk ) and set Ai = {τ = ti } ∈ Fti .3 The Brownian motion W (t + τ ) − W (τ ) We recall that W (t + h) − W (t). Assume first that τ is discrete. is a Brownian motion for any h > 0.5) is proved. . By (4. (4.

In fact one checks easily that if ϕ ∈ Cb (R) then the function u : [0. we define the transition semigroup Pt ϕ(x) = E[ϕ(W (t) + x)]. t > 0. (4. is the unique solution of the Dirichlet problem above. s ≥ 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 ∈ R. which we will present later. x ∈ R. ∀ t. To this purpose. x) = 1 uxx (t. t ≥ 0. (4. x ∈ R.8) 2πt We deduce. ϕ ∈ Bb (H). (4.4 Transition semigroup We shall denote by Bb (R) the set of all real. Remark 4. ∀ t > 0.12 One can show that u(t.9) . Pt−s ϕ(x) = E[ϕ(W (t) − W (s) + x)]. ∀ x ∈ R. t ≥ 0. x) = Pt ϕ(x) is continuous. ϕ ∈ Bb (R). bounded and Borel functions and by Cb (R) the subspace of Bb (R) of those functions which are uniformly continuous and bounded on R. There is a simple deterministic proof based on maximum principle and a stochastic proof.13 Prove that for t > s ≥ 0. x) = ϕ(x). is a semigroup of linear operators in Bb (R). based on Itˆ’s formula. ξ ∈ R. by an explicit computation. t ≥ 0. u(t. x) = Pt ϕ(x). o Exercise 4. infinitely differentiable and fulfills   ut (t. ξ2 1 e− 2t . that Pt .50 Chapter 4 4.6) Since the law of W (t) + x is Nx. x ∈ R. Notice that Pt coincides with the heat semigroup in R. +∞) × R → R. x).7) = −∞ gt (x − y)ϕ(y)dy. that is P0 = I and where gt (ξ) = √ Pt+s = Pt Ps .  2   u(0. Given ϕ ∈ Bb (R) we want to study the evolution in time of ϕ(W (t) + x).

Exercise 4. By Proposition B. Set X(t) = W (t) + x = (W (s) + x) + (W (t) − W (s)) =: U + V.10) (Pt−s ϕ)(X(s))dP.13) h(u) = E[ϕ(u + V )] = E[ϕ(u + W (t) − W (s))] = Pt−s ϕ(u). where (recall Exercise 4.Markov property 51 4.6 it follows that E[ϕ(X(t))|Fs ] = E[ϕ(U + V )|Fs ] = h(U ). .14 For any t > s > 0 and any ϕ ∈ Bb (H) we have E[ϕ(X(t))|Fs ] = (Pt−s ϕ)(X(s)).15 Let s > 0. Equivalently ϕ(X(t))dP = A A t ≥ 0. x) = W (t) + x. (4. where x ∈ R. We are here concerned with the stochastic process X(t) = X(t. Proof. ∀ A ∈ Fs . Proposition 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 ].10) is proved. they are recalled in Appendix A. So. To prove the last statement notice that by Proposition B. η a Fs -measurable random variable and ϕ ∈ Bb (R). (4. 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.11) Moreover X(·) is a Markov process. Show that E[ϕ(W (t) + η|Fs ] = (Pt−s ϕ(η)). (4.

We set x = 0 for simplicity. Proposition 4.. by (4. so that X(t) = W (t). Therefore. (4.13) Proof.Then we have E[ϕ(X(t))|Fτ ] = (Pt−τ ϕ)(X(τ )).16 Let τ be a stopping time and let t ≥ τ and ϕ ∈ Bb (H). .13) is proved.52 Chapter 4 4. n. Assume first that τ is of the form τ (Ω) = (tk )k∈N . (4.10) and taking into account that by the definition of Fτ we have A ∩ {τ = ti } ∈ Fti ... (4. Let A ∈ Fτ . ∞ (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. ∀ A ∈ Fτ . Therefore.5. we can write.12) Equivalently ϕ(X(t))dP = A A (Pt−τ ϕ)(X(τ ))dP.1 Strong Markov property We now consider conditional expectation with respect to Fτ where τ is a stopping time. . 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. i = 1.

4. Let A ∈ Fτ . M (t) ≥ a) = P(B(t) ≥ a). • Tb = inf{t ≥ 0 : B(t) = b}.t] b ∈ R. Recall that (Proposition 4.17 Let a ≥ 0 and t ≥ 0. (4. • m(t) = min B(s). a ≤ 0.Markov property 53 Let now τ be an arbitrary stopping time and let (τn ) be defined by (4. • M (t) = max B(s).2). taking into account that {Ta ≤ t} = {M (t) ≥ a} (4. a ≥ 0 (4. Property (4.13) it follows that ϕ(W (t))dP = A A (Pt−τn ϕ)(W (τn ))dP for all A ∈ Fτ .16) t ≥ 0.t] Notice that {Ta ≤ t} = {M (t) ≥ a}.6 Some consequences of the strong Markov property In this section we want to determine the laws of the following important random variables. Then we have P(B(t) ≤ a.14) . Then by (4. s∈[0. Proof. We have. and {Ta ≤ t} = {m(t) ≤ a}. Lemma 4. s∈[0. t ≥ 0. Now the conclusion follows letting n → ∞.15) To find the laws of Ta with a ≥ 0 and M (t) the following lemma is useful. t ≥ 0.8) F τ ⊂ F τn for all n ∈ N.12) is called the strong Markov property of W . t ≥ 0.

a > 0.+∞) (a)]dP l = {Ta ≤t} E[1 [a. (4.17) . M (t) ≥ a) = P(W (t) ≤ a. M (t) ≥ a) = {Ta ≤t} ∀ s > 0.a] (a) = Ps 1 [a.+∞) (W (t))|FTa ]dP l = P(W (t) ≥ a. Ta ≤ t) = {Ta ≤t} Chapter 4 1 (−∞. Proposition 4.a] (a)]dP = {Ta ≤t} E[Pt−Ta 1 [a.a] (W (Ta ))]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞.a] (a)]dP. l since {Ta ≤ t} ∈ FTa .+∞) (a). Write P(M (t) ≥ a) = P(M (t) ≥ a.18 (Reflection principle) For all a ≥ 0 we have P(M (t) ≥ a) = 2P(W (t) ≥ a).a] (W (t))|FTa ]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞. we have. By the strong Markov property it follows that P(W (t) ≤ a. Proof.a] (W (t))dP l = {Ta ≤t} E[1 (−∞. Ps 1 (−∞.54 P(W (t) ≤ a. l On the other hand. W (t) ≤ a) + P(M (t) ≥ a. l l Therefore P(W (t) ≤ a. as easily checked. M (t) ≥ a) = {Ta ≤t} E[1 (−∞.a] (W (t))|FTa ]dP. W (t) ≥ a). M (t) ≥ a) = P(W (t) ≥ a). l E[Pt−Ta 1 (−∞.

21 (Law of Ta ) Let a ≥ 0 and t ≥ 0. W (t) ≥ a) = P(W (t) ≥ a) so. We have in fact by Proposition 4. though random variables M (t) and |W (t)| are different. Then we have a2 a ((Ta )# P)(dt) = √ e− 2t dt.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. 2πt (4. The following results can be proved similarly. +∞)) are different. W (t) ≤ a) = P(W (t) ≥ a). Corollary 4. By (4. Remark 4. the conclusion follows. η2 a2 d a P(Ta ≤ t) = √ e− 2t dt. it is clear that P(M (t) ≥ a. dt 2πt3 which implies the conclusion. 2πt3 (4.+∞) (ξ)dξ.19 it follows that at fixed time t the law of M (t) coincides with that of |W (t)|. Corollary 4.Markov property 55 Now. in particular M (t) is increasing whereas |W (t)| is not. by Lemma 4. Moreover.19) Proof. .14) and Proposition 4. Obviously the laws of M (·) and |W (·)| on C0 ([0.18 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.18 we can easily deduce the expressions of the laws of M (t) and Ta for all a ∈ R. By Proposition 4.17 we have P(M (t) ≥ a.20 From Corollary 4.

25 (Law of Ta ) Let a ∈ R and t ≥ 0.23) 4.20) Proposition 4. (4. Then we have P(W (t) ≥ a.21) Corollary 4.22) Corollary 4. U (t) is called the Brownian motion reflected in 0 (iii) V (t) = W (t ∧ τx ) + x. absorbed in 0 t ≥ 0. x ≥ 0. t ≥ 0. +∞). τx ]. For any x ≥ 0 we set in this section Moreover we consider the following processes which take values in [0.7 Application to partial differential equations τx = inf{t ≥ 0 : W (t) + x = 0} = T−x .24 (Law of m(t)) For all t ≥ 0 we have (m(t)# P)(dξ) = − √ ξ2 2 e− 2t 1(−∞. (ii) U (t) = |W (t) + x|.22 Let a ≤ 0 and t ≥ 0. ∀ t ∈ [0. Then we have a2 |a| e− 2t dt. Y (t) is called the Brownian motion killed in 0. 2πt (4. (i) Y (t) = W (t) + x. V (t) is called the Brownian motion . m(t) ≤ a) = P(W (t) ≤ a). Chapter 4 (4.56 Lemma 4.23 (Reflection principle) For all a ≤ 0 we have P(m(t) ≤ a) = 2P(W (t) ≤ a).a] (ξ)dξ. ((Ta )# P)(dt) = √ 2πt3 (4.

x) is the solution of the Dirichlet problem in [0. τx ]. x) = E[ϕ(W (t) + x)1 t≤τx ] l = Pt ϕ(x) − E[ϕ(W (t) + x)1 t>τx ]. x) = 1 uxx (t.26 We have +∞ u(t. 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. t > 0. Proposition 4. x ≥ 0. +∞). t ≥ 0. ξ2 λ > 0.25)  u(t. Define for any ϕ ∈ Bb ([0.7. x). +∞)) Ut ϕ(x) := u(t. E[ϕ(W (t) + x)1 t>τx ] = E[1 t>τx (Pt−τx ϕ)(0)] =: E[ψ(τx )]. l where ϕ is extended to R by setting ϕ(−x) = ϕ(x).Markov property 57 4.26) where g is defined by (4.1 The Dirichlet problem in the half-line ∀ t ∈ [0. l t ≥ 0. x) = 0 [gt (x − y) − gt (x + y)]ϕ(y)dy. We are going to show that u(t.   ut (t. (4. (4. x) := E[ϕ(W (t) + x)1 t≤τx ]. We have u(t. x) = ϕ(x). x ∈ H. t > 0    2   (4.8). Proof. x > 0. l l where ψ(λ) = 1 t>λ l 1 2π(t − λ) R x ≥ 0. 0) = 0.24) We are here concerned with the process Y (t) = W (t) + x. x ≥ 0. using the strong Markov property we find that. .      u(0. e− 2(t−λ) ϕ(ξ)dξ.

We consider the process For any ϕ ∈ Bb ([0. Moreover U0 = I and Ut+s = U (t)U (s) for all t. Ut ϕ(x) = u(t. x ≥ 0.y ϕ(y)dy.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.y = 0 gt−s (y)gs (x)ds = 1 Erfc 2 |x| + |y| √ 2t .y = − √ e− 2t = −gt (x + |y|) ∂x 2πt we get u(t.2 The Neumann problem U (t) = |W (t) + x|.58 Next. Since. +∞)) we set Qt ϕ(x) = E[ϕ(|W (t) + x|)] = (2πt)−1/2 R e− |x−y|2 2t ϕ(|y|)dy. x) is the solution of the Dirichlet problem (4. by a direct computation.25). we see that +∞ Qt ϕ(x) = 0 (2) [gt (x − y) + gt (x + y)]ϕ(y). that if ϕ ∈ Cb ([0. and the conclusion follows. 4. +∞ −r 2 e dr. x) = R gt (x − y)ϕ(y)dy − R gt (x + |y|)ϕ(y)dy. Replacing in the last integral y with −y.7. (x+|y|)2 1 ∂ Gx. a We recall that Erfc (a) = 2 √ π . for x > 0. t ≥ 0. +∞)). It is easy to check. recalling the law of τx (see (4. s ≥ 0.

8). x ≥ 0.Markov property 59 where gt is defined by (4. t ≥ 0. +∞)) then u(t.3 The Ventzell problem V (t) = W (t ∧ τx ) + x. ∞) × [0. x) = 1 uxx (t. where x ≥ 0. Moreover Q0 = I and Qt+s = Q(t)Q(s) for all t.      u(0. {t≥τx } = {t<τx } since W (τx ) + x = 0. Set Zt ϕ(x) = E[ϕ(W (t ∧ τx ) + x)].24). ∞) × [0. x ≥ 0. [gt (x − y) − gt (x + y)]ϕ(y)dy + √ 2πt −∞ 0 If ϕ ∈ Cb ([0. x) = Qt ϕ(x) is continuous in [0. Zt ϕ(x) = Ω ϕ ∈ Bb ([0.    2    ux (t. t > 0. setting u(t. t ≥ 0. 0) = 0. where Ut is defined by (4. 0) = 0. ∞) and solves the following Neumann problem   ut (t. x). So x y2 ϕ(0) e− 2t dy. x) = ϕ(x). +∞)). t > 0. x ≥ 0. x ≥ 0. x) = 1 uxx (t. infinitely differentiable in (0. x ≥ 0. x) = ϕ(x). x). .7. 4. +∞)). s ≥ 0. Therefore Zt ϕ(x) = Ut ϕ(x) + ϕ(0) P(T−x ≤ t). Let us consider the stochastic process. ϕ(B(t ∧ τx ) + x)dP ϕ(W (t) + x)dP + ϕ(0)dP.   ut (t.      u(0. Now it is easy to check that if ϕ ∈ Cb ([0. x) = Zt ϕ(x) we see that u is the solution to the Ventzell problem. So. ∞). t ≥ 0    2   +∞ Zt ϕ(x) =  uxx (t.

s ≥ 0. Chapter 4 .60 Moreover Z0 = I and Zt+s = Z(t)Z(s) for all t.

1 5.. 5. We call Ft . P). t ∈ [0... F .A = {ω ∈ C0 : (B(t1 ). P) is a stochastic process of the form n F = i=1 Fi−1 1 [ti−1 . T ]. is adapted to the Brownian motion B if F (t) is Ft -measurable for any t ∈ [0.··· .1. in (Ω. B(tn )) ∈ A} where 0 ≤ t1 < . . We say that a stochastic process F (t). F . The family of σ–algebras (Ft )t≥0 is increasing. tn ≤ t and A ∈ B(Rn ). for any t > 0 we denote by Ct the algebra of all cylindrical sets Ct1 .tn . l 61 (5. We denote by (Ft )t≥0 the completion of the natural filtration of B with all P-null sets of Ω.Chapter 5 The Itˆ integral o In all this chapter B represents a Brownian motion in a probability space (Ω.1 Let T > 0. < tn . Similarly as in Chapter 4. we denote by Ft the σ-algebra generated by Ct and all P-null sets of Ω. t ∈ [0.1) .ti ) . T ]. Moreover. An elementary process F (t).. it is called the natural filtration of B. T ]. t ≥ 0 the natural filtration of B augmented with the null sets of P.1 Definition of Itˆ’s integral o Itˆ’s integral for elementary processes o Definition 5..

