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

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

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

2
= e
−
1
2
ξ
1
z
1
+···+ξ
n
z
n

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

k
2
k
(1 +η
1
−η
2

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

C
B
for all X
1
, X
2
∈ C
B
, x ∈ R
d
.
(7.41)
Then F fulﬁlls Hypothesis D.1 so that it possesses a unique ﬁxed point
X(x) ∈ C
B
, that is
F(x, X(x)) = X(x), x ∈ R
d
,
which depends continuously on x. X(x) coincides with the solution X(, s, x)
of (7.2).
It is not diﬃcult to check that F is Gateaux continuously diﬀerentiable,
(the straightforward proof is left to the reader) and that for each x ∈ R
d
,
X, Y ∈ C
B
we have
F
x
(x, X) = I,
[F
X
(x, X)Y ](t) =
_
t
s
b
x
(r, X(r))Y (r)dr+
_
t
s
σ
x
(r, X(r))Y (r)dB(r), t ∈ [s, T
1
],
So, the conclusion follows from Theorem D.6.
7.4.2 Existence of X
xx
(t, s, x)
We now prove the existence of the second derivative of X(t, s, x) with respect
to x.
Theorem 7.21 Assume that Hypotheses 7.1 and 7.3 hold. Then the mapping
R
d
→ C
B
, x → X(, s, x),
is twice diﬀerentiable with respect to x in any couple of directions (h, k) in
R
d
. Moreover, setting
X
xx
(t, s, x)(h, k) = ζ
h,k
(t, s, x), x, h ∈ R
d
, (7.42)
Stochastic evolution equations 103
ζ
h,k
(t, s, x) is the solution to the stochastic diﬀerential equation (with random
coeﬃcients)
_
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
_
d ζ
h,k
(t, s, x) = b
x
(t, X(t, s, x)) ζ
h,k
(t, s, x)dt
+b
xx
(t, X(t, s, x))(η
h
(t, s, x), η
k
(t, s, x))dt
+σ
x
(t, X(t, s, x))(ζ
h,k
(t, s, x), dB(s))
+σ
xx
(t, X(t, s, x)) (η
h
(t, s, x), η
k
(t, s, x), dB(t))
ζ
h,k
(s, s, x) = 0.
(7.43)
We shall prove the theorem when n = r = 1 for simplicity. We ﬁrst prove a
lemma.
Lemma 7.22 Let η(, s, x) ∈ C
B
([s, T]; L
2
(Ω)) be the solution of the equa
tion
η(t, s, x) = 1 +
_
t
s
b
x
(r, X(r, s, x))η(r, s, x)dr
+
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r).
(7.44)
Then η(, s, x) ∈ C
B
([s, T]; L
4
(Ω)) and there exists C > 0 such that
E[η(, s, x)[
4
≤ C, ∀ s ∈ [0, T), x ∈ R
d
. (7.45)
Proof. We have,
[η(t, s, x)[
4
≤ 27 + 27
¸
¸
¸
¸
_
t
s
b
x
(r, X(r, s, x))η(r, s, x)dr
¸
¸
¸
¸
4
+27
¸
¸
¸
¸
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r)
¸
¸
¸
¸
4
.
By using (7.37) and the H¨older inequality we see that there exists a constant
C
1
such that
[η(t, s, x)[
4
≤ 27 + C
1
_
t
s
[η(r, s, x)[
4
dr
+C
1
¸
¸
¸
¸
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r)
¸
¸
¸
¸
4
.
104 Chapter 7
Now, taking expectation on both sides of this inequality and using Corollary
6.8, we ﬁnd that
E[η(t, s, x)[
4
≤ C
2
(1 +
_
t
s
E[η(r, s, x)[
4
dr), 0 ≤ s ≤ t ≤ T, x ∈ R,
where C
2
is another constant. The conclusion follows from the Gronwall
lemma.
Proof of Theorem 7.21. We choose T
1
as in (7.41) and C
B
= C
B
([s, T
1
])
as before. By Theorem 7.20 we know that X(t, s, x) is diﬀerentiable with
respect to x and that its derivative η(, s, x) = X
x
(, s, x) belongs to C
B
and
fulﬁlls equation (7.44). For any x ∈ R we deﬁne a linear bounded operator
T(x) from C
B
into C
B
setting for all t ∈ [s, T
1
],
(T(x)Z)(t) = −
_
t
s
b
x
(r, X(r, s, x))Z(r)dr −
_
t
s
σ
x
(r, X(r, s, x))Z(r)dB(r).
(7.46)
Notice that, since η(, s, x) ∈ C
B
([s, T]; L
4
(Ω)), T(x)Z is diﬀerentiable with
respect to x for any Z ∈ C
B
([s, T]; L
4
(Ω)) and it results
(T
(x)Z)(t) = −
_
t
s
b
xx
(r, X(r, s, x))Z(r)η(, r, x)dr
−
_
t
s
σ
xx
(r, X(r, s, x))Z(r)η(, r, x)dB(r).
(7.47)
Now we write equation (7.44) as
η(, s, x) = 1 + T(x)η(, s, x) (7.48)
By (7.41) it follows that
T(x)
L(C
B
)
≤ 1/2, ∀ x ∈ R.
Thus the solution of (7.48) is given by
η(, s, x) = (1 −T(x))
−1
(1). (7.49)
From this identity it is easy to show the existence of η
x
(, s, x) := ζ(, s, x).
We have in fact, by a straightforward computation
η
x
(, s, x) = (1 −T(x))
−1
(T
(x)η(, s, x)), (7.50)
Stochastic evolution equations 105
where
T
(x)η(, s, x)(t) =
_
t
s
b
xx
(r, X(r, s, x))η
2
(, s, x)dr
+
_
t
s
σ
xx
(r, X(r, s, x))η
2
(, s, x)dB(r).
(7.51)
Now by (7.50) it follows that
η
x
(t, s, x) −T(x)η
x
(, s, x)(t) =
_
t
s
b
xx
(r, X(r, s, x))η
2
(, s, x)dr
+
_
t
s
σ
xx
(r, X(r, s, x))η
2
(, s, x)dB(r),
and the conclusion follows.
7.5 Itˆ o Diﬀerentiability of X(t, s, x) with re
spect to s.
It is useful to recall ﬁrst some results in the deterministic case.
7.5.1 The deterministic case
Let us consider the problem
_
_
_
X
(t) = b(t, X(t)), t ∈ [s, T],
X(s) = x,
(7.52)
under Hypotheses 7.1 and 7.3 with σ = 0. Denote by X(t, s, x) the solution
of (7.52). Let us compute X
s
(t, s, x) (it is well known that X(t, s, x) is C
1
in all variables).
Write
X(t, s, x) = X(t, r, X(r, s, x)), t ≥ r ≥ s. (7.53)
Diﬀerentiating (7.53) with respect to r yields
0 = X
s
(t, r, X(r, s, x)) + X
x
(t, r, X(r, s, x)) X
t
(r, s, x).
Setting r = s we ﬁnd
X
s
(t, s, x) = −X
x
(t, s, x)b(s, x),
106 Chapter 7
which is equivalent to
X(t, s, x) = x +
_
t
s
X
x
(t, r, x)b(r, x)dr, 0 ≤ s ≤ t ≤ T. (7.54)
In the next subsection we are going to generalize this formula for the solution
X(t, s, x) of (7.2).
7.5.2 The stochastic case
Here we want to study the diﬀerentiability of X(t, s, x) with respect to s in
a sense to be precised. A diﬃculty arises since the process s → X(t, s, x) is
not adapted, because X(t, s, x) is not F
s
measurable. It happens, however,
that for any s ∈ [0, T], X(t, s, x) is measurable with respect to the σ–algebra
F
+
s
generated by all sets of the form
¦ω ∈ Ω : (B(s
1
(ω)) −B(s(ω)), ..., B(s
n
(ω)) −B(s(ω))) ∈ A¦ ,
where n ∈ N, 0 ≤ s ≤ s
1
< ... < s
n
≤ T and A ∈ B(R
n
). The family
(F
+
s
)
s∈[0,T]
is called the future ﬁltration of B.
Proposition 7.23 Assume that Hypotheses 7.1 holds. Let x ∈ R
d
, s ∈ [0, T].
Then X(t, s, x) is F
+
s
measurable.
Proof. Let X
N
(t, s, x) be deﬁned by (7.11), N ∈ N. Then X
1
(t, s, x) is
F
+
s
–measurable. We have in fact
X
1
(t, s, x) = x +
_
t
s
b(u, x)du +
_
t
s
σ(u, x)dB(u).
Since
_
t
s
σ(u, x)dB(u) = lim
η→0
n
k=1
σ(t
k−1
, x)(B(t
k
) −B(t
k−1
)),
where η = ¦s = t
0
< t
1
< < t
n
= t¦, then X
1
(t, s, x) is F
+
s
measurable.
We end the proof by recurrence.
Now we introduce the backward Itˆo integral for a process wich is adapted
to the future ﬁltration. For this we need the following result which can be
proved as Lemma 4.3.
Lemma 7.24 Let t
1
< t
2
≤ s, and let ϕ ∈ L
2
(Ω, F
+
s
, P). Then B(t
2
)−B(t
1
)
and ϕ are independent.
Stochastic evolution equations 107
We deﬁne C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))) by a straightforward generaliza
tion of the space C
B
([0, T]; L
2
(Ω; L(R
r
; R
d
))) deﬁned in Chapter 5.
The elements of C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
)) are called stochastic pro
cesses adapted to the future ﬁltration (F
+
t
) and continuous in quadratic
mean.
Let F ∈ C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))). For any η ∈ Σ with η = ¦0 =
s
0
< s
1
< < s
n
= T¦ we set
I
σ
(F) =
n
k=1
F(t
k
)(B(t
k
) −B(t
k−1
))
The proof of next theorem is completely similar to that of equation (5.10).
Theorem 7.25 For any F ∈ C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))) there exists the
limit
lim
σ→0
I
σ
(F) =:
_
T
0
F(s)dB(s), (7.55)
in L
2
(Ω). Moreover we have
E
_
T
0
F(s)dB(s) = 0, (7.56)
and
E
¸
¸
¸
¸
_
T
0
F(s)dB(s)
¸
¸
¸
¸
2
=
_
T
0
E
_
F(s)
2
HS
¸
ds. (7.57)
_
T
0
F(s)dB(s) is called the backward Itˆo integral of the function F in [0, T].
Exercise 7.26 Let t > s. Prove that
_
t
s
B(r)dB(r) =
1
2
(B(t)
2
−B(s)
2
+ (t −s)).
7.5.3 Backward Itˆo’s formula
Theorem 7.27 Assume that Hypotheses 7.1 and 7.3 hold. Then we have
X(t, s, x) −x =
_
t
s
X
x
(t, r, x) b(r, x)dr
+
1
2
_
t
s
TR [X
xx
(t, r, x)(σ(r, x), σ(r, x))]dr
+
_
t
s
X
x
(t, r, x)(σ(r, x), dB(r))),
(7.58)
108 Chapter 7
where
TR [X
xx
(t, r, x)(σ(r, x), σ(r, x))] =
d
k=1
X
xx
(t, r, x)(σ(r, x)e
k
, σ(r, x)e
k
)
and (e
k
) is any orthonormal basis in R
d
.
Proof. We take d = r = 1 for simplicity. For any η ∈ Σ(s, t) we set
[η[ = max
k=1,...,n
(t
k
−t
k−1
).
If η ∈ Σ(s, t) we have
X(t, s, x) −x = −
n
k=1
[X(t, s
k
, x) −X(t, s
k−1
, x)]
= −
n
k=1
[X(t, s
k
, x) −X(t, s
k
, X(s
k
, s
k−1
, x))]
= −
n
k=1
X
x
(t, s
k
, x)(x −X(s
k
, s
k−1
, x))
−
1
2
n
k=1
X
xx
(t, s
k
, x)(x −X(s
k
, s
k−1
, x))
2
+ o([η[).
(7.59)
Arguing as in the proof of Itˆ o’s formula one can show, after some tedious but
straighforward computations, that
lim
η→0
o([η[) = 0, Pa.s..
On the other hand we have
X(s
k
, s
k−1
, x) −x =
_
s
k
s
k−1
b(r, X(r, s
k−1
, x))dr
+
_
s
k
s
k−1
σ(r, X(r, s
k−1
, x))dB(r)
= b(s
k
, x)(s
k
−s
k−1
) + σ(s
k
, x)(B(s
k
) −B(s
k−1
)) + o(s
k
−s
k−1
).
(7.60)
Stochastic evolution equations 109
(Notice that, since b is deterministic, one can replace in (7.60) b(s
k
, x) with
b(ξ
k
, x) where ξ
k
is any point in [s
k−1
, s
k
].) Substituting (7.60) in (7.59) we
ﬁnd that
X(t, s, x) −x =
n
k=1
X
x
(t, s
k
, x)b(s
k
, x)(s
k
−s
k−1
)
+
n
k=1
X
x
(t, s
k
, x)σ(s
k
, x)(B(s
k
) −B(s
k−1
))
+
1
2
n
k=1
X
xx
(t, s
k
, x)σ
2
(s
k
, x)(B(s
k
) −B(s
k−1
))
2
+I
1
(η) + I
2
(η) + I
3
(η) + o
1
([η[).
(7.61)
Obviously
lim
η→0
I
1
(η) =
_
t
s
X
x
(r, x)b(r, x)dr.
Concerning I
2
(η), we note that it is an integral sum corresponding to the
backward Itˆ o integral since X
x
(t, s
k
, x) is F
+
s
k
measurable by Proposition
7.23. Therefore we have
lim
η→0
I
2
(η) =
_
t
s
X
x
(r, x)σ(r, x)dB(r).
The other terms I
3
(η) and o
1
([η[) can be handled as in the proof of Itˆo’s
formula.
In a similar way one can prove the following backward Itˆo formula.
Theorem 7.28 Let ϕ ∈ C
2
b
(R
d
). Then for any 0 ≤ s < t ≤ T, we have
ϕ(X(t, s, x)) −ϕ(x) =
_
t
s
¸D
x
[ϕ(X(t, r, x))], b(r, x))dr
+
1
2
_
t
s
Tr [D
2
x
[ϕ(X(t, r, x))]σ(r, x)σ
∗
(r, x)]dr
+
_
t
s
¸D
x
[ϕ(X(t, r, x))], σ(r, x)dB(r).