62 The Itˆ integral o where n ∈ N. 2 Proposition 5. it is independent of B(tj )−B(tj−1 ). . T ]. by Lemma 4. .3).. T ).3. (5. Therefore we have n E[I(F )] = j=1 E[Fj−1 ]E[B(tj ) − B(tj−1 )] = 0 and (5.2 Assume that F ∈ EB (0.3) is proved. 0 = t0 < t1 < · · · < tn = T and Fi is Fti -measurable for any i = 0. 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 )). Let us prove (5. Notice now that for j < k the random variable Fj−1 Fk−1 [B(tj ) − B(tj−1 )].4) E 0 F (s)dB(s) = 0 Proof.. 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 )] .. F . Let us prove (5. Then I(F ) ∈ L2 (Ω.3) (5. n − 1.4). 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. We have n E[I(F )] = j=1 E[Fj−1 (B(tj ) − B(tj−1 ))].2) Obviously any elementary process is adapted. 1. t ∈ [0. Since Fj−1 is Fj−1 measurable. P) and we have T E 0 T F (s)dB(s) 2 T =0 E(|F (s)|2 )ds. For any elementary process F (t). (5.

F1 = E 0 F (t. ·)|2 dt < ∞. 5. b ∈ R. The scalar product on Z is defined by T F. ·)F1 (t. taking the expectation. Obviously any elementary process F belongs to Z. ω) → F (t. (t.1. .2 General definition of Itˆ’s integral o Let us denote by ZT := L2 ([0. T ] × Ω. Therefore. 2 Exercise 5. It follows that E[|I(F )| ] = j=1 2 n E[|Fj−1 |2 ](tj − tj−1 ). T ) × F . 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. dt × P) the Hilbert space of all (equivalence classes of) functions F : [0. B(0. Hint: Use the identity ab = 1 1 1 (a + b)2 − a2 − b2 . T ). T ) × F and such that T F ZT := E 0 |F (t. as required. which are measurable with respect to the product σ-algebra. Prove that T T T E 0 F (s)dB(s) 0 G(s)dB(s) = 0 E[F (s)G(s)]ds. B(0.3 Let F.Chapter 5 63 is Fk−1 –measurable and consequently is independent of B(tk ) − B(tk−1 ). G ∈ EB (0. T ] × Ω. ·)dt. 2 2 2 a. ω).

P)F → 0 The Itˆ integral o F (s)dB(s).6) E 0 F (s)dB(s) = 0 Moreover. for any a. T )). 2 Processes belonging to EB (0. T ) ⊂ ZT → L2 (Ω. Let us now present a characterization of predictable processes (that is of 2 space EB (0. T ) 2 of EB (0. Therefore it can be uniquely extended to the closure EB (0.b) . b. (5. and b b E a F (s)dB(s) = a (E|F (s)|2 )ds. T ]. the Itˆ integral can be uniquely defined by extension for any preo dictable square integrable process F (t).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. from Exercise 5. the mapping T 2 EB (0. b a (5. Note first that an elementary process is a linear combination of processes of the form F 1 [a. T ) in ZT . T ) are called predictable. We have b F (s)dB(s) in any E a F (s)dB(s) 2 = 0. So. T E 0 T F (s)dB(s) 2 T =0 E(|F (s)|2 )ds. c ∈ [0.4).7) We can define in an obvious way the Itˆ integral o interval [a. FT . .64 In view of (5. b] ⊂ [0. l with F Fa -measurable. T ] we have c b c F (s)dB(s) = a a F (s)dB(s) + b F (s)dB(s). t ≥ 0 and the following properties are fulfilled. 2 is an isometry.5) (5. Moreover.

We call A × [a. Definition 5. by the monotone convergence theorem. P is called the σ-algebra of all predictable events. Prove that t t ϕ s F (r)dB(r) = s ϕ F (r)dB(r). dt × P) such that T F (s)dB(s) = 0. dt × P). We first note that R is a π-system. T ] is a real random variable in the probability space ([0. P. T ] × Ω. dt×P). Exercise 5. l We claim that D is a λ-system.5 The closure EB ([0. [s. T ] and let ϕ ∈ L∞ (Ω. Properties (B. P). P. T ] × Ω.e. 2 Proposition 5. T ] × Ω. P. t] ⊂ [0. So. dt × P) where A = ∞ Ak .4 A real predictable process in [0. So. P. see Appendix A. T ]×Ω. that it fulfills (A. T ] × Ω. P. Then we set D = {A ∈ P : 1 A ∈ ΛT }. Since any element of L2 ([0.1). φn → φ = 1lA in L2 ([0. P. it is natural to approximate a general predictable process by linear combinations of functions of the form 1 A×[a. dt × P). T ]) in L2 ([0. Let (An ) ⊂ D be mutually disjoint sets and set n φn = k=1 1 Ak .1)-(iii). A ∈ D and (A.Chapter 5 65 In turn each F can be approximated by linear combinations of characteristic functions of Fa -measurable sets. dt × P) can be approximated by a monotonic sequence of simple functions. b) a predictable rectangle. . l Then. 2 Proof. Fs . (5. Denote by ΛT the closure of EB ([0.1)-(iii) is fulfilled.6 Let F ∈ L2 ([0. dt × P).7 Let F ∈ L2 ([0. let us show (A.8) Exercise 5.1)(i)-(ii) are clear. T ]) is precisely L2 ([0. i. 0 Show that F = 0. T ] × Ω. For this we shall use the Dynkin Theorem.b) . Now k=1 the conclusion follows by Theorem A. l with A Fa measurable. T ] × Ω. We denote by R the family of all predictable rectangles and by P the σ-algebra generated by R. it is enough to show that 1lA ∈ ΛT for any A ∈ P. P.1.

L2 (Ω)) the space of all stochastic processes which are mean square continuous and adapted. 2 (5. L2 (Ω)) then F (t) is Ft -measurable for all t ∈ [0.2 Itˆ integral for mean square continuous o processes We shall denote by CB ([0.tj ) l and set T n Iσ (F ) := 0 Fσ (s)dB(s) = j=1 F (tj−1 )(B(tj ) − B(tj−1 )).8 Let us prove that T 0 1 B(t)dB(t) = (B 2 (T ) − T ). t → F (t).11) Let σ = {t0 . T ] and the mapping [0. T ]. T ). (5. T ) and. t1 .. in L2 ([0. T ] → L2 (Ω. t1 . tn } ∈ Σ(0.9) |σ|→0 Consequently we have T |σ|→0 lim Iσ (F ) = 0 F (s)dB(s) in L2 (Ω. · · · . T ]. (5. tn } ∈ Σ(0. dt × P). 2 Clearly Fσ ∈ EB (0. T ) consider the elementary process n Fσ := j=1 F (tj−1 )1 [tj−1 . 2 2 2 .. P). is continuous. .66 The Itˆ integral o 5. T ] × Ω. 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 . P).10) Example 5. We recall that if F ∈ CB ([0. P. F .. F . For any decomposition σ = {t0 . using the continuity of F one can check easily that lim Fσ = F.

|σ|→0 2 0 Exercise 5. is not a process with independent increments in general (unless f is deterministic). take for instance t X(t) = 0 B(s)dB(s) = 1 (B 2 (t) − t). We first notice that X(t). has orthogonal increments (in the sense of L2 (Ω. F .10 Let 0 ≤ t1 ≤ t2 ≤ t3 ≤ t4 ≤ T . 2 t ≥ 0.19). F . T ].3 The Itˆ integral as a stochastic process o t Let F ∈ L2 ([0.Chapter 5 Then we have Iσ (B) = 1 1 2 B (T ) − 2 2 n 67 (B(tk ) − B(tk−1 ))2 . T ] × Ω. However. t ≥ 0. Then we have E[(X(t2 ) − X(t1 ))(X(t4 ) − X(t3 ))] = 0 .9 Prove that n |σ|→0 lim B(tk )(B(tk ) − B(tk−1 )) = k=1 1 (B 2 (T ) + T ). P). P). P. t ≥ 0. 2 Therefore the definition of the Itˆ integral depends on the particular form of o the integral sums. P)) as the following result shows. 5. Proposition 5. in L2 (Ω. we deduce that T 1 B(t)dB(t) = lim Iσ (B) = (B 2 (T ) − T ). X(t). t ∈ [0. k=1 Recalling that the quadratic variation of B is T (Theorem 3. dt × P and set X(t) = 0 F (s)dB(s). 2 and n |σ|→0 lim B k=1 tk + tk−1 2 (B(tk ) − B(tk−1 )) = 1 2 B (T ). F . in L2 (Ω.

T ]. is a continuous process. Proof. we have E[X(t)|Fs ] = X(s) + E s t F (r)dB(r)|Fs . Moreover. t ∈ [0. L2 (Ω)). Then X ∈ CB ([0. For this we first prove that it is a martingale with respect to the filtration (Ft ) (see Appendix C). taking into account (5. t ≥ 0.11 Let F ∈ L2 ([0. T ] we have t E(|X(t) − X(t0 )|2 ) = t0 E(|F (r)|2 )dr . We show now that X(t). . dt×P).t4 ] F (s)dB(s) l = 0 1 [t1 .t2 ] 1 [t3 .t2 ] F (s)dB(s) l 0 1 [t3 . We have in fact. l l We are going to show that X(t).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 . so that t→t0 lim E(|X(t) − X(t0 )|2 ) = 0.t4 ] E(F 2 (s))ds = 0. t ≥ 0. T ].12 X(t). for any t. P). T ]. The conclusion follows. Ft . T ]×Ω. is a Ft –martingale Proof. t0 ∈ [0. Proposition 5. then that it is a continuous process.68 Proof. is mean square continuous. Proposition 5. X(t) ∈ L2 (Ω. Since t X(t) − X(s) = s F (r)dB(r). Let t > s. P. We know that for any t ∈ [0.

T ] × Ω.12) is proved and the conclusion follows. n F = i=1 Fi−1 1 [ti−1 . dt × P) t Fn (s)dB(s). n ∈ N. because F (r) contains in general the “story” of the Brownian motion from 0 to r. 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. t (5. F .12) Notice that this is not obvious since s F (r)dB(r) is not independent of Fs in general (1) . It is enough to prove (5. t ∈ [0.13 Let F ∈ L2 ([0. · · · . tn = t and Fi−1 ∈ L2 (Ω. (5.12) when F is an elementary process. (5. We are now ready to prove the continuity of X. P.ti ) . So. T ].Chapter 5 So. Then X has a continuous version and T E sup |X(t)|2 ≤ 4 t∈[0. T ) such that Fn → F and set Xn (t) = 0 (1) in L2 ([0.13) 2 Proof. P. l where s = t1 .T ] 0 E|F (s)|2 ds. taking into account that Fs ⊂ Fi−1 . P). T ]. dt × P) and let t X(t) = 0 F (s)dB(s). Let (Fn ) ⊂ EB (0. t ∈ [0. T ] × Ω. . In this case. it remains to prove that t 69 E s F (r)dB(r)|Fs = 0. since Fi−1 is Fi−1 –measurable and B(ti ) − B(ti−1 ) is independent of Fi−1 . Theorem 5.

14 Let τ be a stopping time. Then by Corollary C.70 The Itˆ integral o Since B(t) is continuous it is clear that Xn (t) is continuous for all n ∈ N. t ≥ 0 is a Brownian motion in (Ω. F. Then W (τ ) is Fτ -measurable and W (t + τ ) − W (τ ). The proofs of the two following propositions are completely similar to that of Proposition 4. .4 5. they will be omitted.1 Itˆ integral with stopping times o Stopping times We proceed here as in Section 4. ω ∈ Ω. So. Taking into account Proposition 5. T ]. Consequently (Xn )(ω) is Cauchy in C([0. is a continuous Ft –martingale. m ∈ N E sup |Xn (t) − Xm (t)|2 t∈[0.15 Let τ be a stopping time and set W (τ )(ω) = W (τ (ω))(ω). t ∈ [0.4. To any stopping time τ we associate the σ-algebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}. P) is called a stopping time with respect to the filtration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0. Proposition 5.2. F. 5.8 and 4. T ]) for almost all ω and its limit. A nonnegative extended random variable τ in (Ω.12 we see that X(t). Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N.8.6 it follows that for any n. which coincides with X(ω) is continuous. Proposition 5. P).T ] T ≤ 4E(|Xn (T ) − Xm (T )|2 ) = 4E 0 |Fn (s) − Fm (s)|2 ds .

¯ Consider now the stochastic process h(s) = 1 {s≤τ } .Chapter 5 71 5.. ω) = X(τ (ω).16 Let F ∈ L2 ([0.. P.. Set Ai := {τ = ti }. Then we have τ T F (s)dB(s) = 0 0 1 {s<τ } F (s)dB(s).. P.2 Itˆ’s integral with stopping times o t Let F ∈ L2 ([0. l (5. T ] × Ω. i = 1. t2 .15 and using the fact that X(t). ω ∈ Ω.4. tn ). ω).. t ∈ [0. The following result reduces a Itˆ’s integral with a stopping time to a o usual one between 0 to T . τ (Ω) = (t1 . . s ∈ [0. Then Ai ∈ Fti . T ]. Arguing as in Proposition 5. n. dt × P) and let τ ≤ T be a stopping time. It is enough to prove the result when τ is of the form. n. Define τ F (s)dB(s) : = X(τ ).14) Proof. T ] × Ω. If s ∈ [t1 . l We have h(s) = 1.. 0 where X(τ. t ∈ [0. .. has a continuous version. .. Proposition 5. T ]. T ]. t2 ) we have h(s)(ω) = 1 if ω ∈ A2 ∪ · · · ∪ An . Let moreover τ ≤ T be a stopping time. λ × P) and set X(t) = 0 F (s)dB(s). with 0 < t1 < t2 < · · · < tn ≤ T . s ∈ [0. t1 ). one can see that X(τ ) is Fτ –measurable.. . i = 1.

Rd ))..72 so that h(s) = 1 A2 ∪···∪An = 1 Ac . dt × P). We shall define the Itˆ integral for predictable processes with values o in L(Rm . T ] × Ω.j (t)dBj (t).15) Let now F ∈ L2 ([0.. dt × P.. Then we have T T T E 0 f (s)dBi (s) 0 g(s)dBj (s) = δi. P. (5. . j = 1.. tk ) with k ≤ n we have h(s) = 1 (Ak ∪. P). P. L(Rm .j 0 E[f (s)g(s)]ds. . Bm (t)). l 5. Lemma 5. T ] × Ω. dt×P. d. if s ∈ [tk−1 . 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 ).. l l 1 Similarly. i.. First we need a lemma whose simple proof is left to the reader.∪An )c . t≥0 Let m ∈ N be fixed and consider a standard m-dimensional Brownian motion in the probability space (Ω. Let (Ft )t∈[0. F . i = 1. m.. L(Rm . We shall denote this space by L2 ([0..17 Let f. P. Rd )))... . dt×P)). . g ∈ L2 ([0. We define the Itˆ o integral of F as the d-dimensional process T m T F (t)dB(t) 0 i = j=1 0 Fi. T ]×Ω. Rd ) (that is such that any matrix element belongs to L2 ([0..5 Multidimensional Itˆ integrals o B(t) = (B1 (t). P. T ] × Ω.T ] be the natural filtration of B (augmented with all P-null sets of Ω) .