(7.62)
110 Chapter 7
Chapter 8
Kolmogorov equations
8.1 The deterministic case
We consider here the problem
_
_
_
X
(t) = b(t, X(t)), t ∈ [s, T],
X(s) = x ∈ R
n
,
(8.1)
where s ∈ [0, T) and b : [0, T] R
n
→R
n
fulﬁlls the following hypothesis.
Hypothesis 8.1
(i) b is continuous on [0, T] R
n
.
(ii) There exists M > 0 such that
[b(t, x) −b(t, y)[ ≤ M[x −y[, x, y ∈ R
n
, t ∈ [0, T].
(iii) b is diﬀerentiable with respect to x and b
x
is continuous on [0, T] R
n
.
As well known, under Hypothesis 8.1 problem (8.1) has a unique solution
X() = X(, s, x) ∈ C
1
([s, T]; R
n
), and it holds
X(t, s, x) = X(t, u, X(u, s, x)), 0 ≤ s ≤ u ≤ t ≤ T, x ∈ R
n
. (8.2)
Morever, diﬀerentiating (8.2) with respect to u and setting u = s we ﬁnd
X
s
(t, s, x) + X
x
(t, s, x) b(s, x) = 0, 0 ≤ s ≤ t ≤ T, x ∈ R
n
. (8.3)
Of great interest for the applications is the transition evolution operator
P
s,t
, s, t ∈ [0, T], deﬁned on the space C
b
(R
n
) by
P
s,t
ϕ(x) = ϕ(X(t, s, x)), x ∈ R
n
, s, t ∈ [0, T]. (8.4)
111
112 Kolmogorov equations
As easily checked, P
s,t
is a linear bounded operator on C
b
(R
n
). Moreover for
any ϕ ∈ C
b
(R
n
) the mapping
[0, T] [0, T] R
n
→R
n
, (s, t, x) → P
s,t
ϕ(x),
is continuous. From (8.2) it follows immediately the cocycle property
P
s,t
= P
s,u
P
u,t
, s, t, u ∈ [0, T]. (8.5)
Proposition 8.1 For any ϕ ∈ C
1
b
(R
n
) we have
d
dt
P
s,t
ϕ = P
s,t
L(t)ϕ, t ≥ s (8.6)
and
d
ds
P
s,t
ϕ = −L(s)P
s,t
ϕ, t ≥ s, (8.7)
where
L(t)ϕ(x) = ¸b(t, x), ϕ
x
(x)), ϕ ∈ C
1
b
(R
n
), x ∈ R
n
. (8.8)
Proof. We have
d
dt
P
s,t
ϕ(x) =
d
dt
ϕ(X(t, s, x)) = ¸b(t, X(t, s, x)), ϕ
x
(X(t, s, x)))
and
P
s,t
L(t)ϕ(x) = ¸b(t, X(t, s, x)), ϕ
x
(X(t, s, x))),
so that (8.6) follows.
Let us prove (8.7). We have, taking into acccount (8.3),
d
ds
P
s,t
ϕ(x) =
d
ds
ϕ(X(t, s, x)) = −¸ϕ
x
(X(t, s, x)), X
x
(t, s, x) b(s, x))
= −L(s)P
s,t
ϕ(x).
Let us now consider the following partial diﬀerential equation called trans
port equation
_
_
_
z
s
(s, x) +¸b(s, x), z
x
(s, x)) = 0, s ∈ [0, T]
z(T, x) = ϕ(x),
(8.9)
where ϕ ∈ C
1
b
(R
n
) and T > 0 is ﬁxed.
Chapter 8 113
Theorem 8.2 Assume that b : [0, T] R
n
→ R
n
fulﬁlls Hypothesis 8.1 and
let ϕ ∈ C
1
b
(R
n
). Then problem (8.9) has a unique solution z. z is given by
z(s, x) = P
s,T
ϕ(x) = ϕ(X(T, s, x)), s ∈ [0, T], x ∈ R
n
. (8.10)
Proof Existence. It is enough to notice that z, given by (8.10), is a
solution of (8.9) by (8.6).
Uniqueness. If z is a solution of problem (8.9) we have
d
ds
z(s, X(s, u, x))
= z
t
(s, X(s, u, x)) +¸z
x
(s, X(s, u, x)), X
t
(s, u, x))
= z
t
(s, X(s, u, x)) +¸z
x
(s, X(s, u, x)), b(s, X(s, u, x))) = 0.
Therefore z(s, X(s, u, x)) is constant in s. Setting s = T and s = u we ﬁnd
that z(T, X(T, u, x)) = z(u, X(u, u, x)) which implies z(u, x) = ϕ(X(T, s, x))
as required.
8.1.1 The autonomous case
We assume here that b(t, x) = b(x) and consider the problem
_
_
_
X
(t) = b(X(t)), t ≥ 0,
X(0) = x ∈ R
n
,
(8.11)
whose solution we denote by X(, x). In this case it is easy to check that for
any t > s ≥ 0, we have P
s,t
= P
0,t−s
.
Deﬁne
P
t
ϕ(x) = ϕ(X(t, x)), ϕ ∈ C
b
(R
n
), t ≥ 0, x ∈ R
n
, (8.12)
so that by (8.5) it follows the semigroup law
P
t+s
= P
t
P
s
, t, s ≥ 0. (8.13)
P
t
is called the transition semigroup associated with (8.11). By Proposition
8.1 we deduce
Proposition 8.3 For any ϕ ∈ C
1
b
(R
n
) we have
D
t
P
t
ϕ = P
t
Lϕ = LP
t
ϕ, t ≥ 0 (8.14)
where
Lϕ(x) = ¸b(x), ϕ
x
(x)), ϕ ∈ C
1
b
(R
n
), x ∈ R
n
. (8.15)
114 Kolmogorov equations
Finally, by Theorem 8.2 we have
Theorem 8.4 Assume that b ∈ C
1
b
(R
n
) and let ϕ ∈ C
1
b
(R). Then problem
_
_
_
u
t
(t, x) = ¸b(x), u
x
(t, x)), t ≥ 0, x ∈ R
n
u(0, x) = ϕ(x), x ∈ R
n
.
(8.16)
has a unique solution given by
u(t, x) = P
t
ϕ(x) = ϕ(X(t, x)), t ≥ 0, x ∈ R
n
. (8.17)
8.2 Stochastic case
We consider the stochastic evolution equation
_
_
_
dX(t) = b(t, X(t))dt + σ(t, X(t))dB(t)
X(s) = x ∈ R
d
(8.18)
and assume that the following hypothesis holds.
Hypothesis 8.2 (i) b : [0, T] R
n
→R
n
and σ : [0, T] R
n
→ L(R
r
, R
n
)
are continuous.
(ii) There exists M > 0 such that
[b(t, x)−b(t, y)[+σ(t, x)−σ(t, y)
HS
≤ M[x−y[, x, y ∈ R
n
, t ∈ [0, T].
(iii) b and σ have ﬁrst and second partial derivatives with respect to x con
tinuous and bounded in [0, T] R
n
.
We denote as before by X(, s, x) the solution of (8.18) corresponding to
η = x ∈ R
n
. For all t, s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ C
b
(R
n
)
we set
P
s,t
ϕ(x) = E[ϕ(X(t, s, x))], x ∈ R
n
, 0 ≤ s ≤ t ≤ T. (8.19)
As easily checked, P
s,t
is a linear bounded operator on C
b
(R
n
).
P
s,t
, 0 < s ≤ t ≤ T, is called the transition evolution operator associated with
(8.18). By Chapter 6 we know that the mapping
(s, t, x) → P
s,t
ϕ(x),
is continuous for all ϕ ∈ C
b
(R
n
).
Chapter 8 115
8.3 Basic properties of transition operators
Let us introduce the Kolmogorov operator
(L(s)ϕ)(x) =
1
2
Tr [ϕ
xx
(x)σ(s, x)σ
∗
(s, x)] +¸b(s, x), ϕ
x
(x)), ϕ ∈ C
2
b
(R
n
).
(8.20)
The ﬁrst basic identity is the following.
Proposition 8.5 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
).
Then P
s,t
ϕ is diﬀerentiable in t and we have
d
dt
P
s,t
ϕ = P
s,t
L(t)ϕ, t ≥ 0. (8.21)
Proof. By the Itˆ o formula we have that
d
t
ϕ(X(t, s, x)) = (L(t)ϕ)(X(t, s, x)) +¸ϕ
x
(X(t, s, x)), σ(t, X(t, s, x))dB(t)).
Integrating with respect to t and taking expectation, yields
E[ϕ(X(t, s, x))] = ϕ(x) +
_
t
s
E[(L(r)ϕ)(X(r, s, x))]dr,
that is
P
s,t
ϕ(x) = ϕ(x) +
_
t
s
P
r,t
(L(r)ϕ)(x)dr,
which coincides with (8.21).
The second basic identity is the following,
Proposition 8.6 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
).
Then P
s,t
ϕ is diﬀerentiable in s and we have
d
ds
P
s,t
ϕ = −L(s)P
s,t
ϕ, t ≥ 0. (8.22)
Proof. Taking expectation in the backward Itˆ o formula (7.62) we ﬁnd
P
s,t
ϕ(x) −ϕ(x) =
_
t
s
L(r)P
s,r
ϕ(x)dr,
which yields (8.22).
116 Kolmogorov equations
8.4 Parabolic equations
We consider here the parabolic equation
_
_
_
z
s
(s, x) + (L(s)(z(s, )))(x) = 0, 0 ≤ s < T,
z(T, x) = ϕ(x), x ∈ R
n
,
(8.23)
We say that a function z : [0, T] R
n
→ R is a solution to (8.23) if z is
continuous and bounded together with its partial derivatives z
t
, z
x
, z
xx
, and
fulﬁlls (8.23).
Theorem 8.7 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
). Then
there exists a unique solution z of problem (8.23). z is given by
z(s, x) = E[ϕ(X(T, s, x))], 0 < s ≤ T, ϕ ∈ C
2
b
(R
n
). (8.24)
Proof. Existence. By (8.22) it follows that
z(s, x) = P
s,T
ϕ(x), s ∈ [0, T], x ∈ R
n
,
fulﬁlls (8.23).
Uniqueness. Let z be a solution to (8.23), and let 0 ≤ u ≤ s ≤ T. Let us
compute the Itˆ o diﬀerential of z(s, X(s, u, x)). We have
d
s
z(s, X(s, u, x)) = z
s
(s, X(s, u, x))ds + (L(s)z(s, X(s, u, )))(x)
+¸z
x
(s, X(s, u, x)), σ(s, X(s, u, x))dB(s))
= ¸z
x
(s, X(s, u, x)), σ(s, X(s, u, x))dB(s)).
since z fulﬁlls (8.23). Integrating in s between u and T yields
z(T, X(T, u, x)) −z(u, X(u, u, x)) = ϕ(X(t, u, x)) −z(u, x)
=
_
t
u
z
x
(s, X(s, u, x))σ(s, X(s, u, x))dB(s).
Now, taking expectation we ﬁnd
z(u, x) = E[ϕ(X(t, u, x))].
Exercise 8.8 Prove the cocycle law
P
s,r
P
r,t
= P
s,t
(8.25)
for 0 ≤ s ≤ t ≤ t ≤ T.
Chapter 8 117
8.4.1 Autonomous case
Assume that b and σ are independent of t :
b(t, x) = b(x), σ(t, x) = σ(x), x ∈ R
n
.
Then we have L(s) = L where
Lϕ(x) =
1
2
Tr [ϕ
xx
(x)σ(x)σ
∗
(x)] +¸b(x), ϕ
x
(x)), ϕ ∈ C
2
b
(R
n
).
Proposition 8.9 Let X(t, s, x) be the solution of the stochastic evolution
equation
_
_
_
dX(t) = b(X(t))dt + σ(X(t))dB(t)
X(s) = x ∈ R
n
.
(8.26)
Then for any and a > 0 the laws of X(t, s, x) and X(t +a, s +a, x) coincide.
Proof. Set Y (t) = X(t + a, s + a, x). The we have
X(t+a, s+a, x) = x+
_
t+a
s+a
b(X(r, s+a, x))dr+
_
t+a
s+a
σ(X(r, s+a, x))dB(r).
Setting r −a = ρ yields
Y (t) = x +
_
t
s
b(Y (ρ))dρ +
_
t
s
σ(Y (ρ))d[B(ρ + a) −B(a)].
Setting B
1
(t) = B(t + a) − B(a) we see that Y (t) fulﬁlls equation (8.26)
but with the Brownian motion B(t) replaced by B
1
(t). Now the conclusion
follows.
By the proposition and the cocycle law (8.25)it follows that, setting
P
t
= P
0,t
, t ≥ 0,
we have
P
t+s
= P
t
P
s
, t, s ≥ 0, P
0
= 1.
Thus P
t
, t ≥ 0 is a semgroup of linear operators in C
b
(R
d
).
Setting
v(s, x) = u(t, t −s, x), t ≥ 0, s ∈ [0, t], x ∈ R
n
,
problem (8.23) becomes
_
_
_
v
s
(s, x) = Lv(s, x), s ∈ [0, t], x ∈ R
n
,
v(0, x) = ϕ(x), x ∈ R
(8.27)
Then by Theorem 8.7 we ﬁnd the result
118 Kolmogorov equations
Theorem 8.10 Assume that b, σ : R → R are Lipschitz continuous and of
class C
2
. Then, for any ϕ ∈ C
2
b
(R), problem (8.27) has a unique solution
given by
v(s, x) = P
t−s,t
ϕ(x) = P
t
ϕ(x), t ≥ 0, s ∈ [0, t], x ∈ R. (8.28)
8.5 Examples
Example 8.11 Consider the parabolic equation in R
n
_
_
_
u
t
(t, x) =
1
2
Tr [Qu
xx
(t, x)] +¸Ax + u
x
(t, x))
u(0, x) = ϕ(x),
(8.29)
where A, Q ∈ L(R
n
), Q is symmetric and ¸Qx, x) ≥ 0 for all x ∈ R
n
.