Then we have m T (I(F ))i = j=1 0 Fi. P. Rd )). Remark 5.j (t)dBj (t) and.17) . Rm ) is isomorphic to Rm and F becomes a vector F = (F1 . i = 1. which yields (5.15).j (t)dBj (t). dB(t) = 0 E|F (t)|2 dt.16). Fm ). Then we have T 2 T E 0 F (t)dB(t) = 0 E[Tr (F (t)F ∗ (t))]dt.j (t)2 ]dt.. Proof.16) reduces to T 2 T E 0 F (t). In this case we shall write the Itˆ integral of F as o T F (s). Set I(F ) = T 0 F (t)dB(t). taking into account (5. (5. d m 0 T E|I(F )| = i=1 j=1 2 E[Fi.. dt × P. dB(s) 0 and formula (5.16) where Tr denotes the trace. T ] × Ω. . L(Rm . · · · .19 Assume that d = 1 so that L(Rd .18 Let F ∈ L2 ([0.. (5. It follows that d m T 2 E|I(F )|2 = i=1 E j=1 0 Fi.Chapter 5 73 Proposition 5. d.

74 The Itˆ integral o .

B a real Brownian motion. t ≥ 0. (6. continuous and continuous in mean square.1 Introduction Let (Ω. X is adapted. o Given a regular real function ϕ. T ] × Ω. o k We need some notations.1) where x ∈ R. F . We set dX(t) = b(t)dt + σ(t)dB(t) and call dX(t) the Itˆ differential of X. If ϕ ∈ Cb (R) we set ϕ 0 = sup |ϕ(x)|. 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)). P. σ ∈ L2 ([0. x∈R 75 .Chapter 6 The Itˆ formula o 6. x∈R and k ϕ k = ϕ 0 + j=1 sup |Dj ϕ(x)|. (Ft )t≥0 the natural filtration of B augmented with the null sets of P and P the σ-algebra of all predictable events (also augmented with the null sets of P). 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. We are given two stochastic processes b.

F . that is terms with (dt)2 and dt dB(t).2) in the differential form.4) 1 2 σ (t)ϕ (X(t)) + b(t)ϕ (X(t)) dt.5) Proof. + or.1 One can deduce formally Itˆ’s formula by proceeding as folo lows. P)) and let η = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. F . P) (6. We shall write (6. Lemma 6. Set Jη := n F (tk−1 )(B(tk ) − B(tk−1 ))2 . Writing (dB)2 = dt is justified by Lemma 6. also as ϕ (X(t)) = ϕ (X(t))dX(t) + 1 2 σ (t)ϕ (X(t))dt. 2 t ≥ 0. Tthe following result on quadratic sums of a process is a generalization of Theorem 3. o t Chapter 6 ϕ(X(t)) = ϕ(x) + 0 t ϕ (X(s))σ(s)dB(s) (6. T ].76 We shall prove the following Itˆ’s formula.3) t ≥ 0. k=1 .2) 1 2 σ (s)ϕ (X(s)) + b(s)ϕ (X(s)) ds.19. T ). L2 (Ω. Remark 6. Put (dB)2 = dt and neglet the terms of order greater than dt. 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. 2 + 0 t ≥ 0. (6.2 Let F ∈ CB ([0.2 below. 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 . setting ϕ (X(t)) = ϕ (X(t))σ(t)dB(t). 2 (6.

F . the last sum vanishes. To prove (6. obviously n |η|→0 T lim F (tk−1 )(tk − tk−1 ) = k=1 0 F (s)ds in L2 (Ω. (6. 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) lim E  Jη − k=1 F (tk−1 )(tk − tk−1 ) since.The Itˆ formula o It is enough to prove that  |η|→0 77 n 2   = 0. . P).7) = k=1 E|F (tk−1 )|2 E |B(tk ) − B(tk−1 )|2 − (tk − tk−1 ) 2 .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.

The conclusion follows. t ∈ [0. λ1 ] and X(t) = b0 t + σ0 B(t).78 since F (tk−1 ) and B(tk ) − B(tk−1 ) are independent..2) when 3 ϕ ∈ Cb (R). t ∈ [0.3 Let ϕ ∈ Cb (R). t] with t ≤ λ1 .2) holds. 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 ≤ 2|η| k=1 E[|F (tk−1 )|2 (tk − tk−1 )] → 0.. 0 = λ0 < λ1 < · · · < λp and bi . 2 Lemma 6. We start by proving (6. σi are Fti -measurable for any i = 0. Let η = {t0 = 0 < t1 < · · · < tN = t}.2) in [0. . l (6. b and σ given by (6. Since Cb (R) is dense in Cb (R) it is enough to show (6. σ(t) = σ0 . E[|B(tk ) − B(tk−1 )|4 ] = 3(tk − tk−1 )2 . 1.. l σ= i=1 σi−1 1 [λi−1 .8) and X by (6. taking into account that E[|B(tk ) − B(tk−1 )|2 ] = (tk − tk−1 ). p − 1. x ∈ R. Then identity (6.λi ) . In this case we have b(t) = b0 . Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]. .8) where p ∈ N. First we assume that b o and σ are elementary processes. p p b= i=1 bi−1 1 [λi−1 . 3 2 Proof. λ1 ].1). as |η| → 0.λi ) . Now. Now we are in position to prove Itˆ’s formula.

3 . 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 .2 + I2. (6. P) |η|→0 |η|→0 (6.1 + I2.11) It is easy to check that lim I2.1 = lim I2.1 | ≤ 1 ϕ 2 |b0 |2 (tk − tk−1 )2 → 0 as |η| → 0 2 k=1 N . P). t |η|→0 t lim I1 = 0 ϕ (X(s))b(s)ds + 0 ϕ (X(s))σ(s)dB(s) in L2 (Ω. So. F .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 =: I2.9) 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.12) In fact |I2. F . (6.2 = 0 in L1 (Ω. (6.

P). We have N 1 Rη = k=1 0 (1 − ξ)[ϕ (ξk ) − ϕ (X(tk−1 ))](X(tk ) − X(tk−1 ))2 dξ. F . so that. 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 E|B(t)| ≤ [E|B 2 (t)|]1/2 = t1/2 .2 | ≤ ϕ 2 |b0 | |σ0 | k=1 N (tk − tk−1 )E|B(tk ) − B(tk−1 )| ≤ ϕ 2 |b0 | |σ0 | k=1 (tk − tk−1 )3/2 → 0 as |η| → 0. where ξk = (1 − ξ)X(tk−1 ) + ξX(tk ).13) So.2 it follows that t |η|→0 lim 2I2. (6.3 = 0 ϕ (X(s))σ 2 (s)ds in L2 (Ω. N |Rη | ≤ ϕ Consequently N 3 k=1 |X(tk ) − X(tk−1 )|3 . |ϕ (ξk ) − ϕ (X(tk−1 ))| ≤ ϕ 0 (1 − ξ)|X(tk ) − X(tk−1 )|. . the conclusion will follow provided |η|→0 lim E|Rη | = 0. we deduce setting 1 − ξ ≤ 1.14).14) Let us prove (6. (6.80 and (1) N Chapter 6 E|I2. Moreover. by Lemma 6. 3 Since ϕ ∈ Cb (R) we have by the mean value theorem.

(2) Since E|B(t)|3 ) ≤ [E(B(t)6 )]1/2 = √ 15. 2 + 0 Now the conclusion follows by the dominated convergence theorem letting j → ∞.15) Then we have (see (5. Taking expectation in the Itˆ formula we find a useful identity which o allows to estimate the expectation of ϕ(X(t)). j→∞ lim σj = σ in L2 ([0. for any j ∈ N. Proof.16) 1 σj (s)ϕ (Xj (s)) + bj (s)ϕ (Xj (s)) ds. t t Xj (t) = x + 0 bj (s)ds + 0 σj (s)dB(s). s ∈ [0.4 Let x ∈ R. The proof is complete when t ≤ λ1 .2) holds for all t ∈ [0. Moreover by (6.The Itˆ formula o and so (2) 81 . 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 ). P.10)) j→∞ lim Xj = X in CB ([0. P. T ] × Ω. T ]. Set. T ]. 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. We finally prove 2 Theorem 6. Let (bj ) and (σj ) be sequences of elementary processes such that j→∞ lim bj = b. dt × P). . T ] × Ω.2) we have t ϕ(Xj (t)) = ϕ(x) + 0 t ϕ (Xj (s))σj (s)dB(s). (6. (6. b. σ ∈ L2 ([0. T ]. Then identity (6. as |η| → 0. dt × P) and ϕ ∈ Cb (R). L2 (Ω)).

P. Let t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s).1. t ∈ [0.5 Assume that x ∈ R. Then condition (6.17) 6. σ ∈ L2 ([0. 0 (6.82 Chapter 6 Proposition 6. T ]. Then t E(|X(t)|2 ) = |x|2 + E 0 (σ 2 (s) + 2X(s)b(s))ds. 2 Cb (R) Proof of Proposition 6. Example 6. provided the integrand in the right hand side is summable. T ]. T ] × Ω. Proposition 6. dt × P) and ϕ ∈ C 2 (R).6.19) Then E[ϕ(X(t))] < +∞ and (6. . P. b.7 Take ϕ(x) = x2 . For any R > 0 consider a function ϕR ∈ such that ϕ(x) if |x| ≤ R. b.17) also holds without the assumption that ϕ is bounded. ϕR (x) = 0 if |x| ≥ R + 1.19) becomes t E 0 |σ 2 (s) + 2X(s)b(s)|ds < +∞ which is clearly fulfilled.17) holds. dt × P) and 2 ϕ ∈ Cb (R).6 Assume that x ∈ R. (6. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s). T ] × Ω.1 The Itˆ formula for unbounded functions o We want now to show that formula (6. Then E[ϕ(X(t))] = ϕ(x) + 1 E 2 t [ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)]ds. t ∈ [0. (6.18) and assume in addition that t E 0 |ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)|ds < +∞. σ ∈ L2 ([0.

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). m > 1. say M (ω).s. t∈[0. 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. R→∞ lim τR = T P–a.2) to ϕR (X(t)). applying Itˆ’s formula (6. (6.21) and the dominated convergence theorem. ω) attains the maximum. As an application of Proposition 6. l 2 0 Now.22) Taking expectation we obtain E[ϕ(X(t ∧ τR ))] − ϕ(x) 1 = E 2 t (6.19).   t∈[0. in view of Proposition 5. by the assumption (6.. So.21) Now.T ]   T  if sup |X(t)| < R.23) 1 s<(t∧τR ) [ϕ (X(s))σ (s) + 2ϕ (X(s)b(s)]ds.6 let us estimate E where F is predictable and m ∈ N. Then we have τR (ω) = T for all R > M (ω). For such a ω. T ] : |X(t)| ≥ R} if sup |X(t)| ≥ R.The Itˆ formula o Then. l (6. Let now τR be the stopping time   inf{t ∈ [0.20) t ϕR (X(s)))σ(s)dB(s). we can let R → ∞ obtaining the conclusion. ω) is continuous for almost all ω ∈ Ω. T 0 2m F (s)dB(s) . (6. We know that X(·. X(·.T ] τR = It is clear that τR is increasing and bounded by T .

So.25) yields T E[|X(t)|4 ] ≤ 36T E 0 |F (t)|4 dt. P. P. Then X ∈ L2m ([0. P.84 Chapter 6 Proposition 6.24) Proof.24) when F is bounded (because L∞ ([0. (6.8 Assume that F ∈ L2m ([0. We start from the case m = 2. (6. dt × P)). b ∈ L2 ([0. t ∈ [0. T ] × Ω. T ]. Substituting this in (6. (6. T ] × Ω. dt × P). (6. P. and set t X(t) = 0 F (s)dB(s). m ∈ N. dt × P) is dense in L2m ([0. T ] . Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dW (s).26) From which 0 E|X(t)|4 dt ≤ 36T 2 0 E|F (t)|4 dt. Rd ) and σ ∈ L2 ([0. L(Rm .24) is proved for m = 2. dt × P. T ] × Ω.25) Integrating between 0 and T . m ∈ N. 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 . setting ϕ(x) = x4 . It is enough to prove (6. Rd )). dt × P. T ] × Ω. t ∈ [0. P. P. T ] × Ω. dt × P) and we have T E[|X(T )| 2m ] ≤ [m(2m − 1)] T m m−1 0 E |F (t)|2m dt.19) holds so that. by Proposition 6. Assume that x ∈ Rd . 4 and so on. We can now easily iterate the previous argument taking successively m = 3.2 Itˆ’ formula for a vector valued process o Let d. yields T T 1/2 T 1/2 E|X(t)| dt ≤ 6T E 0 0 T 4 |X(t)| dt T 4 E 0 |F (t)| dt 4 . Then (6. 6. T ] × Ω.6 we have t E[|X(t)|4 ] = 6E 0 |X(s)|2 |F (s)|2 ds .

2. j ∈ {1. σ(t)dB(t) + 1 Tr[(σσ ∗ )(t)D2 ϕ(X(t))] + b(t). Let i = j and set n η Ii. F . P). T ].The Itˆ formula o We are going to prove the following Itˆ’s formula.29) f (s)ds. (6.29) follows from Lemma 6. t ≥ 0.9 Let f ∈ CB ([0.. So. (6.28) The proof is similar to that of the one-dimensional case seen before. Let η = {0 = t0 < t1 < · · · < tn = T } be a decomposition of [0. (6. Lemma 6. σ(s)dB(s) . Dϕ(X(s)) 2 + 0 ds. If i = j. Then we have n σ E[(Ii. 1 Tr[(σσ ∗ )(s)D2 ϕ(X(s))] + b(s). = δi. We shall write (6. o t 85 ϕ(X(t)) = ϕ(x) + 0 t Dϕ(X(s)).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. 2. we shall only sketch some points of the proof. T ]. in L2 (Ω.27) for all t ∈ [0.. m}.27) in the differential form ϕ (X(t)) = Dϕ(X(t)). Dϕ(X(t)) 2 dt. .j := k=1 f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )). T ].. Let us start with a preliminary lemma.j 0 Proof.j )2 ] = E h. Then we have n |σ|→0 lim f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )) k=1 T (6. L2 (Ω)) and let i.

31) Concerning I1 we have N I1 = k=1 (3) Dϕ(X(tk−1 )). (6.27) holds. . and σ(t) = σ0 .86 Chapter 6 as |σ| → 0. x ∈ Rd and let b and σ given by (6. k ∈ Rd . p − 1. taking ϕ ∈ Cb (Rd ) and proving (6. P.10 Let ϕ ∈ Cb (Rd ). l (6. λ1 ] t ∈ [0.λi ) ... Now we prove Itˆ’s formula when b and σ are elementary processes as. We have b(t) = b0 .λi ) . 1. Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]. by Taylor’s formula we can write N ϕ(X(t)) − ϕ(x) = k=1 Dϕ(X(tk−1 )).6) in [0. P. o p p b= i=1 bi−1 1 [λi−1 . (3) On the other hand. k) = D2 ϕ(x)h. l σ= i=1 σi−1 1 [λi−1 . L(Rm .3. Let η = {t0 = 0 < t1 < · · · < tN = t}. Rd )) i = 0. k for all x. 0 = λ0 < λ1 < · · · < λp bi ∈ L2 (Ω.. We proceed as in the proof of Lemma 6. Then identity (6. . λ1 ].30). X(tk ) − X(tk−1 ) + 1 2 N D2 ϕ(X(tk−1 ))(X(tk ) − X(tk−1 )). 3 Proof. X(tk ) − X(tk−1 ) + Rη k=1 =: I1 + I2 + I3 .30) where p ∈ N. We use the notations Dϕ(x)h = Dϕ(x). Fti . Fti . b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 ) . Rd ) and σi ∈ L2 (Ω. 2 Lemma 6. t] with t ≤ λ1 . X(t) = b0 t + σ0 B(t). t ∈ [0. h and D2 ϕ(x)(h. h.

F . b0 (tk − tk−1 )2 N +2 k=1 N D2 ϕ(X(tk−1 ))b0 .β (Bβ (tk ) − Bβ (tk−1 )).j=1 α. σ0 (B(tk ) − B(tk−1 )) (tk − tk−1 ) + k=1 D2 ϕ(X(tk−1 ))σ0 (B(tk )−B(tk−1 )).α (s)σi.9 we have t |η|→0 d m 2 Di.j=1 α=1 t lim 2I2.The Itˆ formula o So.32) Concerning I2 we write N 2I2 = k=1 D2 ϕ(X(tk−1 ))b0 .j ϕ(X(s)) σi. taking into account Lemma 6. Now. we see that |η|→0 lim E|Rη | = 0. (6.β (s)ds 0 i.3 = = 0 Tr [D2 ϕ(X(s))(σσ ∗ (s))]ds. (6. σ0 (B(tk )−B(tk−1 )) =: I2. k=1 i.34) Moreover. (6. P) |η|→0 (6. σ(B(tk ) − B(tk−1 )) k=1 N d m 2 Di. P). we have N 2I2.1 = lim I2. b(s) ds+ 0 Dϕ(X(s)). t |η|→0 t 87 lim I1 = 0 Dϕ(X(s)). σ(s)dB(s) in L2 (Ω.α (Bα (tk ) − Bα (tk−1 )) σi. proceeding as before.3 .β=1 Therefore.1 +I2.2 +I2.2 = 0 in L1 (Ω.3 = = D2 ϕ(X(tk−1 ))(σ(B(tk ) − B(tk−1 ))).j ϕ σi.33) It is easy to check that |η|→0 lim I2. F .35) .

P. 2 (6. σ(t) dt.12 Let d = 1. Exercise 6. σ ∈ L2 ([0. Finally... m.. d.. σk ∈ L2 ([0. . 2. Let moreover ϕ ∈ Cb (Rd ). i = 1..37) . σi ∈ L2 ([0. dt × P : Rd ). m ∈ N. T ] × 2 Ω. . dt × P : L(Rm . Let ϕ ∈ 2 Cb (R). T ]. P. 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 ).. dt × P). T ] × Ω. Prove that dϕ(X(t)) = Dϕ(X(t)).27) holds for any t ∈ [0. σm (t))...4 we obtain the result Theorem 6. b. Set m t t X(t) = 0 b(s)ds + k=1 0 σk (s)dBk (s). Then identity (6. 2 where σ = (σ1 . σd ). 2 (6. Exercise 6. Set X(t) = b(t)dt + σdB(t). P. m = 1 bi .88 Chapter 6 The proof is complete when t ≤ λ1 . Prove that 1 ϕ (X(t))|σ(t)|2 dt. P.. k = 1.11 Let b ∈ L2 ([0..13 Let d ∈ N. T ] × Ω. i = 1. 2 = . . dt × P).36) dϕ(X(t)) = ϕ (X(t))dX(t) + where σ(t) = (σ1 (t). T ] × Ω. dX(t) + 1 D2 ϕ(X(t))σ(t). proceeding as we did for the proof of Theorem 6.. x ∈ Rd and ϕ ∈ Cb (Rd ).. Rd )).

Rd ). F . L(R .1) on the interval [s. We denote by (Ft )t≥0 the natural filtration of B(t) (augmented with all P-null sets of Ω). We shall write (7. In order to solve (7. setting S and to write b HS : = [Tr(SS ∗ )]1/2 . Fs . for all G ∈ CB ([0. X(t))dt + σ(t. By a solution of equation (7. t ≥ 0. η ∈ L2 (Ω. Let us consider the following integral equation t t X(t) = η + s b(u. R ))) and 0 ≤ a < b ≤ T. 2 b S ∈ L(Rr .1) in differential form as   dX(t) = b(t. Rd )) that fulfills equation (7. b is called the drift and σ the diffusion coefficient of the equation. L (Ω. T ]. P).3) 89 . b : [0.1) we shall use a fixed point argument. based on the identity b 2 b E a G(t)dB(t) 2 r = a d E [Tr (G(t)G∗ (t))] dt.1). T ] we mean a function X ∈ CB ([s. Rd ). X(u))du + s σ(u.1) where s ∈ [0. T ). This suggests to endow L(Rr . L2 (Ω. T ]. Rd ) with the Hilbert–Schmidt norm. (7. X(t))dB(t). X(u))dB(u). T ]. P.Chapter 7 Stochastic evolution equations We are given two positive integers r. in a probability space (Ω. Rd ) G(t) 2 HS E a G(t)dB(t) = a E dt. t ∈ [s. T ] × Rd → Rd and σ : [0.2)  X(s) = η. (7. d and an r-dimensional standard Brownian motion B(t). T ] × Rd → L(Rr . (7.

x) − b(t. Rd )).5) is a consequence of (7.5) Notice that. L2 (Ω.1) is equivalent to the following. T ] γ2 (X)(t) := and set γ(X) := η + γ1 (X) + γ2 (X). t ∈ [s.90 Chapter 7 7. x) − σ(t. y ∈ Rd . Hypothesis 7. (7.4) ≤ M 2 (1 + |x|2 ). T ] × Rd .1) has a unique solution X ∈ CB ([s. γ1 and γ2 map CB into itself. (ii) There exists M > 0 such that for all t ∈ [0. X(u))du. X ∈ CB . Rd ). T ). y)|2 + σ(t. Step 1. (7. after possibly changing the constant M . Then problem (7. Then equation (7.4). T ]. Fs . T ]. x) 2 HS 2 HS ≤ M 2 |x − y|2 (7.1 holds and let s ∈ [0. Define γ1 (X)(t) := s t t b(u.6) . we have |b(t. Proof.1 Assume that Hypothesis 7. (7. We are going to solve (7. T ]. t ∈ [s.1 Existence and uniqueness The standard assumptions for the well-posedness of problem (7. Rd )).1) by a fixed point argument in the space CB := CB ([s. x. y) and |b(t. Theorem 7. σ(u. η ∈ L2 (Ω.1 (i) b and σ are continuous on [0. T ]. X ∈ CB . X = η + γ1 (X) + γ2 (X) = γ(X). x)|2 + σ(t.1) are the following. L2 (Ω. X(u))dB(u). P. s X ∈ CB .

X(u))|2 du ≤ M 2 (t − s) s 2 CB ). γ1 maps CB into itself and γ1 (X) CB ≤ M (t − s)(1 + X CB ). X(u)) − b(u. we see that γ2 maps CB into itself. X. X(u)) 2 HS )du ≤ M2 s (1 + |X(u)|2 )du ≤ M 2 (t − s)(1 + X 2 CB ) So. Y (u))|2 du ≤ (t − s)M Consequently |X(u) − Y (u)|2 du ≤ (t − s)2 M 2 X − Y 2 CB du. t t |γ1 (X)(t)|2 ≤ (t − s) s |b(u. Let X. Y ∈ CB . X(u)) − σ(u. Concerning γ2 we have taking into account (7. t |γ1 (X)(t) − γ1 (Y )(t)|2 ≤ (t − s) s t 2 s |b(u. ≤ M 2 (t − s) X − Y . γ is Lipschitz continuous. t E|γ2 (X)(t)| = s t 2 E( σ(u.5). using the H¨lder inequality and taking into aco count (7.Stochastic evolution equations 91 Concerning γ1 we have.4). Y (u)) 2 HS )du 2 CB . We have. γ1 (X) − γ1 (Y ) Furthermore CB ≤ M (T − s) X − Y CB . Step 2.7) t E|γ2 (X)(t) − γ2 (Y )(t)|2 = s E( σ(u.5). Y ∈ CB (7. T ].3) and (7. using again the H¨lder inequality and taking o into account (7. (1 + |X(u)|2 )du ≤ M 2 (t − s)2 (1 + X Since γ1 (X)(t) is Ft –measurable for all t ∈ [s.

T ])) and so it is a continuous process. Let us prove the co-cycle law. η)). If (7. s. s.3 Assume that Hypothesis 7.8) By (7.2 By Theorem 5. Then Z solves the problem   dZ(t) = b(t. Whe shall use greek letters for stochastic initial data and latin letters for deterministic ones. η). T ]. r. Z(t))dB(t). s.1 holds and let η ∈ L2 (Ω. CB . T1 ]. s. 0 ≤ s ≤ r ≤ t ≤ T. By the uniqueness part of Theorem 7. η)). Y ∈ CB . s. (7.9) does not hold we choose T1 ∈ (s. η).13 it follows that there exists a version of the solution X(·. r. X. Z(t))dt + σ(t.1) on [s. In the following we shall denote by X(·. η) which belongs to L2 (Ω. γ2 (X) − γ2 (Y ) CB Chapter 7 ≤M √ T −s X −Y CB . T ] such that M T1 − s + T1 − s ≤ 1/2. Y ∈ CB . Then X(t. s. X(r. (7.10) Proof. C([s. (7. Now we repeat the proof with T1 replacing s and in a finite number of steps we arrive to the conclusion. X(r.1 it follows that Z(t) = X(t. Proposition 7. .92 and so. Remark 7. Define Z(t) = X(t.7) and (7. η) the solution of problem (7.9) γ is a 1/2–contraction on CB . Fs . s. t ∈ [s. η) = X(t. η) = X(t. it possesses a unique fixed point.1). Then by the previous argument there is a unique solution to (7. Rd ).  Z(r) = X(r. s. and so. as required. P. Now if T − s is such that √ M T − s + T − s ≤ 1/2.8) it follows that γ maps CB into itself and √ γ(X) − γ(Y ) CB ≤ M (T − s + T − s ) X − Y | for all X.

η). η) = η and for any N ∈ N. t t XN +1 (t. Then we have b(u. .15) is clear for N = 0. . n. s. . η) = X(·.. Rd ) and X(t. Let XN be defined by (7.15) Once (7. x) is a Markov process. s. s.. We claim that n XN (t.. η)) = b(u. Assume that it holds for a given N ∈ N. (7. η)) = σ(u. η))du + s σ(u. XN (u.Stochastic evolution equations 93 Remark 7. k = 1.. s. Let us proceed by recurrence.. η) = XN (t. Proposition 7. so that XN (t. xk ) in Ak .5 Assume that Hypothesis 7. s. s. k = 1. and A1 . l (7. s.. XN (u. σ(u. l ∀ N ∈ N.. η ∈ L2 (Ω. xk )1 Ak . η))dB(u). xk )) in Ak .11) Then we have N →∞ lim XN (·. s. s.1 holds and that n η= k=1 xk 1 Ak .. s. s. . η) = k=1 XN (t.13) where x1 .14) Proof. More precisely.4 By the contraction principle it follows that the solution X(t. xk )) in Ak . XN (u. define X0 (t. s. Then we have X(t. s. η) in CB ([s. s. x ∈ Rd . Equality (7.12) Next result. . gives some information about the relationship between X(t. η) = n X(t. n.15) is proved. xn ∈ Rd . P.. η) of problem (7. the conclusion follows letting N tend to infinity. s. s. x).. XN (u. k = 1. s. L2 (Ω. s. s.1) can be obtained as a limit of successive approximations... Rd )). (7. η) = η + s b(u. l k=1 (7. n. XN (u.. XN (u. which as we shall see plays an important rˆle in proving that o X(·. Fs .. (7. An are mutually disjoints sets in Fs such that n Ω= k=1 Ak . .11). s.. T ]. xk )1 Ak .

L2m (Ω. (7. s. l σ(u. XN (u. Then problem (7. XN (u. T ].24) proved in Proposition 6. s.1.16) . In particular X(·.2 Examples Example 7. Theorem 7. s. Rd )). s. Rd )). η)) = k=1 1 Ak σ(u. ∀ x ∈ Rd . P. T ]. xk ))dB(u) = k=1 1 Ak XN +1 (t. xk )du s n + s σ(u. We proceed as in the proof of Theorem 7.1.7 Consider the stochastic differential equation dX = AXdt + CdB(t). using inequality (6. X(0) = x. s. the conclusion follows.8. Rd )).94 so that b(u. l Consequently n t XN +1 (t. Proof. T ]. s. T ]. L2m (Ω.1 by a fixed point argument in the space m CB := CB ([s. η ∈ L2m (Ω.1) has a unique solution X(·.6 Assume that Hypothesis 7. Rd )). s. XN (u. where A ∈ L(Rd ). xk ) + l t b(u. η)) = k=1 n Chapter 7 n 1 Ak b(u. T ). η) = k=1 1 Ak X0 (t. s. xk )). η) ∈ CB ([s. Rd ). XN (u.15) holds for N + 1. s. s ∈ [0. XN (u. Rd ) and x ∈ Rd . So. XN (u.1 Solution of the stochastic differential equation in the space CB ([s. s. C ∈ L(Rr . 7. L2m (Ω. xk ) l and (7. x) ∈ CB ([s. s.1 holds and let m ∈ N. Fs . L2m (Ω. xk )). 7.

we find X(t) = e x + 0 tA e(t−s)A CdB(s).1 applies. Y (0) = 0. t ∈ [0.16) has a unique solution X(t) which fulfills the integral equation t X(t) = x + A 0 X(s)ds + CB(t).20) For this we check that X(t) given by (7. (7. T ].Stochastic evolution equations 95 Clearly Theorem 7. Taking into account that.19) is given by 1 2 X(t) = et(a− 2 c ) ecB(t) x. thanks to Proposition 3. T ].1 applies so that (7. which can be easily solved by the method of variation of constants. (7. x ∈ R.12. t ∈ [0. (7.20) solves (7. We want to show that the solution of (7. Write X(t) = eF (t) where F (t) = t a − 1 c2 + cB(t).17) yields t X(t) = A 0 e(t−s)A (x + CB(s))ds + x + CB(t). T ].19) where a. (7.8 Let r = d = 1 and consider the stochastic differential equation dX = aXdt + cXdB(t). t ∈ [0. t t e(t−s)A CdB(s) = CB(t) + A 0 0 t e(t−s)A CB(s)ds. t ≥ 0. By substituting Y (t) in (7. c. We obtain t Y (t) = 0 e(t−s)A (x + CB(s))ds. Again Theorem 7.19).18) Example 7.17) Setting t Y (t) = 0 X(s)ds. Then we have 2 dF (t) = a− 1 2 c dt + cdB(t) 2 . Y fulfills the equation Y (t) = AY (t) + x + CB(t). X(0) = x.