The corresponding stochastic diﬀerential equation is
_
_
_
dX(t) = AX(t)dt +
√
Q dB(t),
X(0) = x,
(8.30)
where B is a standard Brownian motion in a probability space (Ω, G, P)
taking values in R
n
. The solution of (8.30) is given by the variation of
constants formula
X(t, x) = e
tA
x +
_
t
0
e
(t−s)A
_
QdB(s). (8.31)
Therefore the law of X(t, x) is given by
X(t, x)
#
P = N
e
tA
x,Q
t
, (8.32)
where
Q
t
=
_
t
0
e
sA
Qe
sA
∗
ds, t ≥ 0, (8.33)
where A
∗
is the adjoint of A.
Consequently, the transition semigroup P
t
looks like
P
t
ϕ(x) =
_
R
n
ϕ(y)N
e
tA
x,Q
t
(dy). (8.34)
So, the solution of (8.29) is given by
u(t, x) = P
t
ϕ(x).
Chapter 8 119
If, in particular, det Q
t
> 0 we have
u(t, x) = (2π)
−n/2
[det Q
t
]
−1/2
_
R
n
e
−
1
2
Q
−1
t
(y−e
tA
x),(y−e
tA
x)
ϕ(y)dy. (8.35)
Example 8.12 Consider the parabolic equation in R
_
_
_
u
t
(t, x) =
1
2
qx
2
u
xx
(t, x) + axu
x
(t, x)
u(0, x) = ϕ(x),
(8.36)
where q > 0 and a ∈ R.
The corresponding stochastic diﬀerential equation is
_
_
_
dX(t) = aX(t)dt +
√
q X(t)dB(t),
X(0) = x,
(8.37)
where B is a real Brownian motion in is a real Brownian motion in some
probability space (Ω, F, P).
The solution of (8.37) is given by
X(t, x) = e
(a−q/2)t+
√
q B(t)
x. (8.38)
Therefore
P
t
ϕ(x) =
1
√
2πt
_
+∞
−∞
e
−
y
2
2t
ϕ(e
(a−q/2)t+
√
q y
x)dy. (8.39)
120 Kolmogorov equations
Appendix A
λsystems and πsystems
Let Ω be a non empty set. A non empty family R of parts of Ω is called a
πsystem if
A, B ∈ R =⇒ A ∩ B ∈ R,
a λsystem if
_
¸
¸
¸
¸
_
¸
¸
¸
¸
_
(i) Ω, ∅ ∈ D.
(ii) A ∈ D =⇒ A
c
∈ D.
(iii) (A
i
) ⊂ D mutually disjoint =⇒
∞
i=1
A
i
∈ D.
(A.1)
Obviously any algebra is a πsystem. Moreover, if D is a λsystem such that
A, B ∈ D =⇒ A ∩ B ∈ D then it is σ–algebra. In fact if (A
i
) is a sequence
in D of not necessarily disjoint sets we have
∞
_
i=1
A
i
= A
1
∪ (A
2
¸ A
1
) ∪ (A
3
¸ A
2
¸ A
1
) ∪ ∈ D
and so
∞
i=1
A
i
∈ D by (ii) and (iii).
Let us prove the following Dynkin theorem.
Theorem A.1 Let R be a πsystem and let D be a λsystem including R.
Then we have σ(R) ⊂ D, where σ(R) is the σ algebra generated by R. If in
particular, D ⊂ σ(R) we have σ(R) = D.
Proof. Let D
0
be the minimal λsystem including R. We are going to show
that D
0
is a σ–algebra, which will imply the theorem. For this it is enough
to show, as remarked before, that the following inclusion holds
A, B ∈ D
0
=⇒ A ∩ B ∈ D
0
. (A.2)
121
122 λsystems and πsystems
For any B ∈ D
0
we set
H (B) = ¦F ∈ D
0
: B ∩ F ∈ D
0
¦.
We claim that H (B) is a λsystem. In fact properties (i) and (iii) are clear.
It remains to show that if F ∩ B ∈ D
0
then F
c
∩ B ∈ D
0
or, equivalently,
that F ∪B
c
∈ D
0
. In fact, since F ∪B
c
= (F ¸ B
c
) ∪B
c
= (F ∩B) ∪B
c
and
F ∩ B and B
c
are disjoint, we have that F ∪ B
c
∈ D
0
as required.
If we show that
H (B) ⊃ R, ∀B ∈ D
0
(A.3)
then we conclude that H (B) = D
0
by the minimality of D
0
and (A.2) is
proved.
On the other hand it is clear that if R ∈ R we have R ⊂ H (R) since R is
a πsystem. Therefore H (R) = D
0
by the minimality of D
0
. Consequently,
the following implication holds
R ∈ R, B ∈ D
0
⇒ R ∩ B ∈ D
0
,
which yields R ⊂ H (B) and (A.3) is fulﬁlled.
Example A.2 Let A be an algebra of subsets of Ω and let F be the σ
algebra generated by A. Let P
1
and P
2
be probability measures on (Ω, F)
such that
P
1
(I) = P
2
(I), ∀ I ∈ A.
Using the Dynkin theorem we can show that P
1
= P
2
. It is clear in fact that
A is a πsystem. Deﬁne
D = ¦B ∈ F : P
1
(B) = P
2
(B)¦.
It is easy to see that D is a λsystem which contains D. So, by Corollary
A.1 it follows that P
1
= P
2
.
Appendix B
Conditional expectation
B.1 Deﬁnition
We are given a probability space (Ω, F, P) and a σalgebra G included in F.
Let X : Ω →R be a real random variable on (Ω, F, P)
(1)
.
We say that X is Gmeasurable if
I ∈ B(R) ⇒ X
−1
(I) ∈ F.
It is clear that X is not Gmeasurable in general.
Let us consider the signed measure
µ(G) =
_
G
XdP, G ∈ G.
It is clear that µ is absolutely continuous with respect to the restriction of
P to G. Therefore, by the RadonNikodym Theorem there exists a unique
Y ∈ L
1
(Ω, G, P) such that
µ(G) =
_
G
XdP =
_
G
Y dP, ∀ G ∈ G. (B.1)
The Gmeasurable random variable Y is called the conditional expectation of
X given G; it is denoted by E(X[G).
In view of (B.1) E(X[G) is characterized by
_
G
XdP =
_
G
E(X[G)dP, ∀ G ∈ G. (B.2)
Exercise B.1 Assume that X ∈ L
2
(Ω, F, P). Show that E(X[G) coincides
with the orthogonal projection of X into the closed subspace L
2
(Ω, G, P) of
L
2
(Ω, F, P).
(1)
In all this appendix by random variable we mean an equivalence class of random
variables with respect to the usual equivalence relation.
123
124 Conditional expectation
B.2 Basic properties
Let X, Y ∈ L
1
(Ω, F, P) and let G be σalgebra included in F. It is obvious
that if X is Gmeasurable, we have E(X[G) = X. Setting G = Ω in (B.2)
yields
E[E(X[G)] = E(X). (B.3)
Moreover, one can check easily the linearity of conditional expectation,
E(αX + βY [G) = αE(X[G) + βE(Y [G), (B.4)
for all α, β ∈ R and all X, Y ∈ L
1
(Ω, F, P). Also if X ≥ 0, Pa.s., one has
E(X[G) ≥ 0, Pa.s. From this one deduces the inequality
[E(X[G)[ ≤ E([X[ [G). (B.5)
Proposition B.2 Assume that X is independent of G. Then we have
E(X[G) = E(X). (B.6)
Proof. Let A ∈ G. Then 1l
A
and X are independent so that
_
A
XdP =
_
Ω
1l
A
XdP = P(A)E(X) =
_
A
E(X[G)dP.
Proposition B.3 Let H be a σalgebra included in G. Then we have
E(X[H ) = E
_
E(X[G)
¸
¸
H
¸
. (B.7)
Proof. Let A ∈ H . Then we have
_
A
XdP =
_
A
E(X[H )dP (B.8)
and
_
A
XdP =
_
A
E(X[G)dP =
_
A
E
_
E(X[G)
¸
¸
H
¸
dP. (B.9)
So, comparing (B.8) and (B.9) we see that
_
A
E(X[H )dP =
_
A
XdP =
_
A
E
_
E(X[G)
¸
¸
H
¸
dP.
Proposition B.4 Let X, Y, XY ∈ L
1
(Ω, F, P). Assume that X is Gmeasurable.
Then we have
E(XY [G) = XE(Y [G). (B.10)
Appendix B 125
Proof. It is enough to show (B.10) for X = 1l
A
where A ∈ G. Let now
G ∈ G, then since G∩ A ∈ G we have
_
G
E(1l
A
Y [G)dP =
_
G
1l
A
Y dP =
_
G∩A
Y dP
=
_
G∩A
E(Y [G)dP =
_
G
1l
A
E(Y [G)dP,
for any G ∈ G.
Recalling Proposition B.2 we ﬁnd.
Corollary B.5 Let X, Y, XY ∈ L
1
(Ω, F, P). Assume that X is Gmeasurable
and that Y is independent of G. Then we have
E(XY [G) = XE(Y ). (B.11)
Let us prove now a useful generalization of this Corollary.
Proposition B.6 Let X, Y ∈ L
1
(Ω, F, P) and let φ : R
2
→ R be bounded
and Borel. Assume that X is Gmeasurable and Y is independent of G. Then
we have
E(φ(X, Y )[G) = h(X), (B.12)
where
h(x) = E[φ(x, Y )], x ∈ R. (B.13)
Proof. We have to show that
_
G
φ(X, Y )dP =
_
G
h(X)dP, ∀ G ∈ G.
This is clearly equivalent to
E(Zφ(X, Y )) = E(Zh(X)), ∀Z ∈ L
1
(Ω, G, P). (B.14)
Denote by µ the law of the random variable (X, Y, Z) with values in R
3
µ = (X, Y, Z)
#
P.
So,
E(Zφ(X, Y )) =
_
R
3
zφ(x, y)µ(dx, dy, dz). (B.15)
126 Conditional expectation
Since X and Z are Gmeasurable and Y is independent of G, the random
variables (X, Z) and Y are independent so that
µ(dx, dy, dz) = ν(dx, dz)λ(dy),
where
ν(dx, dz) = (X, Z)
#
P(dx, dz), λ(dy) = Y
#
P(dy).
Therefore we can write (B.15) as
E(Zφ(X, Y )) =
_
R
3
zφ(x, y)ν(dx, dz)λ(dy).
Using the Fubini Theorem we get ﬁnally
E(Zφ(X, Y )) =
_
R
2
z
__
R
φ(x, y)λ(dy)
_
ν(dx, dz)
=
_
R
2
zh(x)ν(dx, dz) = E(Zh(X)),
as required.
Exercise B.7 Let F, H, FH ∈ L
1
(Ω, G, P) and Z = E(H[G). Prove that
E(FH) = E(FZ). (B.16)
Exercise B.8 Let g : R → R be convex and let F, g(F) ∈ L
1
(Ω, F, P).
Prove the Jensen inequality
E(g(F)[G) ≥ g(E(F[G)). (B.17)
Appendix C
Martingales
C.1 Deﬁnitions
Let (Ω, F, P) be a probability space, (F
t
)
t≥0
an increasing family of σ
algebras included in F and (M(t))
t∈[0,T]
with M(t) ∈ L
1
(Ω, F
t
, P), t ∈ [0, T],
a stochastic process.
(M(t))
t∈[0,T]
is said to be a martingale (with respect to the ﬁltration
(F
t
)
t≥0
) if
E[M(t)[F
s
] = M(s), ∀ 0 ≤ s < t ≤ T,
a submartingale if
E[M(t)[F
s
] ≥ M(s), ∀ 0 ≤ s < t ≤ T,
a supermartingale if
E[M(t)[F
s
] ≤ M(s), ∀ 0 ≤ s < t ≤ T.
Thus (M(t))
t∈[0,T]
is a martingale if and only if
_
A
M(s)dP =
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
,
a submartingale if and only if
_
A
M(s)dP ≥
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
,
and a supermartingale if and only if
_
A
M(s)dP ≤
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
.
127
128 Martingales
Proposition C.1 If M is a martingale then [M[ is a submartingale.
Proof. Let 0 ≤ s < t ≤ T, A ∈ F
s
. Set
A
+
= ¦ω ∈ Ω : M(s)(ω) > 0¦, A
−
= ¦ω ∈ Ω : M(s)(ω) ≤ 0¦.
Clearly A
+
and A
−
belong to F
s
. Consequently we have
_
A
[M(s)[dP =
_
A
+
M(s)dP −
_
A
−
M(s)dP
=
_
A
+
M(t)dP −
_
A
−
M(t)dP ≤
_
A
[M(t)[dP.
This shows that [M[ is a submartingale.
Example C.2 The Brownian motion B is a martingale. In fact, let t > s
and A ∈ F
s
. Since B(t) −B(s) and 1l
A
are independent we have
_
A
(B(t) −B(s))dP = E(1l
A
(B(t) −B(s))) = 0,
so that
_
A
B(t)dP =
_
A
B(s)dP.
Exercise C.3 Using Jensen’s inequality prove that any convex function of
a martingale is a submartingale. (See Exercise B.8).
C.2 The basic inequality for martingales
Let M(t) be a martingale, let 0 < t
1
< t
2
< ... < t
n
≤ T and set
S = sup
1≤i≤n
[M(t
i
)[.
We are going to prove an important estimate (due to Kolmogorov) of S in
terms of M(t
n
).
Proposition C.4 For all λ > 0 we have
P(S ≥ λ) ≤
1
λ
_
{S≥λ}
[M(t
n
)[dP. (C.1)
Appendix C 129
Proof. Set
A
1
= ¦[M(t
1
)[ ≥ λ¦,
A
2
= ¦[M(t
1
)[ < λ, [M(t
2
)[ ≥ λ¦,
A
n
= ¦[M(t
1
)[ < λ, ..., [M(t
n
)[ ≥ λ¦.
Clearly, sets A
1
, ..., A
n
are mutually disjoint. Moreover A
i
∈ F
t
i
, i = 1, ..., n,
and we have
¦S ≥ λ¦ =
n
_
i=1
A
i
.