ω ∈ Ω |b(t. ω) − σ(t. (7. . y. Y (t. The following result can be proved as Theorem 7. x. V (t.25) (ii) For any Y ∈ CB ([0. L2 (Ω. T ]. ω)du + s σ(u.1. ω)). x ∈ Rd and AC = CA. Rd )) and V ∈ CB ([0.24) ≤ M 2 (1 + |x|2 ). (7. T ] × L(Rr . Y (t. Rd ) × Ω → Rd are such that: Hypothesis 7. Show that the solution of (7. ω).23) Here η ∈ L2 (Ω. x. X(u.1. ω)). (7. ω) and |b(t. x. (7. ω ∈ Ω. T ]. t t X(t. Rd ))) where. ω). Fs . ω) 2 HS 2 HS ≤ M 2 |x − y|2 (7.3 and 7. Exercise 7. X(0) = x. ω) = b(t. ω)|2 + σ(t. T ]. ω) = σ(t. 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). ω).21) is given by 2 X(t) = et(A−C /2) eCB(t) x. y ∈ Rd .9 Let r = 1 and consider the differential stochastic equation dX = AXdt + CXdB(t). for all t ∈ [0. X(u. ω) − b(t. ω) = η(ω) + s b(u. x. Rd )) we have U ∈ CB ([0. ω)dB(u). T ] × Rd × Ω → Rd and σ : [0. T ]. L2 (Ω.4) one deals with stochastic differential equations having random coefficients. x. by Itˆ’s formula. y. U (t. ω)|2 + σ(t.21) where A.22) 7.2 (i) There exists M > 0 such that for all t ∈ [0. Rd ).96 and. T ]. C ∈ L(Rd ). L2 (Ω. b : [0. L(Rr .3 Differential stochastic equations with random coefficients In some situations (see Subsections 7.

t ∈ [0. dB(t) . Let us show that X(t) = e− 2 1 Rt 0 Rt |F (s)|2 ds+ 0 F (s).27) For this we check that X(t) given by (7.2 7. dB(s) . Fs .dB(s) x. L∞ (Ω.27) solves (7. dB(t) .10 applies and so there exists a solution X of (7. T . First we show that E|X(t. Rd )). dB(t) = X(t) F (t). (7. eH(t) |F (t)|2 dt t ≥ 0. s and Lipschitz o continuous on η in mean square. Write X(t) = eH(t) where H(t) = − Then we have 1 dH(t) = − |F (t)|2 dt + F (t). dB(t) . So. where F ∈ CB (0. Example 7. T ) and η ∈ L2 (Ω. Rd )). s.1) is H¨lder continuous on t. t ≥ 0. T ]. η)|2 is bounded.2 holds. Rd ). Then problem (7.27) is proved. Now it is easy to check that Theorem 7. We are going to prove that the solution X(t. η) to (7.26). T ]. . 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). = eH(t) F (t). (7.26)  X(0) = x. t ≥ 0. s. Let s ∈ [0. 7. (7.1 holds.10 Assume that Hypothesis 7.23) has a unique solution X ∈ CB ([s.11 Let d = 1 and consider the stochastic differential equation   dX(t) = X(t) F (t).2.1 Continuous dependence on data Continuous dependence on mean square We assume here that Hypothesis 7.Stochastic evolution equations 97 Theorem 7.26). L2 (Ω.

η)|2 ≤ C(T. By Hypothesis 7. η)|2 ≤ 3[E(|η|2 ) + M 2 ((T − s)2 + (T − s)]e3M Proof. there exists a constant C(T. s. E(|η|2 ))(t − t1 ). Then for all s ∈ [0. η)|2 ≤ C1 (T.1 holds. η) with respect to t.13 Assume that Hypothesis 7. η) with respect to t.30) . (7. s.1(ii) and the H¨lder inequality we deduce that o t E (|X(t)|2 ) ≤ 3E(|η|2 ) + 3M 2 (t − s) s t (1 + E |X(u)|2 )du +3M 2 s (1 + E |X(u)|2 )du.1 holds. Proposition 7. E(|η|2 )).98 Chapter 7 Lemma 7. η) − X(t1 . The conclusion follows from the Gronwall lemma. T ] and η ∈ L2 (Ω. Consequently E (|X(t)|2 ) ≤ 3E(|η|2 ) + 3M 2 ((T − s)2 + (T − s)) t +3M ((T − s) + 1) s 2 E |X(u)|2 du.29) We start with the regularity of X(t. s. (7. E(|η|2 )) such that E |X(t. s. s. Then there exists a constant C1 (T. Fs . η) = X(t).12. X(u)) 2 HS )du. s. Writing for short X(t. Rd ). We note that. P. we have t 2 2 (T −s+1) . s.12 Assume that Hypothesis 7. η. X(u))du +3 s E( σ(u. 0 ≤ s < t ≤ T. s. Fs . by Lemma 7. E(|η|2 )) such that we have E |X(t. (7.28) E (|X(t)| ) ≤ 3E(|η| ) + 3E s t 2 2 b(u. Rd ) we have E |X(t. Let 0 ≤ s ≤ t1 < t ≤ T and η ∈ L2 (Ω. We now study the regularity of X(t.

ζ)|2 ) ≤ 3E(|η − ζ|2 ) + 3M 2 (T − s + 1) t × s E |X(u. η) − X(t. s. s. s. s. s. Proposition 7. s. Taking expectation and using (7. Then there exists a constant CT. P. Fs . s. s. (1 + E |X(u. s1 .Stochastic evolution equations Proof. s. X(u. η) − X(t1 . η) − X(t.η |s − s1 |. η)|2 du t 2 t1 + 2M Consequently.4) we obtain E (|X(t.1 holds. X(u. Rd ). η)|2 ≤ CT. let 0 < s < s1 < t ≤ T.14 Assume that Hypothesis 7. s. Rd ). s. η) − X(u.31) +3 s (b(u. η) − X(t. We finally study the regularity of X(t.η > 0 such that E |X(t. s. Then E |X(t. s.1 holds.32) . s. s. η) − X(t1 . X(u. X(u. Proposition 7. η)|2 )du. ζ ∈ L2 (Ω. s. We have t 99 E |X(t. η)|2 ≤ 2M 2 ((t − t1 )2 + t − t1 )(1 + C 2 (T. s. Let us study the regularity of X(t. s. We have |X(t. E |X(t. (7. η) − X(t. and η ∈ L2 (Ω. Fs . ζ))dB(u) . s. η) with respect to η. s. ζ))du t 2 +3 s (σ(u. let 0 ≤ s < t ≤ T and η. s. ζ)|2 du and the conclusion follows from the Gronwall lemma. η) − σ(u. η) with respect to s. η) − b(u. ζ)|2 ≤ 3e3M Proof.15 Assume that Hypothesis 7. E(|η|2 ))) and the conclusion follows. (7. ζ)|2 ≤ 3|η − ζ|2 t 2 2 (T −s+1)(t−s) E(|η − ζ|2 ). η)|2 ≤ 2M 2 (t − t1 ) t1 (1 + E |X(u.

η) = X(t. s. First we need a lemma. η) − X(s. η). x)|2m ≤ C1 (T. x)|2m < +∞.35) . s. (7. s. |x|2 ))(t − t1 )m . . s. X(·.100 Proof.24). Then there exists a constant C1 (T. x) belongs to C −1/(2m) (7. Lemma 7. η) − η|2 ) 2 = CT E (|X(s1 . s1 . s. Let 0 ≤ s ≤ t1 < t ≤ T.18 Assume that Hypothesis 7. Then we have E |X(·. m ∈ N and ∈ (0. we can write Chapter 7 X(t. which can be proved as Proposition 7.16 Assume that Hypothesis 7. s. s. Let x ∈ Rd . x) belongs to a suitable Sobolev space.10).1 holds. Taking into account the co-cycle law (7. whose definition is recalled in Appendix E below. s. s1 . s. η) − X(t.3 Almost sure continuity and h¨lderianity o of trajectories In this section we show that X(·. First.1 it follows that Proposition 7.13 using (6. s. Then the Sobolev embedding theorem (also stated in Appendix E) will imply that X(·. By (7. s.1 holds. x) is H¨lder o continuous almost surely. (7. 0 ≤ s ≤ t ≤ T . s.3 and the Sobolev embedding theorem E.17 Assume that Hypothesis 7. we consider almost sure regularity of X(t.14 we have Lemma 7. η)|2 ) .30). X(s1 . 7. y ∈ Rd . ·). T ]) almost surely. η) − X(t.34) ([s. Finally.33) Now from Proposition E. let 0 ≤ s < t ≤ T and x.31) there exists CT > 0 such that 2 E (|X(t.1 holds. 1/2). s. s. x ∈ Rd and m ∈ N. s1 . η)) − X(t. s. x) − X(t. x) − X(t1 .2m Moreover. The conclusion follows now from (7. Then there is a constant C(T ) > 0 such that E |X(t. s1 . y)|2m ≤ C(T )|x − y|2m . |x|) such that E |X(t. η)|2 ) ≤ CT E (|X(s1 . arguing as in the proof of Proposition 7.

. 1]d ) almost surely.20 Assume that Hypotheses 7. L2 (Ω. Dx b. x)) · η h (t.3 it follows that 101 Proposition 7. x → X(·. dB(t))      h η (s. 1]d . T ] the mapping Rd → CB .Stochastic evolution equations Now from Proposition E.37) We set CB = CB ([s. ·)|2m < +∞. s. ·) belongs to C −d/(2m) (7. x) = h. x) · h = η h (t. t∈[0. s. T ]) =: CB ([s. X(t. s. (1) Recall the notations given at the beginning of Chapter 6. ·)]2 ) < ∞. x) with respect to x In this section we assume.2m Moreover. T ]. s. is continuously Gateaux differentiable and its Gateaux derivative is given by Xx (t. s.3 2 2 (i) Dx b. let 0 ≤ s < t ≤ T and x. x) is the solution to the stochastic differential equation with random coefficients.4 Differentiability of X(t. (7. x) = bx (t.36) ([0. s.T ] (7. Rd )). h ∈ Rd . s. Then for any s ∈ [0. x).4. X(t.3 hold. (ii) We have (1) sup ([b(t. that Hypothesis 7. s. s. 7.38) where η h (t. x).1 and 7. . s. Then for any m > 1 and ∈ (0. s. y ∈ [0. besides Hypothesis 7. x. ·)]2 + [σ(t. s.1 holds.1. x))(η h (t.39) +σx (t. s. Dx σ and Dx σ are continuous on [0.19 Assume that Hypothesis 7. s. X(t. x).  h  dη (t. 7. x) Theorem 7.1 Existence of Xx (t. T ] × Rd . x)dt     (7. 1) we have E |X(t.

s. x). (7. x).6.k (t. X(r))dr + s σ(r. T1 ].1 so that it possesses a unique fixed point X(x) ∈ CB . (the straightforward proof is left to the reader) and that for each x ∈ Rd .2). h ∈ Rd . X2 ∈ CB . X)·Y ](t) = s bx (r. which depends continuously on x. s. Note that the coefficients of equation (7.39) fulfill Hypothesis 7. So. t t [FX (x. s. X(r))Y (r)dB(r). 7. X(r))dB(r). x ∈ Rd . X(x) coincides with the solution X(·.21 Assume that Hypotheses 7.1 and 7. Y ∈ CB we have Fx (x. X(r))Y (r)dr+ s σx (r. To prove the theorem we use Theorem D. X. is twice differentiable with respect to x in any couple of directions (h. the conclusion follows from Theorem D. s. x) with respect to x. Moreover.3 hold. x)(h. so it possesses a unique solution by Theorem 7. that is F (x. x) of (7. s.10. 1 X1 − X2 2 CB for all X1 . T1 ]. k) = ζ h.2 Existence of Xxx (t. setting t t [F (x. s. x → X(·.3. (7.4. X) = I. X(x)) = X(x).6 from Appendix D (with Λ = Rd and E = CB ). k) in Rd . x ∈ Rd . x. Then the mapping Rd → CB . setting Xxx (t. X2 ) CB ≤ (7. X)](t) : = x + s b(r. t ∈ [s. x) We now prove the existence of the second derivative of X(t.102 Chapter 7 Proof.40) where T1 > s is chosen such that F (x. Theorem 7.41) Then F fulfills Hypothesis D. It is not difficult to check that F is Gateaux continuously differentiable.42) . T1 ]) and define a mapping F : Rd × CB → CB . X1 ) − F (x. We set CB = CB ([s. t ∈ [s.

x)|4 ≤ C. x)dB(r). X(r. X(t. X(r. x))η(r. Proof. x). s. s. s. s.k ζ (s. s. x))η(r. dB(t))       h. x)|4 ≤ 27 + C1 s t |η(r. s.k  d ζ (t. s. x). x) ∈ CB ([s. By using (7. s.k (t. T ]. x)dr 4 +27 s σx (r. x) = 0. T ). s. s. s. x))η(r. x) = bx (t. x)dB(r) . x)dt        +bxx (t. x)|4 dr 4 +C1 s σx (r.Stochastic evolution equations 103 ζ h. s. s. Then η(·. η k (t. η k (t. x)| 4 ≤ 27 + 27 s t bx (r. x) is the solution to the stochastic differential equation (with random coefficients)  h. x). x). s.45) |η(t. x)) · ζ h. . x))η(r. X(t.43) We shall prove the theorem when n = r = 1 for simplicity.k (t. t 4 ∀ s ∈ [0. s. s. T ]. s. Lemma 7. (7. x))(η h (t. s. L2 (Ω)) be the solution of the equation t η(t. x ∈ Rd . x))(ζ h.37) and the H¨lder inequality we see that there exists a constant o C1 such that t |η(t. s. x) ∈ CB ([s. We first prove a lemma. dB(s))        +σxx (t. x))η(r. x) = 1 + s t bx (r. X(t. x)dB(r) . s. X(r. s. s.22 Let η(·. L4 (Ω)) and there exists C > 0 such that E|η(·. s. x)) · (η h (t. s.44) + s σx (r. We have. X(t. X(r. s. x))dt      +σx (t. s. s. X(r. s.k (t. x)dr (7. s. (7. s.

49) From this identity it is easy to show the existence of ηx (·. x))Z(r)dr − s 4 σx (r. s. s. x ∈ R. t t (T (x)Z)(t) = − s bx (r. By Theorem 7. T1 ]) as before. s. T1 ]. s. since η(·.46) Notice that. (7. s. s.44) as η(·. x)dB(r). For any x ∈ R we define a linear bounded operator T (x) from CB into CB setting for all t ∈ [s. r. We have in fact. 0 ≤ s ≤ t ≤ T. T ]. x))Z(r)η(·. Proof of Theorem 7. s. X(r. x)dr (7. x) = (1 − T (x))−1 (1). taking expectation on both sides of this inequality and using Corollary 6. ∀ x ∈ R. X(r. we find that t E|η(t. x) is differentiable with respect to x and that its derivative η(·. s. s. We choose T1 as in (7. x) ∈ CB ([s.8. x)|4 dr).41) and CB = CB ([s. x) = Xx (·.47) − s σxx (r.21. X(r. s.48) ≤ 1/2. (7. T (x)Z is differentiable with respect to x for any Z ∈ CB ([s.44). x))Z(r)dB(r). where C2 is another constant. Now we write equation (7. T ]. x) = (1 − T (x))−1 (T (x)η(·. x). The conclusion follows from the Gronwall lemma. x)). by a straightforward computation ηx (·. Thus the solution of (7. x) = 1 + T (x)η(·. x))Z(r)η(·. X(r. L4 (Ω)) and it results t (T (x)Z)(t) = − s t bxx (r. s. x) := ζ(·. s. x)|4 ≤ C2 (1 + s E|η(r. s. s.50) . (7. r.48) is given by η(·. x) By (7. x) belongs to CB and fulfills equation (7. L (Ω)).41) it follows that T (x) L(CB ) (7.20 we know that X(t. s. s. s.104 Chapter 7 Now.

s. x) = X(t.3 with σ = 0.52). x)dB(r). x)b(s. s. s. s. s. x) the solution of (7. s. X(r. s.53) Differentiating (7. s. and the conclusion follows. x)). x)) · Xt (r. Now by (7. X(r.51) t + s σxx (r. X(r. s. x) = −Xx (t. s. Setting r = s we find Xs (t. t ≥ r ≥ s. x) is C 1 in all variables). r. Denote by X(t. x)(t) = s bxx (r.Stochastic evolution equations where t 105 T (x)η(·. s. s.5. s. . x) with reo spect to s. under Hypotheses 7. x))η 2 (·. s. x) (it is well known that X(t. It is useful to recall first some results in the deterministic case. x)dr (7. s. x))η 2 (·. r. x))η 2 (·. T ]. x). x)dr t + s σxx (r. X(r. x)(t) = s bxx (r. s. s. Write X(t.50) it follows that t ηx (t. X(r. (7. X(r.1 The deterministic case t ∈ [s. s.5 Itˆ Differentiability of X(t. r. s.  X(s) = x. X(t)). x))η 2 (·. (7. s. Let us compute Xs (t.52) Let us consider the problem   X (t) = b(t. x) − T (x)ηx (·. X(r.53) with respect to r yields 0 = Xs (t. s. 7. x).1 and 7. x)) + Xx (t. s. x)dB(r). 7.

s ∈ [0. x) is not adapted. s. Fs+ .. (7. s. Lemma 7. We end the proof by recurrence.T ] is called the future filtration of B. A difficulty arises since the process s → X(t. s.11). 0 ≤ s ≤ s1 < . N ∈ N. 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)). then X1 (t. < sn ≤ T and A ∈ B(Rn ). x) is not Fs -measurable. 0 ≤ s ≤ t ≤ T. x) = x + s Xx (t. Proof. Since s t n σ(u. where n ∈ N. and let ϕ ∈ L2 (Ω. x) = x + s b(u. r. however. x)dB(u) = lim |η|→0 σ(tk−1 . X(t. We have in fact t t X1 (t. x) be defined by (7. x) is Fs+ -measurable. Then X1 (t. 7. Now we introduce the backward Itˆ integral for a process wich is adapted o to the future filtration. . s. x) is Fs+ -measurable. x)dB(u). Then B(t2 )−B(t1 ) and ϕ are independent.106 which is equivalent to t Chapter 7 X(t. s. T ].2 The stochastic case Here we want to study the differentiability of X(t. . s..54) In the next subsection we are going to generalize this formula for the solution X(t.. s.23 Assume that Hypotheses 7.2). x)b(r.5. s. s. that for any s ∈ [0. x)du + s σ(u. The family (Fs+ )s∈[0. B(sn (ω)) − B(s(ω))) ∈ A} . Let x ∈ Rd . It happens. Proposition 7. T ]. Then X(t..1 holds. x)(B(tk ) − B(tk−1 )). k=1 where η = {s = t0 < t1 < · · · < tn = t}. x) is Fs+ –measurable. x)dr. For this we need the following result which can be proved as Lemma 4. because X(t. x) with respect to s in a sense to be precised.3.. Let XN (t. x) of (7.24 Let t1 < t2 ≤ s. P). s. s.

x)(σ(r. T ]. Theorem 7. L2 (Ω. L(Rr . Then we have X(t.26 Let t > s.58) + s Xx (t. x). L2 (Ω.25 For any F ∈ CB + ([0. r. L2 (Ω.27 Assume that Hypotheses 7. T ]. L(Rr . Moreover we have T E 0 F (s)dB(s) = 0. 2 7. T ]. x)dr t 1 + 2 t TR [Xxx (t. x))]dr s (7. . T ]. 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. The elements of CB + ([0. o Exercise 7. (7. Rd ))) there exists the limit T |σ|→0 lim Iσ (F ) =: 0 F (s)dB(s). Rd ))). r. Prove that t B(r)dB(r) = s 1 (B(t)2 − B(s)2 + (t − s)). x)(σ(r. T ].57) F (s)dB(s) is called the backward Itˆ integral of the function F in [0.10). (7. r.55) in L2 (Ω).56) and T E 0 T 0 F (s)dB(s) = 0 E F (s) 2 HS ds. T ]. 2 T (7. L(Rr . L2 (Ω. x). Rd ))) by a straightforward generalization of the space CB ([0. L(Rr . Let F ∈ CB + ([0. dB(r)) .3 Backward Itˆ’s formula o t Theorem 7. s. Rd )) are called stochastic processes adapted to the future filtration (Ft+ ) and continuous in quadratic mean. x) · b(r.5. L(Rr . L2 (Ω.1 and 7.3 hold. Rd ))) defined in Chapter 5. σ(r. x) − x = s Xx (t.Stochastic evolution equations 107 We define CB + ([0.

x)(σ(r.108 where d Chapter 7 TR [Xxx (t. x) − X(t. P-a.. X(r. x) − x = sk−1 sk b(r.s. . sk−1 . t) we have n X(t. x). r. sk . sk−1 . x))] (7. Proof. sk . r.. x)(B(sk ) − B(sk−1 )) + o(sk − sk−1 ). X(r. sk . x)(x − X(sk . sk−1 . x)) − 1 2 Xxx (t. X(sk . sk−1 . x))2 + o(|η|). x))dr (7. x))dB(r) = b(sk . σ(r. x)(x − X(sk . x)(σ(r. x) − x = − k=1 n [X(t.. s. x)] =− k=1 n [X(t. x)(sk − sk−1 ) + σ(sk . σ(r. sk−1 . k=1 Arguing as in the proof of Itˆ’s formula one can show. sk−1 . On the other hand we have sk X(sk . t) we set |η| = max (tk − tk−1 ).59) =− k=1 n Xx (t.60) + sk−1 σ(r. We take d = r = 1 for simplicity.. For any η ∈ Σ(s. x) − X(t. after some tedious but o straighforward computations. sk−1 . that |η|→0 lim o(|η|) = 0.. x)ek . x))] = k=1 Xxx (t. x)ek ) and (ek ) is any orthonormal basis in Rd . sk . sk .n If η ∈ Σ(s. k=1.

x)(B(sk ) − B(sk−1 )) (7. we have t ϕ(X(t. x)(sk − sk−1 ) + k=1 Xx (t. Therefore we have t |η|→0 lim I2 (η) = s Xx (r. x)σ 2 (sk .59) we find that n X(t. b(r. r. x)(B(sk ) − B(sk−1 ))2 k=1 +I1 (η) + I2 (η) + I3 (η) + o1 (|η|).28 Let ϕ ∈ Cb (Rd ). Obviously t |η|→0 lim I1 (η) = s Xx (r. x)) − ϕ(x) = s Dx [ϕ(X(t. x)dB(r). The other terms I3 (η) and o1 (|η|) can be handled as in the proof of Itˆ’s o formula. x)σ(sk . one can replace in (7. x)σ(r. x) with b(ξk . x)b(sk . x) where ξk is any point in [sk−1 .23.Stochastic evolution equations 109 (Notice that. x) dr 1 + 2 t t 2 Tr [Dx [ϕ(X(t. x)dB(r). . x) − x = k=1 n Xx (t. sk . sk ]. sk . we note that it is an integral sum corresponding to the backward Itˆ integral since Xx (t. sk . Concerning I2 (η).) Substituting (7.61) n 1 + 2 Xxx (t. o 2 Theorem 7. s. x)]dr s (7. Then for any 0 ≤ s < t ≤ T. x) is Fs+ measurable by Proposition o k 7. x)dr. sk . σ(r. x)σ ∗ (r.60) in (7. x))]. x))]. r.62) + s Dx [ϕ(X(t. x)b(r. x))]σ(r. r. since b is deterministic. s. In a similar way one can prove the following backward Itˆ formula.60) b(sk .

110 Chapter 7 .

x) = 0. T ]. u.4) .t ϕ(x) = ϕ(X(t. T ]. and it holds X(t. s. under Hypothesis 8. x) + Xx (t. t ∈ [0. s. As well known. where s ∈ [0. (8. x)). x ∈ Rn . y)| ≤ M |x − y|. X(t)).2) with respect to u and setting u = s we find Xs (t. s. T ) and b : [0. (8.1 (i) b is continuous on [0. T ]. s. T ] × Rn → Rn fulfills the following hypothesis. x)). t ∈ [0. (8. s. differentiating (8.Chapter 8 Kolmogorov equations 8. T ] × Rn . T ]. s. x) ∈ C 1 ([s. x ∈ Rn . (8. (iii) b is differentiable with respect to x and bx is continuous on [0. s. 0 ≤ s ≤ u ≤ t ≤ T. 111 x ∈ Rn . Rn ). X(u. defined on the space Cb (Rn ) by Ps. s.2) Morever. y ∈ Rn . 0 ≤ s ≤ t ≤ T. Hypothesis 8. x) · b(s.3) Of great interest for the applications is the transition evolution operator Ps.1) has a unique solution X(·) = X(·. T ]. T ] × Rn .  X(s) = x ∈ Rn .t .1 The deterministic case t ∈ [s. t ∈ [0. (ii) There exists M > 0 such that |b(t.1) We consider here the problem   X (t) = b(t. x) = X(t.1 problem (8. x. x) − b(t.

T ]. x ∈ Rn .8) where 1 ϕ ∈ Cb (Rn ). Ps.t ϕ(x) = ϕ(X(t.t ϕ(x) = ϕ(X(t. s ∈ [0. X(t. X(t. x) = ϕ(x).t L(t)ϕ. zx (s. T ] (8. x)) = − ϕx (X(t.t is a linear bounded operator on Cb (Rn ). (8. We have. x) ds ds = −L(s)Ps.2) it follows immediately the cocycle property Ps. Let us prove (8.t ϕ = −L(s)Ps. x).3). x). From (8.7). x) · b(s. t. (s. ϕx (X(t.t ϕ(x). u ∈ [0. is continuous.112 Kolmogorov equations As easily checked.t = Ps. (8.5) 1 Proposition 8. T ] × [0.u Pu. d d Ps.6) t ≥ s.t .7) (8. x) = 0. s. ds L(t)ϕ(x) = b(t. Let us now consider the following partial differential equation called transport equation   zs (s. s. x)). We have t≥s (8. taking into acccount (8. ϕx (x) . t. x) + b(s.t ϕ = Ps.t ϕ(x). x)). 1 where ϕ ∈ Cb (Rn ) and T > 0 is fixed. s.t L(t)ϕ(x) = b(t. x)) . ϕx (X(t. x)).6) follows. Xx (t. so that (8. Proof. x) → Ps. d d Ps. s. s. x)) = b(t. x)) dt dt and Ps. dt and d Ps. s. T ] × Rn → Rn .1 For any ϕ ∈ Cb (Rn ) we have d Ps.9)  z(T. s. .t ϕ. s. s. Moreover for any ϕ ∈ Cb (Rn ) the mapping [0.

t ≥ 0. x)) = z(u. By Proposition 8. u. x)). u.11) whose solution we denote by X(·. s ≥ 0.5) it follows the semigroup law Pt+s = Pt Ps .1. given by (8. x)).11). t ≥ 0. u. X(s. ϕ ∈ Cb (Rn ).t−s . x) = ϕ(X(T.6). Therefore z(s.Chapter 8 113 Theorem 8.1 we deduce 1 Proposition 8. x)) ds = zt (s. u. In this case it is easy to check that for any t > s ≥ 0.15) 1 ϕ ∈ Cb (Rn ).2 Assume that b : [0. If z is a solution of problem (8. t≥0 (8. Setting s = T and s = u we find that z(T. Xt (s. x)). Then problem (8.13) Pt is called the transition semigroup associated with (8. x). (8. X(s. Uniqueness. u.T ϕ(x) = ϕ(X(T. u.  X(0) = x ∈ R . t. x ∈ Rn . x) = b(x) and consider the problem   X (t) = b(X(t)). u.9) we have d z(s. Define Pt ϕ(x) = ϕ(X(t. x)) as required. . X(s.t = P0. x ∈ Rn .10). s.3 For any ϕ ∈ Cb (Rn ) we have Dt Pt ϕ = Pt Lϕ = LPt ϕ. u. X(T.10) Proof Existence. It is enough to notice that z. x)) + zx (s. X(s. where Lϕ(x) = b(x). X(s.14) (8. T ]. s. 8. x)) = 0. X(s. u. X(s. ϕx (x) . x)) is constant in s. x ∈ Rn . x) = zt (s. is a solution of (8. T ] × Rn → Rn fulfills Hypothesis 8.1 The autonomous case We assume here that b(t. b(s. (8.9) has a unique solution z. s ∈ [0.9) by (8. x) = Ps. we have Ps.12) so that by (8. (8. X(u. x)) which implies z(u. x)) + zx (s. z is given by z(s.1 and 1 let ϕ ∈ Cb (Rn ). n (8. x)). u.