Let us estimate
_
{S≥λ}
[M(t
n
)[dP. We have obviously
_
A
n
[M(t
n
)[dP ≥ λP(A
n
).
Now we estimate
_
A
n−1
[X(t
n
)[dP. We have, recalling that [M(t)[ is a sub–
martingale,
λP(A
n−1
) ≤
_
A
n−1
[M(t
n−1
)[dP ≤
_
A
n−1
[M(t
n
)[dP.
Therefore
_
A
n−1
[M(t
n
)[dP ≥ λP(A
n−1
).
Proceeding in a similar way we obtain
_
A
k
[M(t
n
)[dP ≥ λP(A
k
), k = 1, . . . , n. (C.2)
Summing up on k from 1 to n the conclusion follows.
C.3 Square integrable martingales
In this section we are given a martingale M(t) such that M(t) ∈ L
2
(Ω, F, P)
for all t ∈ [0, T].
Let 0 < t
1
< t
2
< ... < t
n
≤ T and set as before
S = sup
1≤i≤n
[M(t
i
)[.
We are going to estimate of E[S
2
] in terms of E[M
2
(t
n
)].
130 Martingales
Proposition C.5 We have
E
_
sup
1≤i≤n
[M(t
i
)[
2
_
≤ 4E([M(t
n
)[
2
). (C.3)
Proof. Set
F(t) = P(S > t), t ≥ 0.
By (C.1) we have
F(t) ≤
1
t
_
{S≥t}
[M(t
n
)[dP. (C.4)
Consequently
E(S
2
) =
_
∞
0
P(S
2
> t)dt =
_
∞
0
P(S >
√
t)dt.
So, by (C.1) and the Fubini Theorem we have
E(S
2
) ≤
_
∞
0
_
1
√
t
_
{S≥
√
t}
[M(t
n
)[dP
_
dt
=
_
[0,+∞)×Ω
1
√
t
[M(t
n
)[1l
{S≥
√
t}
P(dω)dt
=
_
Ω
[M(t
n
)[P(dω)
_
∞
0
1
√
t
1l
{S≥
√
t}
dt
=
_
Ω
[M(t
n
)[P(dω)
_
S
2
0
1
√
t
dt
= 2
_
Ω
[M(t
n
)SP(dω) ≤ 2
__
Ω
[M(t
n
)[
2
dP
_
1/2
__
Ω
S
2
dP
_
1/2
.
Now the conclusion follows easily.
Corollary C.6 Let M be a square integrable continuous martingale. Then
for any T > 0 we have
E
_
sup
t∈[0,T]
[M(t)[
2
_
≤ 4E[M
2
(T)]. (C.5)
Appendix C 131
Proof. Let 0 < s
1
< s
2
< < s
m
= T. By Proposition C.5 it follows that
E
_
sup
1≤i≤m
[M(s
i
)[
2
_
≤ 4E
_
[M(T)[
2
¸
.
Since M is continuous it follows, by the arbitrariness of the sequence s
1
, s
2
, . . . , s
m
,
that
E
_
sup
s∈[0,T]
[M(s)[
2
_
≤ 4E
_
[M(T)[
2
¸
,
as required.
132 Martingales
Appendix D
Fixed points depending on
parameters
D.1 Introduction
Let Λ, E be Banach spaces (norms [ [). We are given a continuous mapping
F : Λ E → E, (λ, x) → F(λ, x)
and assume that
Hypothesis D.1 There exists κ ∈ [0, 1) such that
[F(λ, x) −F(λ, y)[ ≤ κ[x −y[, ∀ λ ∈ Λ, x, y ∈ E.
The following result (contraction principle) is classical.
Theorem D.1 (i). There exists a unique continuous mapping
x : Λ → E, λ → x(λ),
such that
x(λ) = F(λ, x(λ)), ∀ λ ∈ Λ. (D.1)
(ii). If in addition F is of class C
1
, then x is of class C
1
and
x
(λ) = F
λ
(λ, x(λ)) + F
x
(λ, x(λ))x
(λ). (D.2)
We want to generalize the second part of this result to mappings F(λ, x)
which are only continuously Gˆateaux diﬀerentiable.
133
134 Fixed points
D.2 Gˆateaux diﬀerentiable mappings
Let A and B be Banach spaces and let Φ : A → B be a continuous mapping
from A into B.
Deﬁnition D.2 We say that Φ is Gˆ ateaux diﬀerentiable if there exists a
mapping
DΦ : A → L(A, B), a → DΦ(a),
such that
lim
ξ→0
1
ξ
(Φ(a + ξc) −Φ(a)) = DΦ(a)c, ∀ a, c ∈ A.
If in addition for all c ∈ A the mapping A → B, a → DΦ(a)c is continuous
we say that Φ is continuously Gˆ ateaux diﬀerentiable.
Remark D.3 It is well known that if the mapping A → L(A, B), a →
DΦ(a) is continuous then Φ is diﬀerentiable.
(1)
Example D.4 Let A, B = L
2
(0, 1) and Φ(x) = sin x. Then one can check
easily that Φ is continuously Gˆ ateaux diﬀerentiable and
DΦ(x)y = y cos x, ∀ x, y ∈ L
2
(0, 1).
However, (as one can see) Φ is not diﬀerentiable in any point.
We shall need the following result.
Proposition D.5 Let Φ : A → B be continuously Gˆateaux diﬀerentiable.
Then the following identity holds
Φ(c) −Φ(a) =
_
1
0
DΦ((1 −ξ)a + ξc)(c −a)dξ. (D.3)
Proof. Set
F(ξ) = Φ((1 −ξ)a + ξc), ξ ∈ [0, 1].
Then we have
F
(ξ) = DΦ((1 −ξ)a + ξc)(c −a)dξ,
and the conclusion follows just integrating this identity between 0 and 1.
(1)
One also says that Φ is Fr´echet diﬀerentiable.
Appendix D 135
D.3 The main result
We can back to the notations of the introduction and consider two Banach
spaces Λ and E and a continuous mapping
F : Λ E → E, (λ, x) → F(λ, x).
We assume that Hypothesis D.1 is fulﬁlled and denote by x the mapping
x : Λ → E, λ → x(λ),
such that
x(λ) = F(λ, x(λ)), ∀ λ ∈ Λ. (D.4)
Theorem D.6 Assume that Hypotheses D.1 is fulﬁlled and that F is con
tinuously Gˆateaux diﬀerentiable. Then x() is continuously Gˆateaux diﬀeren
tiable as well and we have
x
(λ) µ = (1 −F
x
(λ, x(λ)))
−1
F
λ
(λ, x(λ)) µ, (D.5)
equivalently
x
(λ) µ = F
λ
(λ, x(λ)) µ + F
x
(λ, x(λ))(x
(λ) µ). (D.6)
Proof. Let λ, µ ∈ Λ and h ∈ R. From (D.4) and (D.3) it follows that
x(λ + hµ) −x(λ) = F(λ + hµ, x(λ + hµ)) −F(λ, x(λ))
= h
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ
+
_
1
0
F
x
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) (x(λ + hµ) −x(λ))dξ.
(D.7)
Set now
G(λ, x, µ, h)z = Gz :=
_
1
0
F
x
(λ+ξhµ, x(λ)+ξ(x(λ+hµ)−x(λ)))zdξ, z ∈ E.
Then G ∈ L(E) and by Hypothesis D.1
[Gz[ ≤ κ[z[, ∀ z ∈ E.
136 Fixed points
Then from equation (D.7) we have
(1 −G(λ, x, µ, h))(x(λ + hµ) −x(λ))
= h
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ,
which implies
1
h
x(λ + hµ) −x(λ)) = (1 −G(λ, x, µ, h))
−1
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ.
Letting h → 0 we ﬁnd
x
(λ) µ = (1 −F
x
(λ, x(λ)))
−1
F
λ
(λ, x(λ)).
Therefore
x
(λ) µ −F
x
(λ, x(λ))(x
(λ) µ) = F
λ
(λ, x(λ)).
Appendix E
Fractional Sobolev spaces and
regularity of processes
E.1 Fractional Sobolev spaces on [0, 1]
Let ∈ (0, 1), m ∈ N. Deﬁne
f
2m
,2m
:=
_
[0,T]
2
[f(t) −f(s)[
2m
[t −s[
1+2m
dt ds
W
,2m
(0, T) is by deﬁnition the space of all f : [0, T] →R such that f
,2m
<
+∞.
Theorem E.1 (Sobolev embedding) Assume that > 1/(2m). Then the
following inclusion holds with continuous embedding.
W
,2m
(0, T) ⊂ C
−1/(2m)
([0, T]). (E.1)
Example E.2 (The Brownian motion) Let > 0 and let p ≥ 1. We ask
the question whether B() belongs to W
,p
(0, T) or not.
Let us compute
E(B
p
W
,p) = E
_
[0,T]
2
[B(t) −B(s)[
p
[t −s[
1+p
dt ds
Take for simplicity p = 2m, then
E
_
B
2m
W
,2m
_
= E
_
[0,T]
2
[B(t) −B(s)[
2m
[t −s[
1+2m
dt ds
= c
m
_
[0,T]
2
[t −s[
m
[t −s[
1+2m
dt ds = c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds
137
138 Fractional Sobolev spaces
The integral is ﬁnite if and only if <
1
2
.
For instance taking m = 1 we conclude that B() ∈ W
,2
(0, T) for <
1
2
.
This does not imply that B() is continuous.
But if we take m = 2 we have B() ∈ W
,4
(0, T) again for <
1
2
. Therefore
if
1
4
< <
1
2
we conclude by the Sobolev embedding that B() ∈ C
−
1
4
(0, T).
Arguing similarly taking larger m we conclude that B() ∈ C
α
(0, T) for
any α ∈ (0, 1/2).
E.2 Processes belonging to W
,2m
(0, T)
Let (Ω, F, P) be probability space and let X(t), t ∈ [0, T], be a real stochastic
process on (Ω, F, P). One situation often encountered is when the following
estimate holds for some m > 1, ∈ (0, 1/2), and c
m
> 0
E[[X(t) −X(s)[
2m
] ≤ c
m
[t −s[
m
, ∀ t, s ∈ [0, T]. (E.2)
This estimate (provided m > 1) allows us to conclude that trajectories of X
are H¨older continuous almost surely, as the next proposition shows.
Proposition E.3 Assume that there is m > 1, ∈ (0, 1/2), and c
m
> 0
such that (E.2) is fulﬁlled. Then we have
E
_
[X[
2m
,2m
¸
< +∞. (E.3)
Moreover, X(, ω) belongs to C
−1/(2m)
([0, T]) for almost ω ∈ Ω.
Proof. We have in fact
E
_
X
2m
,2m
_
≤ c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds < ∞,
since ∈ (0, 1/2) and m− 1 − 2m > −1. The last statement follows from
the Sobolev embedding theorem.
Remark E.4 Kolomogorov test It is a generalization Proposition E.3. As
sume that there is a > 0, b > 0 such that
E[[X(t) −X(s)[
1+a
] ≤ c
m
[t −s[
1+b
∀ t, s ∈ [0, T]. (E.4)
Then X has αH¨ older continuous trajectories with α <
1+b
a
.
Appendix F 139
E.3 Multi dimensional Sobolev spaces and reg
ularity of random ﬁelds
Let ∈ (0, 1), m ∈ N, d ∈ N. Deﬁne
f
2m
,2m
:=
_
[0,T]
2d
[f(x) −f(y)[
2m
[x −y[
d+2m
dx dy.
W
,2m
([0, T]
d
) is by deﬁnition the space of all f : [0, T]
d
→ R such that
f
,2m
< +∞.
Theorem E.5 (Sobolev embedding) Assume that > d/(2m). Then the
following inclusion holds with continuous embedding.
W
,2m
([0, T]
d
) ⊂ C
−d/(2m)
([0, T]
d
). (E.5)
Let (Ω, F, P) be probability space and let X(x), x ∈ [0, T]
d
, be a random
ﬁeld on (Ω, F, P).
Assume that there is m > 1, ∈ (0, 1), and c
m
> 0
E[[X(x) −X(y)[
2m
] ≤ c
m
[t −s[
2m
, ∀ t, s ∈ [0, T]. (E.6)
This estimate implies that almost all trajectories of X are H¨ older continuous
almost surely.
Proposition E.6 Assume that there is m > 1, ∈ (0, 1), and c
m
> 0 such
that (E.2) is fulﬁlled. Then we have
E
_
[X[
2m
,2m
¸
< +∞. (E.7)
Moreover, X(, ω) belongs to C
−d/(2m)
([0, T]) for almost ω ∈ Ω.
Proof. We have in fact
E(X
2m
,2m
) ≤ c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds < ∞,
since ∈ (0, 1/2) and m− 1 − 2m > −1. The last statement follows from
the Sobolev embedding theorem.