x)−b(t.t is a linear bounded operator on Cb (Rn ).2 Stochastic case We consider the stochastic evolution equation   dX(t) = b(t.17) 8. by Theorem 8. x. 0 < s ≤ t ≤ T. x)). is called the transition evolution operator associated with (8. y ∈ Rn . t ≥ 0. (8. x)−σ(t. x ∈ Rn . ux (t.t ϕ(x) = E[ϕ(X(t.18) corresponding to η = x ∈ Rn . t ≥ 0. (iii) b and σ have first and second partial derivatives with respect to x continuous and bounded in [0.t . We denote as before by X(·.2 we have Kolmogorov equations 1 1 Theorem 8. (ii) There exists M > 0 such that |b(t. . x) .4 Assume that b ∈ Cb (Rn ) and let ϕ ∈ Cb (R). T ] × Rn → Rn and σ : [0. X(t))dB(t)  X(s) = x ∈ Rd (8.2 (i) b : [0. s. X(t))dt + σ(t. x) → Ps. x) = ϕ(x). Ps. has a unique solution given by u(t.18).t ϕ(x). Rn ) are continuous. t ∈ [0. x ∈ Rn . Ps.114 Finally. T ] × Rn . Hypothesis 8. For all t. x ∈ Rn .19) As easily checked. x) = Pt ϕ(x) = ϕ(X(t. x))]. By Chapter 6 we know that the mapping (s. (8. 0 ≤ s ≤ t ≤ T. is continuous for all ϕ ∈ Cb (Rn ).18) and assume that the following hypothesis holds. x) = b(x). x ∈ Rn (8. t.16)  u(0. s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ Cb (Rn ) we set Ps. Then problem   ut (t. x) the solution of (8. s. y)|+ σ(t. y) HS ≤ M |x−y|. T ] × Rn → L(Rr . T ].

t ϕ is differentiable in s and we have d Ps.t ϕ is differentiable in t and we have d Ps.22). x)) = (L(t)ϕ)(X(t. x)) + ϕx (X(t.2 holds and let ϕ ∈ Cb (Rn ). that is Ps. The second basic identity is the following.5 Assume that Hypothesis 8. s.t ϕ = −L(s)Ps. x)] + b(s. ds t ≥ 0.22) Proof. x))] = ϕ(x) + s E[(L(r)ϕ)(X(r. Integrating with respect to t and taking expectation.t ϕ(x) − ϕ(x) = s L(r)Ps. (8. 2 Let us introduce the Kolmogorov operator (L(s)ϕ)(x) = 2 ϕ ∈ Cb (Rn ).2 holds and let ϕ ∈ Cb (Rn ). dt Proof. s.t ϕ = Ps. σ(t. Then Ps.20) The first basic identity is the following. s.3 Basic properties of transition operators 1 Tr [ϕxx (x)σ(s. x))]dr. 2 Proposition 8. s. ϕx (x) .t L(t)ϕ. Taking expectation in the backward Itˆ formula (7. which coincides with (8. Then Ps. (8. X(t. (8. x))dB(t) . x)). .t ϕ(x) = ϕ(x) + s t Pr.21).21) dt ϕ(X(t. which yields (8. x).t ϕ. yields t E[ϕ(X(t. s.r ϕ(x)dr. 2 Proposition 8. By the Itˆ formula we have that o t ≥ 0.6 Assume that Hypothesis 8. x)σ ∗ (s. s.t (L(r)ϕ)(x)dr.Chapter 8 115 8.62) we find o t Ps.

t = Ps. (8.  z(T. σ(s. X(u.23) We consider here the parabolic equation   zs (s. u. n We say that a function z : [0. X(s. x) t s ∈ [0. We have o ds z(s. x))]. x ∈ Rn . Then there exists a unique solution z of problem (8. u. zxx . u. x)) − z(u. z is given by z(s.23). x))dB(s) = zx (s. x))dB(s). σ(s. Now. X(T. ·)))(x) + zx (s. By (8. x) = ϕ(x). since z fulfills (8. x))].23) if z is continuous and bounded together with its partial derivatives zt .t for 0 ≤ s ≤ t ≤ t ≤ T.4 Parabolic equations 0 ≤ s < T.2 holds and let ϕ ∈ Cb (Rn ). X(s. x) + (L(s)(z(s. (8. x))ds + (L(s)z(s.23). and let 0 ≤ u ≤ s ≤ T. x) = Ps. x)) = ϕ(X(t. u.T ϕ(x).8 Prove the cocycle law Ps. Uniqueness. Let z be a solution to (8. 2 0 < s ≤ T. zx . X(s. Exercise 8. X(s. x) = E[ϕ(X(t. x ∈ R . u. u.116 Kolmogorov equations 8.23). X(s. x)). u. (8. T ]. u. ·)))(x) = 0. T ] × Rn → R is a solution to (8.7 Assume that Hypothesis 8. fulfills (8. X(s. Let us compute the Itˆ differential of z(s. u. = u zx (s.25) . x) = E[ϕ(X(T.23). Existence. Integrating in s between u and T yields z(T.22) it follows that z(s. u. X(s. ϕ ∈ Cb (Rn ). u. x))σ(s. x)) = zs (s. x)). x))dB(s) . u.23).24) Proof. and fulfills (8. taking expectation we find z(u. u. u. s. 2 Theorem 8. x)). x)) − z(u. X(s. X(s.r Pr. X(s.

t. t ≥ 0. Set Y (t) = X(t + a. s+a. t ≥ 0 is a semgroup of linear operators in Cb (Rd ). x ∈ R (8. s. s+a. s + a. x) = σ(x). 2 Proposition 8. x) = ϕ(x). x ∈ Rn . x) be the solution of the stochastic evolution equation   dX(t) = b(X(t))dt + σ(X(t))dB(t) (8. Setting v(s. t].4. Proof. x). we have Pt+s = Pt Ps . s. ϕx (x) . ϕ ∈ Cb (Rn ).  v(0.Chapter 8 117 8. t − s. x). x))dr + s+a σ(X(r. s ∈ [0. 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)]. s ∈ [0. s+a. s + a. x) = b(x). problem (8.27) Then by Theorem 8. x ∈ Rn . P0 = 1. s ≥ 0.26) but with the Brownian motion B(t) replaced by B1 (t).7 we find the result . x) = Lv(s. x))dB(r). σ(t. x). x ∈ Rn . The we have t+a t+a X(t+a. x) and X(t + a.t . Thus Pt . Lϕ(x) = Then for any and a > 0 the laws of X(t. t ≥ 0.9 Let X(t.1 Autonomous case b(t.25)it follows that. 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). setting Pt = P0. Setting B1 (t) = B(t + a) − B(a) we see that Y (t) fulfills equation (8. t]. x) = u(t.26)  X(s) = x ∈ Rn .23) becomes   vs (s. x) = x+ s+a b(X(r. By the proposition and the cocycle law (8. Now the conclusion follows. x) coincide.

(8. (8. . t ≥ 0.Qt (dy). G .118 Kolmogorov equations Theorem 8.Qt . P) taking values in Rn . The solution of (8. x)] + Ax + ux (t. Then.29) where A. s ∈ [0.30) is given by the variation of constants formula t X(t.29) is given by u(t. x)  u(0. x) = Pt−s. x) = ϕ(x).31) Therefore the law of X(t.t ϕ(x) = Pt ϕ(x). (8.33) where A∗ is the adjoint of A. x ≥ 0 for all x ∈ Rn . the solution of (8. σ : R → R are Lipschitz continuous and of 2 class C 2 .  X(0) = x. Q ∈ L(Rn ). for any ϕ ∈ Cb (R).10 Assume that b. x) = 2 Tr [Quxx (t. ∗ t ≥ 0. (8.27) has a unique solution given by v(s. t]. (8. The corresponding stochastic differential equation is  √  dX(t) = AX(t)dt + Q dB(t). problem (8. x) is given by X(t.32) esA QesA ds. x) = e x + 0 tA e(t−s)A QdB(s).28) 8. x) = Pt ϕ(x). (8. the transition semigroup Pt looks like Pt ϕ(x) = Rn ϕ(y)NetA x.34) So. x)# P = NetA x. where Qt = 0 t (8.5 Examples Example 8. Q is symmetric and Qx. x ∈ R.11 Consider the parabolic equation in Rn  1  ut (t.30) where B is a standard Brownian motion in a probability space (Ω. Consequently.

x) = ϕ(x). x) + axux (t. (8. in particular.37) is given by X(t. det Qt > 0 we have u(t.37) where B is a real Brownian motion in is a real Brownian motion in some probability space (Ω.12 Consider the parabolic equation in R   ut (t. x) = e(a−q/2)t+ Therefore 1 Pt ϕ(x) = √ 2πt +∞ −∞ √ q B(t) x. (8. x) = (2π)−n/2 [det Qt ]−1/2 Rn 119 e− 2 1 Q−1 (y−etA x). x) 2  u(0. P).36) where q > 0 and a ∈ R.(y−etA x) t ϕ(y)dy. x) = 1 qx2 uxx (t. The solution of (8. (8. F . (8. The corresponding stochastic differential equation is  √  dX(t) = aX(t)dt + q X(t)dB(t).38) e− 2t ϕ(e(a−q/2)t+ y2 √ qy x)dy.  X(0) = x. (8.Chapter 8 If.39) .35) Example 8.

120 Kolmogorov equations .

where σ(R) is the σ algebra generated by R. which will imply the theorem.      (iii) (Ai ) ⊂ D mutually disjoint =⇒ (A. Obviously any algebra is a π-system. B ∈ D =⇒ A ∩ B ∈ D then it is σ–algebra. A non empty family R of parts of Ω is called a π-system if A. as remarked before. Theorem A. i=1 Let us prove the following Dynkin theorem. Moreover. a λ-system if   (i) Ω.1) ∞ i=1 Ai ∈ D.1 Let R be a π-system and let D be a λ-system including R. Proof. 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. B ∈ D0 =⇒ A ∩ B ∈ D0 . For this it is enough to show. D ⊂ σ(R) we have σ(R) = D. Let D0 be the minimal λ-system including R. We are going to show that D0 is a σ–algebra.2) .Appendix A λ-systems and π-systems Let Ω be a non empty set. B ∈ R =⇒ A ∩ B ∈ R. ∅ ∈ D. Then we have σ(R) ⊂ D.     (ii) A ∈ D =⇒ Ac ∈ D. 121 (A. if D is a λ-system such that A. that the following inclusion holds A.

by Corollary A. Define D = {B ∈ F : P1 (B) = P2 (B)}. which yields R ⊂ H (B) and (A. Consequently.122 For any B ∈ D0 we set λ-systems and π-systems H (B) = {F ∈ D0 : B ∩ F ∈ D0 }. Using the Dynkin theorem we can show that P1 = P2 .2) is proved. It is clear in fact that A is a π-system. On the other hand it is clear that if R ∈ R we have R ⊂ H (R) since R is a π-system. If we show that H (B) ⊃ R. since F ∪ B c = (F \ B c ) ∪ B c = (F ∩ B) ∪ B c and F ∩ B and B c are disjoint. It is easy to see that D is a λ-system which contains D.2 Let A be an algebra of subsets of Ω and let F be the σalgebra generated by A . F ) such that P1 (I) = P2 (I).3) is fulfilled. In fact. Let P1 and P2 be probability measures on (Ω. B ∈ D0 ⇒ R ∩ B ∈ D0 . . the following implication holds R ∈ R. So. Example A. Therefore H (R) = D0 by the minimality of D0 . We claim that H (B) is a λ-system. ∀ I ∈ A .3) then we conclude that H (B) = D0 by the minimality of D0 and (A. It remains to show that if F ∩ B ∈ D0 then F c ∩ B ∈ D0 or.1 it follows that P1 = P2 . we have that F ∪ B c ∈ D0 as required. ∀B ∈ D0 (A. equivalently. that F ∪ B c ∈ D0 . In fact properties (i) and (iii) are clear.

P) such that µ(G) = G XdP = G Y dP. (B.2) Exercise B. Therefore. (B. G ∈ G. G . it is denoted by E(X|G ). (1) 123 . F . P). Let us consider the signed measure µ(G) = G XdP. by the Radon-Nikodym Theorem there exists a unique Y ∈ L1 (Ω. In view of (B. ∀ G ∈ G. Show that E(X|G ) coincides with the orthogonal projection of X into the closed subspace L2 (Ω. It is clear that X is not G -measurable in general.Appendix B Conditional expectation B. F . G . P) of L2 (Ω.1) The G -measurable random variable Y is called the conditional expectation of X given G . Let X : Ω → R be a real random variable on (Ω. F . F . ∀ G ∈ G.1) E(X|G ) is characterized by XdP = G G E(X|G )dP. P) (1) . In all this appendix by random variable we mean an equivalence class of random variables with respect to the usual equivalence relation.1 Definition We are given a probability space (Ω. P) and a σ-algebra G included in F . We say that X is G -measurable if I ∈ B(R) ⇒ X −1 (I) ∈ F . It is clear that µ is absolutely continuous with respect to the restriction of P to G .1 Assume that X ∈ L2 (Ω. P).

Then we have XdP = A A (B. F . P).8) and (B.3 Let H be a σ-algebra included in G . Y ∈ L1 (Ω. Then we have E(XY |G ) = XE(Y |G ). Proposition B. P) and let G be σ-algebra included in F . Assume that X is G -measurable. β ∈ R and all X.s. F . Y. Proposition B. (B.2 Basic properties Let X.7) E(X|H )dP (B. Setting G = Ω in (B. Then we have E(X|H ) = E E(X|G ) H .2) yields E[E(X|G )] = E(X)..6) 1 A XdP = P(A)E(X) = l A E(X|G )dP.10) . Proof. we have E(X|G ) = X. one can check easily the linearity of conditional expectation.9) So.4 Let X. Also if X ≥ 0. Let A ∈ H . Proof. one has E(X|G ) ≥ 0.5) (B.4) for all α.124 Conditional expectation B. (B. From this one deduces the inequality |E(X|G )| ≤ E(|X| |G ). P-a. Let A ∈ G .2 Assume that X is independent of G . comparing (B. Proposition B.8) and XdP = A A E(X|G )dP = A E E(X|G ) H dP. (B.s. Then 1 A and X are independent so that l XdP = A Ω (B. E(αX + βY |G ) = αE(X|G ) + βE(Y |G ). (B. XY ∈ L1 (Ω. F . P). Y ∈ L1 (Ω. It is obvious that if X is G -measurable. Then we have E(X|G ) = E(X).9) we see that E(X|H )dP = A A XdP = A E E(X|G ) H dP.3) Moreover. P-a.

Proof. Y )) = R3 zφ(x.Appendix B 125 Proof. 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. (B. ∀ G ∈ G. F . This is clearly equivalent to E(Zφ(X. Y )].13) h(X)dP. Assume that X is G -measurable and that Y is independent of G . y)µ(dx. Corollary B. Recalling Proposition B. We have to show that φ(X. Z) with values in R3 µ = (X. Then we have E(φ(X. E(Zφ(X. So. Assume that X is G -measurable and Y is independent of G . (B. Y )dP = G G (B. Y. (B. Let now G ∈ G .14) Denote by µ the law of the random variable (X.5 Let X. G .2 we find. F . Z)# P. dz).11) x ∈ R.12) where h(x) = E[φ(x. dy.15) . P). l for any G ∈ G . Y ∈ L1 (Ω. XY ∈ L1 (Ω. P) and let φ : R2 → R be bounded and Borel. It is enough to show (B. Y. ∀Z ∈ L1 (Ω.10) for X = 1lA where A ∈ G . Then we have E(XY |G ) = XE(Y ).6 Let X. Y )|G ) = h(X). Let us prove now a useful generalization of this Corollary. Y. Proposition B. Y )) = E(Zh(X)). (B. P).

126 Conditional expectation Since X and Z are G -measurable and Y is independent of G . Y )) = R3 λ(dy) = Y# P(dy). zφ(x. where ν(dx. P) and Z = E(H|G ). (B. dz)λ(dy).8 Let g : R → R be convex and let F. the random variables (X. H. y)λ(dy) ν(dx. dz) = E(Zh(X)). g(F ) ∈ L1 (Ω.15) as E(Zφ(X. (B. F . Therefore we can write (B. y)ν(dx.16) Exercise B. dz) = ν(dx. Using the Fubini Theorem we get finally E(Zφ(X. dy. Prove that E(F H) = E(F Z). dz) = (X. G .7 Let F. dz). as required. dz)λ(dy). P). Z)# P(dx. Exercise B. Prove the Jensen inequality E(g(F )|G ) ≥ g(E(F |G )). Y )) = R2 z R φ(x. F H ∈ L1 (Ω.17) . dz) = R2 zh(x)ν(dx. Z) and Y are independent so that µ(dx.

a submartingale if E[M (t)|Fs ] ≥ M (s). a submartingale if and only if M (s)dP ≥ A A M (t)dP. A ∈ Fs . (M (t))t∈[0. ∀ 0 ≤ s < t ≤ T. and a supermartingale if and only if M (s)dP ≤ A A M (t)dP. ∀ 0 ≤ s < t ≤ T.T ] is a martingale if and only if M (s)dP = A A M (t)dP.T ] with M (t) ∈ L1 (Ω. P). t ∈ [0. T ].Appendix C Martingales C. P) be a probability space. a stochastic process. ∀ 0 ≤ s < t ≤ T.T ] is said to be a martingale (with respect to the filtration (Ft )t≥0 ) if E[M (t)|Fs ] = M (s). (Ft )t≥0 an increasing family of σalgebras included in F and (M (t))t∈[0. 127 . A ∈ Fs . ∀ 0 ≤ s < t ≤ T. Thus (M (t))t∈[0.1 Definitions Let (Ω. ∀ 0 ≤ s < t ≤ T. F . ∀ 0 ≤ s < t ≤ T. Ft . A ∈ Fs . a supermartingale if E[M (t)|Fs ] ≤ M (s).

128 Martingales Proposition C. let t > s and A ∈ Fs .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 ).2 The basic inequality for martingales S = sup |M (ti )|. (See Exercise B. A− = {ω ∈ Ω : M (s)(ω) ≤ 0}. Proposition C.1) . 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. {S≥λ} (C. Proof. Clearly A+ and A− belong to Fs . l A so that B(t)dP = A A B(s)dP. Exercise C. C.4 For all λ > 0 we have P(S ≥ λ) ≤ 1 λ |M (tn )|dP. 1≤i≤n Let M (t) be a martingale.3 Using Jensen’s inequality prove that any convex function of a martingale is a submartingale. let 0 < t1 < t2 < .8). A ∈ Fs . Let 0 ≤ s < t ≤ T. Set A+ = {ω ∈ Ω : M (s)(ω) > 0}. Example C.1 If M is a martingale then |M | is a submartingale. This shows that |M | is a submartingale.. In fact. 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..

. Therefore |M (tn )|dP ≥ λP(An−1 ). . . . P) for all t ∈ [0. C. . We have obviously |M (tn )|dP ≥ λP(An ). 1≤i≤n We are going to estimate of E[S 2 ] in terms of E[M 2 (tn )]. We have. |M (t2 )| ≥ λ}..Appendix C Proof. F . < tn ≤ T and set as before S = sup |M (ti )|. Ak k = 1... n. T ]. An−1 Proceeding in a similar way we obtain |M (tn )|dP ≥ λP(Ak ). Moreover Ai ∈ Fti . 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. An−1 |X(tn )|dP.. A2 = {|M (t1 )| < λ. An are mutually disjoint. An Now we estimate martingale. i = 1. Let 0 < t1 < t2 < . .. |M (tn )| ≥ λ}.. Let us estimate {S≥λ} |M (tn )|dP.2) Summing up on k from 1 to n the conclusion follows. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·· An = {|M (t1 )| < λ... .. .. . and we have n {S ≥ λ} = i=1 Ai . Set A1 = {|M (t1 )| ≥ λ}. sets A1 . n. 129 Clearly. (C.

130 Proposition C. by (C. Corollary C.5) . 1 t |M (tn )|dP.3) t ≥ 0.1) and the Fubini Theorem we have ∞ E(S ) ≤ 0 2 1 √ t √ {S≥ t} |M (tn )|dP dt = [0. {S≥t} (C.4) E(S 2 ) = 0 P(S 2 > t)dt = 0 P(S > √ t)dt. By (C.1) we have F (t) ≤ Consequently ∞ ∞ Martingales sup |M (ti )|2 1≤i≤n ≤ 4E(|M (tn )|2 ). Now the conclusion follows easily. Then for any T > 0 we have sup |M (t)|2 ≤ 4E[M 2 (T )].T ] E (C. Set F (t) = P(S > t).+∞)×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 . So. t∈[0. (C.5 We have E Proof.6 Let M be a square integrable continuous martingale.

. Let 0 < s1 < s2 < · · · < sm = T. . . that E as required. By Proposition C. s∈[0.T ] . by the arbitrariness of the sequence s1 . sm . 1≤i≤m Since M is continuous it follows.Appendix C 131 Proof. s2 . sup |M (s)|2 ≤ 4E |M (T )|2 . .5 it follows that E sup |M (si )|2 ≤ 4E |M (T )|2 .

132 Martingales .

y ∈ E.1) (ii). x. Theorem D. 1) such that |F (λ. then x is of class C 1 and x (λ) = Fλ (λ. x) which are only continuously Gˆteaux differentiable. a 133 . (λ. There exists a unique continuous mapping x : Λ → E. ∀ λ ∈ Λ. x(λ))x (λ). ∀ λ ∈ Λ. (D. x(λ)).2) λ → x(λ). Let Λ. y)| ≤ κ|x − y|.1 Introduction F : Λ × E → E.1 There exists κ ∈ [0. x) and assume that Hypothesis D. E be Banach spaces (norms | · |). We are given a continuous mapping The following result (contraction principle) is classical. x) − F (λ. We want to generalize the second part of this result to mappings F (λ.1 (i).Appendix D Fixed points depending on parameters D. If in addition F is of class C 1 . (D. x(λ)) + Fx (λ. such that x(λ) = F (λ. x) → F (λ.

If in addition for all c ∈ A the mapping A → B. B). and the conclusion follows just integrating this identity between 0 and 1.3) Proof. 1). c ∈ A. y ∈ L2 (0. a → DΦ(a). We shall need the following result. a Remark D.2 We say that Φ is Gˆteaux differentiable if there exists a a mapping DΦ : A → L(A. Proposition D.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. One also says that Φ is Fr´chet differentiable. However. Then one can check easily that Φ is continuously Gˆteaux differentiable and a DΦ(x)y = y cos x. Definition D.3 It is well known that if the mapping A → L(A. a Then the following identity holds 1 Φ(c) − Φ(a) = 0 DΦ((1 − ξ)a + ξc)(c − a)dξ. 1]. (1) ξ ∈ [0. a → DΦ(a) is continuous then Φ is differentiable. B).5 Let Φ : A → B be continuously Gˆteaux differentiable.134 Fixed points D. e . such that ξ→0 lim 1 (Φ(a + ξc) − Φ(a)) = DΦ(a)c. ∀ x. (1) Example D. Then we have F (ξ) = DΦ((1 − ξ)a + ξc)(c − a)dξ. Set F (ξ) = Φ((1 − ξ)a + ξc). (as one can see) Φ is not differentiable in any point.4 Let A. ξ ∀ a. B = L2 (0. (D. 1) and Φ(x) = sin x.

(D. Theorem D.6 Assume that Hypotheses D. x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ + 0 Fx (λ + ξhµ. Let λ. x(λ)))−1 Fλ (λ. x(λ)) · µ.5) (D. (λ.1 |Gz| ≤ κ|z|. x). x(λ)) · µ + Fx (λ.4) λ → x(λ). h)z = Gz := 0 Fx (λ+ξhµ.7) Set now 1 G(λ. . x(λ) + ξ(x(λ + hµ) − x(λ))) · (x(λ + hµ) − x(λ))dξ. ∀ z ∈ E. x(λ)). We assume that Hypothesis D. equivalently x (λ) · µ = Fλ (λ.4) and (D. (D. x(λ)) 1 (D. x(λ + hµ)) − F (λ. x. Then x(·) is continuously Gˆteaux differena a tiable as well and we have x (λ) · µ = (1 − Fx (λ.1 is fulfilled and that F is continuously Gˆteaux differentiable. From (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.1 is fulfilled and denote by x the mapping x : Λ → E. Then G ∈ L(E) and by Hypothesis D.6) =h 0 1 Fλ (λ + ξhµ.3) it follows that x(λ + hµ) − x(λ) = F (λ + hµ. ∀ λ ∈ Λ. x(λ)+ξ(x(λ+hµ)−x(λ)))·zdξ. such that x(λ) = F (λ. Proof. z ∈ E. µ ∈ Λ and h ∈ R.Appendix D 135 D. x(λ))(x (λ) · µ). µ. x) → F (λ.

x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ. Letting h → 0 we find x (λ) · µ = (1 − Fx (λ. x. . µ. x(λ)). Therefore x (λ) · µ − Fx (λ. x(λ)). µ. x.7) we have (1 − G(λ.136 Then from equation (D. h))(x(λ + hµ) − x(λ)) 1 Fixed points =h 0 Fλ (λ + ξhµ. x(λ))(x (λ) · µ) = Fλ (λ. x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ. h))−1 h 1 × 0 Fλ (λ + ξhµ. x(λ)))−1 Fλ (λ. which implies 1 x(λ + hµ) − x(λ)) = (1 − G(λ.

Define f := [0.2m (0.2 (The Brownian motion) Let > 0 and let p ≥ 1.1 Fractional Sobolev spaces on [0. T ) ⊂ C −1/(2m) ([0. Let us compute E( B p W .1 (Sobolev embedding) Assume that > 1/(2m). m ∈ N.2m E =E [0.p ) = E [0.T ]2 |B(t) − B(s)|p dt ds |t − s|1+p Take for simplicity p = 2m.2m Let ∈ (0.2m (0. Then the following inclusion holds with continuous embedding.T ]2 |t − s|m dt ds = cm |t − s|1+2m 137 . T ) or not. 1] 2m .T ]2 = cm [0.T ]2 |B(t) − B(s)|2m dt ds |t − s|1+2m |t − s|m−1−2m dt ds [0.Appendix E Fractional Sobolev spaces and regularity of processes E. We ask the question whether B(·) belongs to W .2m W . < Theorem E.T ]2 |f (t) − f (s)|2m dt ds |t − s|1+2m .p (0. T ] → R such that f +∞. T ]).1) Example E. (E. then B 2m W . W . 1). T ) is by definition the space of all f : [0.

Therefore 1 if 1 < < 1 we conclude by the Sobolev embedding that B(·) ∈ C − 4 (0.T ]2 |t − s|m−1−2m dt ds < ∞.138 Fractional Sobolev spaces The integral is finite if and only if < 1 . since ∈ (0.3 Assume that there is m > 1. 1/2). . be a real stochastic process on (Ω. 1/2). Assume that there is a > 0. such that (E. T ) for < 2 . (E. and cm > 0 E[|X(t) − X(s)|2m ] ≤ cm |t − s|m . and cm > 0 (E.3) ([0.4) Then X has α-H¨lder continuous trajectories with α < o . b > 0 such that E[|X(t) − X(s)|1+a ] ≤ cm |t − s|1+b ∀ t.2m Moreover. ω) belongs to C Proof.2 Processes belonging to W . s ∈ [0.4 Kolomogorov test It is a generalization Proposition E.2 (0. ∈ (0.4 (0. T ]. 2 1 For instance taking m = 1 we conclude that B(·) ∈ W . Then we have E |X|2m < +∞. We have in fact E X 2m . T ). T ]) for almost ω ∈ Ω. T ) again for < 2 . X(·.2) is fulfilled. F . t ∈ [0. One situation often encountered is when the following estimate holds for some m > 1. 1/2).2m −1/(2m) ∈ (0. F . The last statement follows from the Sobolev embedding theorem. E.2) This estimate (provided m > 1) allows us to conclude that trajectories of X are H¨lder continuous almost surely. a (E. P) be probability space and let X(t). 1 But if we take m = 2 we have B(·) ∈ W . 4 2 Arguing similarly taking larger m we conclude that B(·) ∈ C α (0. This does not imply that B(·) is continuous. o Proposition E. T ) Let (Ω. 1/2) and m − 1 − 2m > −1. as the next proposition shows. T ].2m (0. Remark E. 1+b . ≤ cm [0. s ∈ [0. T ]. T ) for any α ∈ (0. ∀ t. P).3.

m ∈ N. be a random field on (Ω. 1/2) and m − 1 − 2m > −1.2m Moreover. W .2m := [0.6 Assume that there is m > 1. T ]d ). s ∈ [0.5) Let (Ω. T ]. Then we have E |X|2m < +∞. |x − y|d+2m Let ∈ (0.6) This estimate implies that almost all trajectories of X are H¨lder continuous o almost surely.5 (Sobolev embedding) Assume that > d/(2m).2m ([0. The last statement follows from the Sobolev embedding theorem. and cm > 0 E[|X(x) − X(y)|2m ] ≤ cm |t − s|2m .T ]2d ([0. x ∈ [0. and cm > 0 such (E. Then the following inclusion holds with continuous embedding. 1). P) be probability space and let X(x). P). X(·. T ]d → R such that . ∈ (0.7) ([0. F .3 Multi dimensional Sobolev spaces and regularity of random fields |f (x) − f (y)|2m dx dy. Assume that there is m > 1. We have in fact E( X 2m . Theorem E. (E. Proposition E. .2m 2m .T ]2 |t − s|m−1−2m dt ds < ∞. T ]d ) is by definition the space of all f : [0. that (E. T ]d ) ⊂ C −d/(2m) ([0.2) is fulfilled. 1). ∀ t. F . 1). T ]) for almost ω ∈ Ω.2m ) −d/(2m) ∈ (0.Appendix F 139 E.2m < +∞. (E. since ∈ (0. ≤ cm [0. Define f W f . d ∈ N. ω) belongs to C Proof. . T ]d .

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