Contents
1 Gaussian measures in Hilbert spaces 1.1 Some concepts of Probability . . . . . . . . . . . 1.1.1 Random variables . . . . . . . . . . . . . . 1.1.2 Product measures . . . . . . . . . . . . . . 1.2 Probability measures in Hilbert spaces . . . . . . 1.2.1 Mean and covariance . . . . . . . . . . . . 1.2.2 Finite dimensional projections of measures 1.3 Gaussian probability measures . . . . . . . . . . . 1.3.1 Gaussian probability measures in R . . . . 1.3.2 Gaussian probability measures in Rn . . . 1.3.3 Gaussian probability measures in H . . . . 1.3.4 Computation of some Gaussian integrals . 1.3.5 The Cameron–Martin space . . . . . . . . 3 3 3 5 5 5 7 9 9 10 11 11 13 17 17 18 18 21 21 22 23 23 25 27 27 28 29 29 31
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2 Gaussian random variables 2.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Independence . . . . . . . . . . . . . . . . . . . . . . 2.2.1 Independent real variables . . . . . . . . . . . 2.2.2 Independent Gaussian random variables . . . 2.3 Gaussian random variables deﬁned in a Hilbert space 2.3.1 Aﬃne changes of variables . . . . . . . . . . . 2.4 The white noise function . . . . . . . . . . . . . . . . 2.4.1 Equivalence classes of random variables . . . . 2.4.2 Deﬁnition of the white noise function . . . . . 3 Brownian Motion 3.1 Stochastic Processes . . . . . . . . . . . . . . 3.2 Brownian motion . . . . . . . . . . . . . . . . 3.2.1 Construction of a Brownian motion . . 3.2.2 Some properties of a Brownian motion 3.3 Wiener integral . . . . . . . . . . . . . . . . . i
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ii 3.4 3.5 Continuity of Brownian motion . . . . . . . . . . . . . The standard Brownian motion . . . . . . . . . . . . . 3.5.1 Some properties of C0 . . . . . . . . . . . . . . 3.5.2 The Wiener measure and the standard Brownian Quadratic variation of the Brownian motion . . . . . . Multidimensional Brownian motions . . . . . . . . . . . . . . . . . . . . . . . motion . . . . . . . . 35 36 37 37 39 41 43 43 44 46 49 50 51 52 53 56 57 58 59 61 61 61 63 66 67 70 70 71 72
3.6 3.7
4 Markov property of the Brownian motion 4.1 Filtration . . . . . . . . . . . . . . . . . . . . . . 4.1.1 Ft measurable random variables . . . . . . 4.2 Stopping times . . . . . . . . . . . . . . . . . . . 4.3 The Brownian motion W (t + τ ) − W (τ ) . . . . . 4.4 Transition semigroup . . . . . . . . . . . . . . . . 4.5 Markov property . . . . . . . . . . . . . . . . . . 4.5.1 Strong Markov property . . . . . . . . . . 4.6 Some consequences of the strong Markov property 4.7 Application to partial diﬀerential equations . . . . 4.7.1 The Dirichlet problem in the halfline . . . 4.7.2 The Neumann problem . . . . . . . . . . . 4.7.3 The Ventzell problem . . . . . . . . . . . . 5 The Itˆ integral o 5.1 Deﬁnition of Itˆ’s integral . . . . . . . . . . . . . o 5.1.1 Itˆ’s integral for elementary processes . . . o 5.1.2 General deﬁnition of Itˆ’s integral . . . . . o 5.2 Itˆ integral for mean square continuous processes o 5.3 The Itˆ integral as a stochastic process . . . . . . o 5.4 Itˆ integral with stopping times . . . . . . . . . . o 5.4.1 Stopping times . . . . . . . . . . . . . . . 5.4.2 Itˆ’s integral with stopping times . . . . . o 5.5 Multidimensional Itˆ integrals . . . . . . . . . . . o
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. . . . . . . . .
6 The Itˆ formula o 75 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 6.1.1 The Itˆ formula for unbounded functions . . . . . . . . 82 o 6.2 Itˆ’ formula for a vector valued process . . . . . . . . . . . . . 84 o 7 Stochastic evolution equations 89 7.1 Existence and uniqueness . . . . . . . . . . . . . . . . . . . . . 90 7.1.1 Solution of the stochastic diﬀerential equation in the space CB ([s, T ]; L2m (Ω; Rd )). . . . . . . . . . . . . . . 94
. . . s. . 102 Itˆ Diﬀerentiability of X(t. . . . . 133 . . . . . .2 Basic properties . . . . . . . . . . 8. . .1 Fractional Sobolev spaces on [0. . . . . . . . . . 101 7.1 Continuous dependence on mean square . . . . . . 133 . . . . . . . . . . . T ) .2 The stochastic case . . 138 . 97 Almost sure continuity and h¨lderianity of trajectories . .1 The deterministic case . . . . 100 o Diﬀerentiability of X(t. . . . D. . . .2 7. .1 The autonomous case . . . . . x) with respect to x . . . . . . . . . . . . . . . . . s.1. . . . . . . s. . . . . . 105 o 7. . . . . a D. .4 7. . . .4. . . . 8. . 123 B. . . .2 Existence of Xxx (t. .5.2m (0. 111 . . . . . . . . . .5. . . . . .2 Examples . . . . . . . . . . . . . . . . .4. . . . . . . . . 128 C. . . . . . . . 116 . . 114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . x) .5 8 Kolmogorov equations 8.2 Stochastic case . . . . . . . . . .3 Square integrable martingales . . . . 137 E. . . . .1 7. . . x) . . . . .3 Diﬀerential stochastic equations with random coeﬃcients 96 Continuous dependence on data . . . .2. . . . . . . . . 113 . . . . . . . . 124 C Martingales 127 C. . . . . . . . .1. . 101 7. . . . . .3 Basic properties of transition operators 8. . .1 The deterministic case . . . . . . .4.2 The basic inequality for martingales . . . . . .5. . . . . . . . 8. . . . . . . . . .1 Deﬁnition . . . .3 The main result . . . . . . . . . . . . . . . . . x) with respect to s. . . . 115 . . . . . . . . . . 106 7. . . .2 Processes belonging to W . . . . . . . . . . . . . . .1 Autonomous case . . . . . . . . . . . . . . 118 121 7. . . . . . . 135 E Fractional Sobolev spaces and regularity of processes 137 E. . . . . . . . . . . . 127 C. . . . . . . B Conditional expectation 123 B. . . . 1] . . . . . . . . . . . . . . . . .1 Existence of Xx (t. . . . . s. . . . . . .1 Deﬁnitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 . . . .1 Introduction . . 129 D Fixed points depending on parameters D. . . . . . . . . . . . . . . . . . . .1. . . 8. . .5 Examples . . . . . . . 8. .4 Parabolic equations . . 105 7. . . . . . . . . . . . . . . . . . . . 134 . . .3 7. . . . . . A λsystems and πsystems . 97 7. 107 o 111 . . . 94 7. . . . . . . . . . .2 Gˆteaux diﬀerentiable mappings . . . . . . . . . . . . . . .3 Backward Itˆ’s formula . . . . . . . .
. . . . . 139 . . . .3 Multi dimensional Sobolev spaces and regularity of random ﬁelds . . . . .2 E. . . . . . . . . . . . . . . . . . . .
positive if T x. Finally.1 Some concepts of Probability Random variables Let (Ω. We recall that T ∈ L(H) is said to be symmetric if T x. · and norm  · ). 1. we shall denote by B(E) the σ–algebra generated by all closed (or equivalently open) subsets of E.1 1. x ≥ 0 for all x ∈ H. F . and by L(H) the Banach algebra of all linear bounded operators T : H → H. The elements of B(E) are called Borel sets. y ∈ H. x∈H is a Banach space. x=1 T x. we shall denote by Cb (H) the space of all functions ϕ : H → R which are continuous and bounded.1. Next section is devoted to some basic facts from Measure Theory and Probability needed in what follows.Chapter 1 Gaussian measures in Hilbert spaces We shall denote by H a real separable Hilbert space (with inner product ·. endowed with the norm ϕ 0: = sup ϕ(x). T y for all x. Cb (H). endowed with the norm T = sup x∈H. y = x. P) be a probabilty space and let E be a Polish (complete separable metric) space. The set of all symmetric and positive elements of L(H) will be denoted by L+ (H). 3 .
B(E)) deﬁned as (X# P)(I) = P(X −1 (I)). Since any positive Borel functions is the limit of an increasing sequence of positive simple functions. cn ≥ 0 and I1 . F . In ∈ B(E). Sometimes we shall use the notation X# P = PX . l / . such that I ∈ B(E) ⇒ X −1 (I) ∈ F . the conclusion follows from the monotone convergence theorem. it is equal to 1 if ω ∈ I to 0 if ω ∈ I. ϕ(X(ω))P(dω) = P(X −1 (I)) = X# P(I) = Ω E ϕ(x)X# P(dx). F ) we mean a mapping X : Ω → E. ω → X(ω).. ..1) holds for all simple functions ϕ of the form n ϕ= i=1 ci 1 I i .1 Let X be an Evalued random variable in (Ω. Let moreover ϕ : E → R be a nonnegative Borel function. Consequently... Let ﬁrst ϕ = 1 I with I ∈ B(E) l ϕ(X(ω)) = 1 X −1 (I) (ω). P). ∀ I ∈ B(E). The law (or image measure or pushforward measure) of X is the probability measure X# P on (E.. c1 . l So. . (1. Theorem 1. In this case we have ∀ ω ∈ Ω.4 Chapter 1 By an Evalued random variable in (Ω.1) Proof. Let us prove the following basic change of variables formula. (1) 1 I (ω) is the characteristic function of I. l with n ∈ N. (1.. Then we have ϕ(X(ω))P(dω) = Ω E (1) ϕ(x)(X# P)(dx). .
The σalgebra generated by all measurable rectangles is called the product σalgebra of Fi ..Gaussian measures 5 1.2. 1. . One can show that P can be uniquely extended to a probability measure on (Ω. H . n... by deﬁnition. h µ(dx).. . i = 1. We shall write m= H xµ(dx). i=1 For any R = n Ai we deﬁne i=1 n P(R) := i=1 Pi (Ai ). .. F ) which is called the product probability of P1 . ∀ h ∈ H. n. i = 1.. x2 µ(dx) < +∞. Assume that µ has ﬁnite ﬁrst momentum. be probability spaces. ∀ h ∈ H. B(H)). ∀ h ∈ H. Assume now that the second moment of µ is ﬁnite.2 1... H Then the linear functional F : H → R deﬁned as F (h) = H x. Pn . P2 . a set of the form R = n Ai where i=1 Ai ∈ Fi .. . h = H x.1 Probability measures in Hilbert spaces Mean and covariance Let µ be a probability measure on (H. xµ(dx) < +∞. Pi ). 2. A meai=1 surable rectangle of Ω is. is continuous since F (h) ≤ H xµ(dx) h.1..2 Product measures Let (Ωi . h µ(dx). By the Riesz representation theorem there exists m ∈ H such that m.. it is denoted by n Fi .. m is called the mean of µ. Fn . Fi . Set Ω = n Ωi .
g. (2) Proposition 1. It is also possible to deﬁne traceclass operators which are not symmetric. A symmetric and positive operator Q ∈ L(H) is said to be of trace class if ∞ Tr Q : = k=1 Qek . x − m k. k ∈ H. Dunford and J. positive and of trace class. k = H h. . k ∈ N. ek 2 µ(dx). In order to state the next result we need the concept of trace class operator. ek < +∞ for one (and consequently for any) complete orthonormal system (ek ). ∀ h.T. ek = H  x − m. Linear Operators. Interscience. 1964. G is continuous since G(h. ek 2 µ(dx) = H H x − m2 µ(dx) < +∞. k ∈ H. To prove that Q is of trace class choose a complete orthonormal system (ek ) in H. by the monotone convergence theorem and the Parseval identity. see e. k) ≤ H x − m2 µ(dx) h k.6 Chapter 1 (so that the ﬁrst one is ﬁnite as well). Schwartz. Q is called the covariance of µ. Therefore. N. we ﬁnd that ∞ Tr Q = k=1 (2)  x − m. x − m µ(dx). ∀ h. Symmetry and positivity of Q are clear. One can show that any trace class operator Q is compact and that Tr Q is the sum of its eigenvalues repeated according to their multiplicity. k ∈ H. Therefore there is a unique linear bounded operator Q ∈ L(H) such that Qh. ∀ h.2 The covariance operator Q of µ is symmetric. Part II. Let us consider the bilinear form G : H × H → R deﬁned as G(h. Proof. x − m µ(dx). but we shall not need in what follows. k) = H h. x − m k. Then we have Qek .
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). For any n ∈ N we consider the projection Pn : H → Pn (H) deﬁned as n Pn x = k=1 x. We want now to show that µ is determined by the sequence (µn ). We ﬁnally deﬁne the Fourier transform µ of a probability measure µ setting µ(h) = H ei x. l n→∞ .3 Let µ. ν ∈ P(H) be such that ϕ(x)µ(dx) = H H ϕ(x)ν(dx). Proposition 1. x ∈ H. (1. µn ). Let C ⊂ H be closed and let (ϕn ) ⊂ Cb (H) be such that (i) lim ϕn (x) = 1 C (x) for all x ∈ H. We shall also consider µn as a probability measure on (H. ∀ h ∈ H. for all ϕ ∈ Cb (R). For this we ﬁrst need the following result.4) Then µ = ν.h µ(dx). setting µn (I) = µn (I ∩ Pn (H)).3) We have limn→∞ Pn x = x for all x ∈ H. Let (ek ) be a complete orthonormal system in H. ek ek .2 Finite dimensional projections of measures We are given a probability measure µ ∈ P(H). (1. symmetric operators in 1 H of trace class. B(H).2. Proof. ∀ ϕ ∈ Cb (H). (1.2) One checks easily that µ : H → C is continuous.Gaussian measures 7 We shall denote by L+ (H) the set of all positive. Thus µn is a probability measure on (Pn (H). B(Pn (H)). 1. ∀I ∈ B(H).
Therefore.5 Let µ. Pn (H) Since (Pn )# µ = (Pn )# ν by assumption.4 Let µ. 1 if x ∈ C. H Since closed sets generate the Borel σ–algebra of H this implies that µ = ν. C) if d(x. A sequence (ϕn ) ⊂ Cb (H) fulﬁlling (i) and (ii) is provided by.4 we prove that the Fourier transform of µ determines µ. Let ϕ ∈ Cb (H). ν ∈ P(H). Then. Proof.3 we have µ = ν. ν ∈ P(H) be such that µ(h) = ν(h) for all h ∈ H. We can now prove the announced result. Now. C) ≤ n ϕn (x) = 1 0 if d(x. using the dominated convergence theorem and the change of variables formula. C) ≥ n . If (Pn )# µ = (Pn )# ν for any n ∈ N we have µ = ν. by the dominate convergence theorem it follows that lim ϕn dµ = lim H n→∞ n→∞ ϕn dν = µ(C) = ν(C). 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). Then µ = ν. 1 1 − n d(x. . we conclude that ϕ(x)µ(dx) = H H ϕ(x)ν(dx) for all ϕ ∈ Cb (H).8 (ii) ϕn 0 Chapter 1 ≤ 1 for all ∈ N. Proposition 1. Proposition 1. As an application of Proposition 1. in view of Proposition 1.
1 Gaussian probability measures in R For any pair of real numbers (m.Pn h ν(dx) = Pn (H) ei Pn ξ. The conclusion follows from Proposition 1. q) with m ∈ R and q ≥ 0 we deﬁne a probability measure Nm.3.Pn h (Pn )# µ(dξ) = (Pn )# µ(Pn h) and ν(Pn h) = H ei x.q is a probability measure since Nm. x2 See e. where δm is the Dirac measure at m.0 = δm . 1.q (R) = √ (3) 1 2πq +∞ e− −∞ (x−m)2 2q 1 dx = √ 2π +∞ −∞ e− 2 dx = 1. B(R)).4. M´tivier. 1968. then we go to the general case. Dunod e e e Universit´. We assume as granted the result when H is ﬁnitedimensional the general case we have by (1.g. / If q > 0 we set 1 Nm.3 Gaussian probability measures We ﬁrst recall the deﬁnition of Gaussian measure on (R. M. 1. In ei x.Pn h µ(dx) = Pn (H) ei Pn ξ. Therefore measures (Pn )# µ and (Pn )# ν have the same Fourier tranforms and so they coincide. µ(Pn h) = H (3) 9 . deﬁned for all B ∈ B(R) by 1 if m ∈ B. Notions fondamentales de la th´orie des probabilit´es.Gaussian measures Proof. If q = 0 we set Nm. B(R)) as follows.q (B) = √ 2πq e− B (x−m)2 2q dx.Pn h (Pn )# ν(dξ) = (Pn )# ν(Pn h). δm (B) = 0 if m ∈ B. for all B ∈ B(R). Nm.q on (R.1) for any h ∈ H and n ∈ N. e .
q (dx) = eimh− 2 qh . k = 1.6 Let m ∈ Rn . Therefore m is the mean and Q the covariance operator of Na. Moreover the Fourier tranform of Na.q .λk . h ∈ Rn . 1 2 (1. Moreover. x − a µ(dx) = Qy. Na.Q is absolutely continuous with respect to the Lebesgue measure in Rn and we have Na. n. 2πq When m = 0 we shall write for short Nq instead N0. if the determinant of Q is positive. . It is easy to see that m is the mean and q the covariance of Nm. Nm..Q on (Rn .x µ(dx) = ei a.10 Chapter 1 If q > 0. Then we have xµ(dx) = m. en ) be an orthonormal basis on Rn such that Qek = λk ek .2 Gaussian probability measures in Rn We are going to deﬁne a Gaussian measure Nm. it is left to the reader. z .q (h) := R eihx Nm. Rn y. . Q ∈ L+ (Rn ) and µ = Nm.q is absolutely continuous with respect to the Lebesgue measure 1 (dx) = dx in (R. ..Q (h) := Rn ei h.Q .Q for short. . Then we deﬁne a probability measure Na. for some λk ≥ 0.. h ∈ R.5) 1.Q = ×N k=1 n mk .h .h − 2 1 Qh.. B(Rn )) by setting Nm..Q . The proof of the following proposition is easy. Let Q ∈ L+ (Rn ) and let (e1 .Q (dx) = 1 (2π)d det Q e− 2 1 Q−1 (x−a).. When m = 0 we shall write NQ instead of Nm. x − a z. Rn y..3.Q is given by Na.q (dx) = √ (x−m)2 1 e− 2q dx. z ∈ Rn .q .. mn ) ∈ Rn and any Q ∈ L+ (Rn ). B(R) and Nm.x−a dx. Finally.Q for any m = (m1 . its Fourier transform is given by Nm. Proposition 1..
Hint. x = k=1 n x. e1 .6) One can show that such a measure does exist Proposition 1.Q (h) = ei m.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 → ∞. 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 . 2006. Berlin. An introduction to inﬁnitedimensional analysis.5.Q ∈ P(H). see e. SpringerVerlag. n Pn (H) → R .3.3 Gaussian probability measures in H Let m ∈ H and Q ∈ L+ (H). Show that the Fourier transform of µn is given by µn (h) = ei (4) Pn k=1 1 mk hk − 2 e Pn k=1 λk h2 k .Q the probability measure on 1 (H.h − 2 1 Qh. (4) (1..g. B(H)) of mean m. For any n ∈ N we set mn := m. given µ = Nm. ek ek → ( x.4 Computation of some Gaussian integrals To compute some integrals with respect to a Gaussian measure µ = Nm. . h ∈ H. We denote by Nm.λk . en .. it is unique thank’s to 1. More precisely. x. Da Prato.. . covariance Q and Fourier transform given by Nm. .3. Exercise 1.7 Prove that µn = (Pn )# µ = ×N i=1 n mk .h . ∀x∈H and identify Pn (H) with Rn through the isomorphism. we shall proceed as follows. ek ek . Pn x = k=1 x. en ). n ∀ k ∈ N.Gaussian measures 11 1. G.
m .λk (dxk ) = √ R ε 2 1 −ε e 2 1 − ελk m2 k 1−ελk . Then we have ε −1 [det(1 − εQ)]−1/2 e 2 (1−εQ) m. ε 2 Since Pn x2 ↑ x2 as n → ∞ and. ∞ 1 −1 x. k=1 Hint.9 Let ε ∈ R. λ1 (1.λk (dξk ). the conclusion follows from the monotone convergence theorem.12 Chapter 1 We shall assume (which is always true after a rearrangement) that λ1 ≥ λ2 ≥ · · · λn ≥ · · · . otherwise. Proposition 1.7 n e H ε P x2 2 n µ(dx) = Pn (H) e ε P ξ2 2 n µn (dξ) = k=1 R e 2 ξk Nmk . by an elementary computation. 1 To formulate the next result notice that for any ε < λ1 . ε 2 e 2 x µ(dx) = H +∞. We have in fact. as easily checked. (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. ek ek . Write log ∞ ∞ (1 − ελk ) k=1 = k=1 log(1 − ελk ) ∞ k=1 and show that the series is convergent since λk < +∞. x ∈ H. .8 Prove that ∞ n→∞ (1 − ελk ) := k=1 (1 − ελk ). e 2 xk Nmk . the linear operator 1 − εQ is invertible and (1 − εQ)−1 is bounded. k=1 (1 − ελk ) > 0. if ε < 1 .7) Proof. For any n ∈ N we have. taking into account Exercise 1.
Gaussian measures Exercise 1.10 Prove that for all m ∈ N Jm :=
H
13
x2m µ(dx) < ∞
and compute Jm . Hint. Notice that Jm = 2m F (m) (0), where F (ε) =
H
e 2 x µ(dx),
ε
2
ε > 0.
Proposition 1.11 We have e h,x µ(dx) = e a,h e 2
H
1
Qh,h
, h ∈ H.
(1.8)
Proof. For any ε > 0 we have e h,x ≤ ex h ≤ eεx e ε h . Choosing ε <
1 , λ1
2 1 2
we have, by the dominated convergence theorem, that
n→∞
e h,x µ(dx) =
H
lim
e h,Pn x µ(dx) = lim
H
1
n→∞
e h,Pn ξ µn (dx)
Pn (H)
1
=
n→∞
lim e Pn m,h e 2
Pn Qh,h
= e m,h e 2
Qh,h
.
1.3.5
The Cameron–Martin space
We are given a Gaussian measure µ = NQ , where Q ∈ L+ (H). We say that 1 µ is non degenerate if Ker Q := {x ∈ H : Qx = 0} = {0}. Thus, if H is ﬁnitedimensional µ is non degenerate if and only if det Q > 0. Assume now that H is inﬁnitedimensional and that µ is non degenerate. We denote by (ek ) a complete orthonormal system in H such that Qek = λk ek , k ∈ N, where (λk ) are the eigenvalues of Q and we set xk = x, ek , k ∈ N. We notice that the inverse Q−1 of Q (which is well deﬁned since Ker Q = {0}) is not continuous because, Q−1 ek = 1 ek , λk k∈N
and λk → 0 as k → ∞. Consequently, recalling the closed graph theorem, we see that the range Q(H) does not coincide with H. However, it is dense in H as the following lemma shows.
14 Lemma 1.12 Q(H) is a dense subspace of H.
Chapter 1
Proof. In fact if x0 is an element of H orthogonal to Q(H), we have Qx, x0 = x, Qx0 = 0, ∀ x ∈ H, which yields Qx0 = 0, and so x0 = 0 because Ker(Q) = {0}. It is useful to introduce the operator Q1/2 deﬁned as
∞
Q1/2 x =
k=1
λk x, ek ek ,
x ∈ H.
Its range Q1/2 (H) is called the Cameron–Martin space of the measure µ. Arguing as before we see that Q1/2 (H) is a subspace of H diﬀerent of H and dense in H. Moreover it is clear that x ∈ Q1/2 (H) if and only if,
∞
λ−1 x2 < +∞. k k
k=1
It is important to notice that the measure of the Cameron–Martin space is zero. Proposition 1.13 We have µ(Q1/2 (H)) = 0. Proof. For any n, k ∈ N set
∞
Un = and
y∈H:
h=1
2 λ−1 yh < n2 h
= {y ∈ Q1/2 (H) : Q−1/2 y < n},
2k
Un,k =
1/2
y∈H:
h=1
2 λ−1 yh < n2 h
.
Clearly Un ↑ Q (H) as n → ∞, and for any n ∈ N, Un,k ↓ Un as k → ∞. So, it is enough to show that µ(Un ) = lim µ(Un,k ) = 0.
k→∞
(1.9)
We have in fact µ(Un,k ) =
{y∈H:
P2k
−1 2 2 h=1 h=1 λh yh <n }
×N
2k
λk (dyk ),
Gaussian measures which, setting zh = λh
−1/2
15 yh is equivalent to NI2k (dz),
µ(Un,k ) =
{z∈R2k :z<n}
where I2k is the identity in R2k . Let us compute µ(Un,k ). We have µ(Un,k ) µ(Un,k ) = = µ(H) Therefore 1 µ(Un,k ) = (k − 1)! and (1.9) follows.
n2 /2 n − r2 2k−1 e 2r dr 0 2 +∞ − r 2k−1 e 2r dr 0
=
n2 /2 −ρ k−1 e ρ dρ 0 . +∞ −ρ k−1 e ρ dρ 0
e ρ
0
−ρ k−1
1 dρ ≤ (k − 1)!
n2 /2
ρ
0
k−1
1 dρ = k!
n2 2
k
,
16 Chapter 1 .
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). by m(X) the mean of X# P and by Q(X) the covariance of X# P. P) be a probability space. Deﬁnition 2. ∀ h ∈ H. k P(dω).1 We say that X# P is a Gaussian random variable if X# P is a Gaussian measure. h = Ω X(ω). h X(ω) − m(X). 17 . ∀h∈H and that m(X).Chapter 2 Gaussian random variables 2. h P(dω). ∀ h ∈ H. k ∈ H. that is if X# P(h) = ei m(X). k = Ω X(ω) − m(X). H a separable Hilbert space. F . ∀ h.h . X : Ω → H a random variable such that X(ω)2 P(dω) < ∞.h e− 2 1 Q(X)h. and Q(X)h. Ω We denote by X# P the law of X.h P(dω).1 Notations Let (Ω. In this case we call m(X) the mean and Q(X) the covariance of X.
.2.. Example 2... Xn are real Gaussian random variables. then X = (X1 .... n we have m(X)k = m(X). if j = k we ﬁnd Q(X)k. Then X = (X1 ... . In particular. Then X1 . en ) be the canonical basis in Rn ... n and a ∈ R we have eiaXk (ω) P(dω) = Ω Ω 1 ei aek .. .. In fact if k = 1.1 Independent real variables Deﬁnition 2. Xn ) is not necessarily Gaussian. .. Xn ) is a ndimensional Gaussian random variable.. n. ... .. k = 1.. Xn are real Gaussian random variables. .3 Assume that X = (X1 . 2. i. Xn be real random variables on (Ω.k = Q(X)ej .. n. P)... let (e1 . Xn ) is a Rn valued random variable. n we have Q(X)j. Xn (ω)).. Notice that. m(X)n ) and Q(X) is a n × n matrix denoted Q(X)i. j = 1.18 Chapter 2 Example 2. Consider the Rn valued random variable X(ω) = (X1 (ω).2 Let n ∈ N. More precisely. .4 Let n ∈ N and let X1 .... . . Then for any k = 1.. X1 . ..X(ω) P(dω) = eiam(Xk ) e− 2 a 1 2 Q(X ) k = ei aek ....k = Q(Xk ).m(X) e− 2 a2 Q(X)ek . .. if conversely X1 .. F . ek = Ω Xk (ω)P(dω) = m(Xk ) and for any j..ek . P). Xn be real random variables in (Ω..j ..2 Independence In this section we introduce the basic concept of independence. So.... . ω ∈ Ω. 2.. F ..... k = 1. m(X) is a vector of Rn denoted by (m(X)1 . ek = Ω (Xj (ω) − mj (Xj ))(Xk (ω) − mk (Xk ))P(dω)... . . .
.. Then by the change of variable formula we have. .1) holds for any choice of positive Borel functions ϕ1 .... .... . be real independent random variables in (Ω.. n.... Xn it is enough to show that (X# P)(I1 × · · · × In ) = ((X1 )# P)(I1 ) · · · ((Xn )# P)(In ).. ...1) holds for any choice of functions ϕ1 .... ..random variables We say that X1 . l i = 1. They are called independent if Xi1 . To prove independence of X1 ...5 Let X1 . if (2. . ϕn positive Borel.. F . Assume conversely that (2. Xn ) and let ψ : Rn → R be deﬁned as ψ(ξ1 . . .. Set X = (X1 . ∀ I1 . ξn ) = ϕ1 (ξ1 ) · · · ϕk (ξn ). .. . .. Proposition 2. . Xn . Let moreover ϕ1 . Xin are independent for any choice of n and of positive integers i1 < i2 < · · · < in . .1) ϕi = 1 Ii . 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).. In ∈ B(R). n ∈ N.. (ξ1 . Then we have ϕ1 (X1 (ω)) · · · ϕn (Xn (ω))P(dω) Ω (2. A necessary and suﬃcient condition for the independence is provided by the following proposition. Proof. ξn ) ∈ Rn . Xn are independent if X# P = 19 ×(X ) j=1 n j # P. then X1 . Let (Xi ) be a sequence of real random variables.. ...... taking into account the independence of X1 .. But this follows immediately setting in (2. Xn . ϕn . .1) = Ω ϕ1 (X1 (ω))P(dω) · · · Ω ϕn (Xn (ω))P(dω). P).... . Xn are independent.. . Conversely. ϕn be Borel positive functions. ..
. Then X1 . Proof.8 Let (Ω. .. for all k = 1.. ....6) for i... An are independent if the random variables 1 A1 .9 Show that sets A1 . .. Xn ). We have in fact (by Exercise 2. hn ) ∈ Rn .. P) be a probability space and A1 . . The following useful result is left to the reader as an exercise. Then the covariance matrix Q(X) is diagonal... . Xn )... Deﬁnition 2.10 Let X1 . ..7 Let X1 . ∀ h = (h1 .20 Chapter 2 Exercise 2. Xn be real independent random variables in (Ω. An ∈ F .. F . ... .. . l l Exercise 2. P) and let X = (X1 .... n and k diﬀerent positive integer j1 .. P) and let X = (X1 . . Proposition 2..6 Let X1 . Xn are independent if and only if n X# P(h) = k=1 (Xk )# P(hk ). F . n Q(X)i... . F . Xn be real random variables in (Ω. 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. F .. Show that X1 · · · Xn dP = Ω Ω X1 dP × · · · × Ω Xn dP and V (X1 + · · · + Xn ) = V (X1 ) + · · · + V (Xn )... .10 does not hold in general.. Proposition 2... Ω = Ω (Xi (ω) − mi (X))P(dω) The converse of Proposition 2.. An are independent if and only if P(Aj1 ∩ · · · ∩ Ajk ) = P(Aj1 ) × · · · × P(Ajk ). .... jk less or equal to n... 1 An are so.... . P).. j = 1. Xn be real independent random variables in (Ω..
. P) and let X = (X1 ... .2. for each h = (h1 .2 Independent Gaussian random variables Let X1 .. ..Q with m ∈ H and Q ∈ L+ (H). hn ) ∈ Rn .. Proof.. hn ) ∈ H. B(H).k h2 k e 1 −2 Pn k=1 Q(Xk )h2 k = i=1 (Xk )# P(h)... . . . Proof.11 Assume that X1 ..... let h = (h1 . P) coincides with (H. Xn ) is Gaussian.3 Gaussian random variables deﬁned in a Hilbert space We now consider the case when (Ω. F . Xn are independent Gaussian random variables. Then X1 .h 1 Q(X)h. If X1 . Xn be real random variables in (Ω.. Xn are independent if and only if Q(X) is diagonal. Xn ).random variables 21 2.. 2. µ)... Assume now that Q(X) is diagonal. Xn are real random variables and that X = (X1 . 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 ) . 1 . .. .. where H is a separable Hilbert space and µ = Nm. Xn )....11. Xn are independent the conclusion follows from Proposition 2. . . By Proposition 2. We have in fact X# P(h) = ei m(X)..h = ei m(X).h e− 2 n 1 Pn k=1 Q(X)k. Then. Xn ) is Gaussian.. Then X = (X1 . Proposition 2. F . 1 2 Proposition 2....h e− 2 =e i m(X).12 Assume that X1 ... taking into account the independence of (X1 . .. In fact.....7 it is enough to show that n X# P(h) = i=1 (Xk )# P(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 NAa+b,AQA∗ , where A∗ is the transpose of A. Proof. We have in fact ei k,y T# µ(dy) =
K H
ei k,T (x) µ(dx) =
H
1
ei k,Ax+b µ(dx)
AQA∗ k,k
= ei k,b
H
ei A
∗ k,x
µ(dx) = ei k,Aa+b e− 2
, k ∈ K.
Example 2.14 Let µ = Nm,Q and n ∈ N, f1 , ..., fn ∈ H. Let F : H → Rn be deﬁned as F (x) := ( x, f1 , ..., x, fn ), x ∈ H. Then by Proposition 2.13 F is a Gaussian random variable with mean m(F ) and covariance Q(F ) given by, m(F ) = F (m) = ( m, f1 , ..., m, fn ) and Q(F ) = F QF ∗ . On the other hand, the linear operator F ∗ : Rn → H is given by
n
F (ξ) =
k=1
∗
fk ξk ,
∀ ξ = (ξ1 , ..., ξn ) ∈ Rn .
Therefore QF (ξ) =
∗
n
Qfk ξk ,
k=1
∀ ξ = (ξ1 , ..., ξn ) ∈ Rn
n
and F QF ∗ (ξ) =
n
Qfk ξk , f1
k=1
, ...,
k=1
Qfk ξk , fn
random variables so that Q(F )h,k = Qfh , fk . Therefore, F1 , ..., Fn are independent if and only if Qfh , fk = 0, if h = k. h, k = 1, ..., n,
23
(2.2)
2.4
The white noise function
In order to deﬁne the white noise function (which will play an important role in what follows), we shall deal with equivalence class of random variables (rather than random variables), which we brieﬂy discuss in the next subsection.
2.4.1
Equivalence classes of random variables
Let (Ω, F , P) be a probability space and let H be a separable Hilbert space. We denote by R(H) the set of all Hvalued random variables. Deﬁnition 2.15 We say that X, Y ∈ R(H) are equivalent (and write X ∼ Y ) if P({ω ∈ Ω : X(ω) = Y (ω)}) = 1. One can easily check that X ∼ Y, X, Y ∈ R(H) is an equivalence relation, so that the set R(H) is disjoint union of equivalences classes. We notice that if X ∼ Y then the laws of X and Y coincide. In fact set K = {ω ∈ Ω : X(ω) = Y (ω)}, so that P(K) = 0. Since for any I ∈ B(H) we have X −1 (I) ⊂ Y −1 (I) ∪ K, it follows that P(X −1 (I)) ≤ P(Y −1 (I)) and, exchanging X and Y we see that P(X −1 (I)) = P(Y −1 (I)). Consequently, all random variables belonging to a ﬁxed equivalence class ˜ ˜ X have the same law, which is called the law of X. In the following we shall not distinguish between a random variable X ˜ and the equivalence class X including X, except when needed.
24
Chapter 2
By Lp (Ω, F , P; H), p ≥ 1, we mean the space of all equivalence class of random variables X : Ω → H such that X(ω)p P(dω) < +∞.
Ω
Lp (Ω, F , P; H), endowed with the norm
1/p
X
Lp (Ω,F ,P;H)
=
Ω
X(ω)p P(dω)
,
is a Banach space. We shall write Lp (Ω, F , P; H) = Lp (Ω, P; H) for brevity. We prove now that the limit of a convergent sequence in L2 (Ω, P; H) of Gaussian random variables is Gaussian. Proposition 2.16 Let (Xn ) ⊂ L2 (Ω, P; H) be a sequence of Gaussian random variables convergent to X in L2 (Ω, P; H). Then X is a Gaussian random variable and m(X), h = lim m(Xn ), h , h ∈ H,
n→∞
and Q(X)h, k = lim Q(Xn )h, k ,
n→∞
h, k ∈ H.
Proof. Since Xn → X in L2 (Ω, P; H) we have
n→∞
lim m(Xn ), h = lim
n→∞
Xn (ω), h P(dω) =
Ω Ω
X(ω), h P(dω) = m(X), h
and
n→∞
lim Q(Xn )h, k
=
n→∞
lim
Xn (ω) − m(Xn ), h
Ω
Xn (ω) − m(Xn ), k P(dω)
=
Ω
X(ω) − m(X), h
X(ω) − m(X), k P(dω) = Q(X)h, k .
Let us show now that X is a Gaussian random variable. We have in fact ei x,h (X# µ)P(dy) =
H Ω
1
ei X(ω),h P(dω) = lim = ei m(X),k e− 2
1
n→∞
ei Xn (ω),h P(dω)
Ω
= lim ei m(Xn ),h e− 2
n→∞
Q(Xn )h,h
Q(X)h,h
.
Q−1/2 z1 x. by Proposition 1. z2 .4. However this deﬁnition is meaningless because µ(Q1/2 (H)) = 0. β ∈ R we have Wf (αx + βy) = αWf (x) + βWf (y).e.3) Proof.17 For all z1 .18 Given z ∈ H (not belonging to Q1/2 (H)) it would be tempting to deﬁne the random variable Wz by setting. H k ∈ N.13 . ∀ x ∈ H.random variables 25 2. QQ−1/2 z2 = z1 . Q−1/2 z2 µ(dx) = QQ−1/2 z1 . x. Wz (x) = Q−1/2 x. z2 ∈ Q1/2 (H) we have Wz1 (x)Wz2 (x)µ(dx) = z1 . z . the mapping W can be uniquely extended as a mapping from H into L2 (H. Let us deﬁne a mapping W : Q1/2 (H) → C(H).. x ∈ Q1/2 (H). Since Q1/2 (H) is dense in H. Remark 2. Lemma 2. Wf is linear in the sense that for all α. y µ a. Here Q1/2 (H) is the Cameron–Martin space and C(H) the space of all real continuous functions on H.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 . where Wz (x) = x. µ) which we denote still by W and call the white noise function. Q−1/2 z . z → Wz (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 . We have in fact Wz1 (x)Wz2 (x)µ(dx) = H H x.
. z1 .19 Let z ∈ H.20 Let n ∈ N. k = 1.. Then Wz is a real Gaussian random variable with mean 0 and covariance z2 .. . that ei(ξ1 Wz1 (x)+···+ξn Wzn (x)) µ(dx) = lim H j→∞ ei(ξ1 H j j Q−1/2 z1 . The following generalization of Proposition 2. We have to show that eiηWz (x) µ(dx) = e− 2 η H 1 2 z2 . n 1 Proof.. we have eiηWz (x) µ(dx) = lim H n→∞ eiη Q H −1/2 z n . Then. zn ∈ H. zn are mutually orthogonal. . ...4) The random variables Wz1 . . h. Let (zj ). Then (Wz1 . zn in H. Then we have by the dominated convergence theorem.. . n. So.19 is important.x +···+ξn Q−1/2 zn .x ) µ(dx) = lim j→∞ ei x..... zk .x µ(dx) = lim e− 2 η n→∞ 1 2 z n 2 = e− 2 η 1 2 z2 .k = zh .. Wzn ) is an ndimensional Gaussian random variable with mean 0 and covariance operator Qz given by (Qz )h. by the dominated convergence theorem.. (2.. Proposition 2.k=1 zj . Proof... .. ∀ η ∈ R. ...26 Chapter 2 Proposition 2. .zk ξj ξk . (zj ) be n sequences in Q1/2 (H) convergent respectively to z1 .Q H 1 j −1/2 (ξ j j 1 z1 +···+ξn zn ) µ(dx) 2 1 = lim e− 2 ξ1 z1 +···+ξn zn  = e− 2 ξ1 z1 +···+ξn zn  = e− 2 j→∞ j 2 1 Pn j.. Let (zn ) ⊂ Q1/2 (H) be a sequence such that zn → z in H. Wzn are independent if and only if z1 . the conclusion follows..
Chapter 3 Brownian Motion
3.1 Stochastic Processes
We are given a probability space (Ω, F , P). We denote by P∗ the outer measure of P. We recall that a null set of Ω is a set of outer measure zero. For any integrable real random variable F we note E(F ) =
Ω
F (ω)P(dω).
So, in particular we have F# P(I) = E(1 I (F )), l ∀ I ∈ B(R).
We say that a property π concerning elements of Ω holds Pa.s. if the set where π does not hold is a null set. Deﬁnition 3.1 A family X = (X(t))t≥0 of real random variables in (Ω, F , P) is called a real stochastic process in [0, +∞). For any ω ∈ Ω, X(·, ω) is called a trajectory of X. • X is Gaussian if for any n ∈ N and any 0 ≤ t1 < · · · < tn the ndimensional random variable (X(t1 ), ..., X(tn )) is Gaussian. • X is continuous if X(·, ω) is continuous Pa.s. • X is pmean continuous, p ≥ 1, if (i) X(t) is pintegrable for any t ≥ 0. (ii) We have
t→t0
lim E[X(t) − X(t0 )p ] = 0, 27
∀ t0 ≥ 0.
(3.1)
28
Chapter 3
We notice that a pmean continuous process is not continuous in general. We say that two stochastic processes X and Y are equivalent if for all t ≥ 0 we have X(t, ω) = Y (t, ω), Pa.s..
When X and Y are equivalent we also say that Y is a version of X (or that X is a version of Y ).
3.2
Brownian motion
Deﬁnition 3.2 A real Brownian motion B = (B(t))t≥0 on (Ω, F , P) is a real stochastic process such that (i) B(0) = 0 and if 0 ≤ s < t, B(t) − B(s) is a real Gaussian random variable with law Nt−s . (ii) If 0 < t1 < ... < tn , the random variables, B(t1 ), B(t2 ) − B(t1 ), · · · , B(tn ) − B(tn−1 ) are independent. We express condition (ii) by saying that B is a process with independent increments. Lemma 3.3 Let t, s > 0. Then E[B(t)(B(s)] = min{t, s}. Proof. Let for instance t > s. Then we have E[B(t)B(s)] = E[(B(t) − B(s))B(s)] + E[B 2 (s)]. On the other hand, B(t) − B(s) is independent of B(s) so that E[(B(t) − B(s))B(s)] = E[B(t) − B(s)]E[B(s)] = 0. Since the law of B(s) is Ns we conclude that E[B(t)B(s)] = s as required. (3.2)
Brownian motion
29
3.2.1
Construction of a Brownian motion
Consider the probability space (H, B(H), µ), where H = L2 (0, +∞) and µ = NQ , Q being an arbitrary (but ﬁxed) non degenerate Gaussian measure in H. Deﬁne B(t) = W1l[0,t] , t ≥ 0, (3.3) where 1 [0,t] (s) = l 1 if s ∈ [0, t], 0 otherwise,
and W is the white noise function deﬁned in Chapter 2. More precisely, for any t ≥ 0 we choose an arbitrary element in the equivalence class of B(t) which we still denote by B(t). Clearly, for any t ≥ 0, B(t) is a Gaussian random variable Nt and for any t > s ≥ 0, B(t) − B(s) = W1l(s,t] is a Gaussian random variable Nt−s . So, B fulﬁlls Deﬁnition 3.2(i). Let us prove (ii). Since the system of elements of H, (1 [0,t1 ] , 1 (t1 ,t2 ] , ..., 1 (tn−1 ,tn ] ), l l l is orthogonal, we have by Proposition 2.20 that the random variables B(t1 ), B(t2 ) − B(t1 ), · · · , B(tn ) − B(tn−1 ) are independent. Thus (ii) is proved as well.
3.2.2
Some properties of a Brownian motion
Proposition 3.4 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F , P). Then B is a Gaussian process. Moreover, if 0 < t1 < ... < tn the law of (B(t1 ), ..., B(tn )) is given by P((B(t1 ), ..., B(tn )) ∈ I) = (2π)−n/2 (t1 (t2 − t1 ) × · · · × (tn − tn−1 ))−1/2
I
e
− 2t1 −
1
η2
(ηn −ηn−1 )2 (η2 −η1 )2 −·− 2(t −t 2(t2 −t1 ) n n−1 )
dη,
(3.4) for all I ∈ B(R ).
n
Proof. Let 0 < t1 < ... < tn and set X := (B(t1 ), B(t2 ) − B(t1 ), ..., B(tn ) − B(tn−1 )) Z := (B(t1 ), ..., B(tn )).
6 Let B(t) be a Brownian motion in a probability space (Ω. T (x1 . m!2m Therefore lim E(B(t) − B(t0 )2m ) = 0 t→0 and the conclusion follows. ... tn − tn−1 ). Then B is pmean square continuous for all p ≥ 1... Moreover. Prove that the following are Brownian motions. P). F . x1 + · · · + xn ).. η = Q T −1 −1 −1 2 (ηn − ηn−1 )2 η1 (η2 − η1 )2 − ··· − − η = t1 (t2 − t1 ) (tn − tn−1 ) η.. . It is clear that Z = T (X). since T −1 η = (η1 . .11 it follows that X is a ndimensional Gaussian random variable with mean 0 and covariance operator Q(X) = diag (t1 . we have det Q(Z) = det Q(X) = t1 (t2 − t1 ) × · · · × (tn − tn−1 ). Now. . by Proposition 2.. Since det T = det T ∗ = 1. be a Brownian motion on (Ω... xn ) ∈ Rn . we have E(B(t) − B(t0 )2m ) = R ξ2m Nt−t0 (dξ) = (2m)! (t − t0 )m . as easily checked. we have (Q(Z)) η. It remain to show (3. P)... It is enough to show the result for p = 2m. the conclusion follows. Proposition 3. Therefore by Proposition 2.13 Z is Gaussian with mean 0 and covariance Q(Z) = T Q(X)T ∗ where T ∗ is the transpose of T . η2 − η1 . Let t > t0 ≥ 0. ∀ (x1 . x1 + x2 . xn ) = (x1 .. F ... t2 − t1 .. B(t2 ) − B(t1 ). T −1 and so. m ∈ N.4). Proof.5 Let B(t). ηn − ηn−1 ).. B(tn ) − B(tn−1 ) are independent. Since B(t) − B(t0 ) is a Gaussian random variable Nt−t0 .η dη. t ≥ 0. .. If I ∈ B(Rn ) we have P(Z ∈ I) = (2π)−n/2 (det Q(Z))−1/2 I e− 2 1 (Q(Z))−1 η. .30 Chapter 3 Since random variables B(t1 ). consider the linear mapping T ∈ L(Rn ) deﬁned by.. . Exercise 3.
(iii) B3 (t) = tB(1/t). Let us prove (3. B3 (0) = 0.. f0 . t ≥ 0. . l Then deﬁne T n f (s)dB(s) := 0 j=1 ftj−1 (B(tj ) − B(tj−1 )). be a Brownian motion in (Ω. where h > 0 is given. Lemma 3. T ) with T > 0. Let us prove two basic identities. where α > 0 is given. fn−1 ∈ R and set n f= j=1 tj−1 1 (tj −tj−1 ] .6) Proof. t ≥ 0.. Identity (3.Brownian motion (i) B1 (t) = B(t + h) − B(h). (3..7 We have T E 0 f (s)dB(s) =0 (3.6). (ii) B2 (t) = αB(α−2 t). F . t ≥ 0.7) +2E j<k f (tj−1 )f (tk−1 )[B(tj ) − B(tj−1 )][B(tk ) − B(tk−1 )] . 0 We start with step functions. We want to deﬁne the stochastic integral: T f (s)dB(s). t ≥ 0. f1 . We have n E(Iσ (f ) ) = E j=1 n 2 f (tj−1 )2 [B(tj ) − B(tj−1 )]2 (3. . t > 0.5) is obvious. Let 0 = t0 < t1 < · · · < tn = T .5) and T 2 n t E 0 f (s)dB(s) = j=1 f (tj−1 )2 (tj − tj−1 ) = 0 f 2 (s)ds. (iv) B4 (t) = −B(t). 31 3. P) and let f ∈ L2 (0.3 Wiener integral Let B(t).
F . P). the equivalence class of random T variables) 0 f (s)dB(s). T ) we have T E 0 f (s)dB(s) 2 = 0. T ) → L2 (Ω. (3. Since S(0.9 Let f ∈ L2 (0. c ≥ 0 we have b c c f (s)dB(s) + a b f (s)dB(s) = a f (s)dB(s). Exercise 3. is continuous. Then I(f ) = T Gaussian random variable Nq with q = 0 f (s)2 ds. T ) the linear space of all step functions. T ) it can be uniquely extended T to the whole L2 (0. T ). T ]. b. It is easy to see that if a. F . Denote by S(0. T ). T ) is dense in L2 (0. T ). b ≥ 0. g ∈ L2 (0. T ) ⊂ L2 (0. which belongs to L2 (Ω. Show that T T T E 0 f (s)dB(s) 0 g(s)dB(s) = 0 f (s)g(s)ds.8) and T t E 0 f (s)dB(s) = 0 f 2 (s)ds. (3. f → I(f ) = 0 f (s)dB(s).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. b We deﬁne in an obvious way the Wiener integral a f (s)dB(s) for any a. is called the Wiener integral of f in [0. We still denote by I(f ) = 0 f (s)dB(s) this estension. It is clear that for any f ∈ L2 (0.9) The random variable (more precisely. P). By (3. T 0 f (s)dB(s) is a real Proof.8 Let f. Proposition 3. It is enough to prove the result for f of the form n f= i=1 fti−1 (ti − ti−1 ). .6) it follows that the linear mapping I T S(0.
tk ] = WPn ftk−1 1l(tk−1 . we have that I(f ) is a real Gaussian random variable Nq with n q= i=1 f 2 (ti−1 )(ti − ti−1 ). so that n 33 I(f ) = i=1 fti−1 (B(ti ) − B(ti−1 )).2. ∞). t ≥ 0 is pmean continuous for any p ≥ 1. ∞) → R such that it is integrable in all interval [0. Let us introduce a stochastic process setting t F (t) = 0 f (s)ds. < tn−1 = T .11 The process F (t). T 0. · · · . k=1 Let f : [0. Since random variables B(t1 ). are independent. 0 = t0 < t1 < . In this case we have in fact ∞ n f (s)dB(s) = 0 k=1 ftk−1 W1l(tk−1 . Let f ∈ L2 (0.10 We use here notations of Section 3. ∀ t ≥ 0.. B(t2 ) − B(t1 ). T ].. We now show a relation between the white noise function and the Wiener integral. Proposition 3. (3. B(tn ) − B(tn−1 ).Brownian motion where n ∈ N.10) when n f= k=1 l ftk−1 1 (tk−1 . .1. Example 3.tk ] = Wf . where 0 ≤ t0 < · · · < tn .tk ] .10) It is enough to show (3. Then we have ∞ Wf = 0 f (s)dB(s).
. T ]) we have T T f (s)dB(s) = f (T )B(T ) − 0 0 f (s)B(s)ds. t1 ..12 If f ∈ C 1 ([0. We note ﬁnally.. ω ∈ Ω. Pa. · · · . Let σ = {t0 . t→t0 f 2 (s)ds. tn } ∈ Σ.e.. . Proposition 3. m ∈ N and t > t0 ≥ 0. (3. m!2m t0 so that lim EF (t) − F (t0 )2m = 0. Pa. k = 1. tk ]. Then by Proposition 3. 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 ).s. that if f ∈ C 1 ([0.9 we have that t F (t) − F (t0 ) = t0 f (s)dB(s) t t0 is a real Gaussian random variable with mean 0 and covariance Therefore q t (2m)! 2m 2 EF (t) − F (t0 ) = f (s)ds .11) Proof. It follows that T σ→0 lim Iσ (f ) = f (T )B(T ) − 0 f (s)dB(s)ds.34 Chapter 3 Proof. where αk are suitable numbers in the interval [tk−1 . Let p = 2m. 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.. n.
Theorem 3. F . 0 (3. Then B possesses a continuous version.13 For any α ∈ (0. Proof. We can now prove the result. F . P). Proposition 3. t ≥ 0.13) Notice that the Wiener integral Yα is meaningful since α ∈ (0. sin πα 0 ≤ s ≤ σ ≤ t.12) (σ − s)−α dB(s). . be a Brownian motion on a probability space (Ω. (1) This requires a proof which is left to the reader.14 Let B(t). We are going to show that B possesses a continuous version. t (t − σ)α−1 (σ − s)−α dσ = s π .14) becomes 1 (1 − r)α−1 r−α dr = β(α. be a Brownian motion on a probability space (Ω. sin πα Now since. obviously. 1/2). 1/2) we have B(t) = where Yα (σ) = 0 sin πα π σ t (t − σ)α−1 Yα (σ)dσ. t ≥ 0. P). yields t σ sin πα B(t) = π dξ(t − σ) 0 α−1 0 (σ − s)−α dB(s) .14) it is enough to set σ = r(t − s) + s so that (3. To check (3. 1).4 Continuity of Brownian motion Let B(t). 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). Exchanging integrals . (3. 1 − α) = 0 π . 1).Brownian motion 35 3. (3. We start from the following elementary identity which is valid for any α ∈ (0.14) where α ∈ (0. To this purpose we shall use a representation formula for B proved in the next proposition.
We denote by B the mapping B : Ω → C0 . Moreover. T ]. where C0 = {η ∈ C([0. ω) is continuous for all ω ∈ Ω. t ∈ [0. Let us prove that F is continuous on [ t2 .16 Prove that B possesses an H¨lder continuous version with o any exponent β < 1/2. T ). +∞)) : η(0) = 0}.15) 2m (Notice that (α − 1) 2m−1 > −1. ω). t−ε Fε (t) = 0 (t − σ)α−1 f (σ)dσ. ω) is a continuous version of B thanks to the following analytic lemma. H) and F is con0 tinuous at 0. T ]. F .T .) Therefore F ∈ L∞ (0. 1 0 Thus limε→0 Fε (t) = F (t).5 The standard Brownian motion Let us consider a Brownian motion B(t). ω → B(·. (3. This is possible in view of Proposition 3. T ]. P) such that B(·.H) . Then F ∈ C([0. Now set t sin πα B(t. 1]. ω) = (t − σ)α−1 Yα (σ. using again H¨lder’s inequalo ity.T .H) . . t ≥ 0.11. H). Lemma 3. Set t F (t) = 0 (t − σ)α−1 f (σ)dσ. Proof. π 0 Then B(·. Choose a version Yα (·. By H¨lder’s inequality we have o t 2m−1 2m F (t) ≤ 0 (t − σ) 2m (α−1) 2m−1 dσ f L2m (0. ∀ t ≥ 0. t ∈ [0. T ]. and F is continuous as required.15 Let α ∈ (0. ω) of the stochastic process Yα which is 2mintegrable with 2m > 1/α. 3. m ∈ N with 2m > 1/α and f ∈ L2m (0. 0 Fε is obviously continuous on [ t2 . T ] for any t0 ∈ (0. 1/2).36 Chapter 3 Proof. uniformly on [ t2 . ω)dσ. in a probability space (Ω. T . T ]. Exercise 3. we ﬁnd F (t) − Fε (t) ≤ M 2m − 1 2mα − 1 2m−1 2m εα− 2m f L2m (0. t0 Let us set for ε < 2 .
2 The Wiener measure and the standard Brownian motion B : Ω → C0 . k. Using this identity one can easily see that C is an algebra.A = Ct1 . η(tn )) ∈ A} . ω))P(dω) = C0 F (η)Q(dη). ω → B(·. . η2 ) := k=1 2k (1 η1 − η2 k . ω) We come back to the mapping B and we denote by Q its law (which is a probability measure on (C0 . So.A×Rk . ..5.. For n ∈ N.. η k = sup{η(t) : t ∈ [0. k]}. (3. Note that Ct1 .t2 . We have set for any k ∈ N.t2 .tn . ∀ η ∈ C0 ...A := {η ∈ C0 : (η(t1 ).tn+1 . η → F (η).5.tn . C0 ...t2 .. we have E[F (B(·))] = Ω F (B(·.. n ∈ N. B(C0 )). It is important to notice that B(C0 ) is generated by the cylindrical subsets of C0 that we shall introduce now. B(C0 )). as easily checked. the σalgebra generated by C coincides with B(C0 ) since any ball (with respect to the metric of C0 ) is a countable intersection of cylindrical sets..tn+k .. Q is called the Wiener measure on (C0 .16) Some examples of mappings F are the following.. Moreover..Brownian motion 37 3.. endowed with the metric. 3. 0 < t1 < · · · < tn and A ∈ B(Rn ) we deﬁne Ct1 .. for any nonnegative Borel mapping F : C0 → R..tn . Let us now consider the σalgebra B(C0 ). + η1 − η2 k ) is a complete metric space. d(η1 ..1 Some properties of C0 ∞ First we notice that...
we have Q(Ct1 .4..tn .. B(C0 ).ω))h P(dω) = E[ei(B(t)−B(s)) ] = e− 2 (t−s)h . Proof.. thanks to (3. Proposition 3. 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. We simply note that..t2 . In an analogous way one can prove that W (t). Then we have Q(Ct1 . Let us show for instance that for t > s ≥ 0. for all η ∈ C0 . is given by e− 2 (t−s)h ... 1 2 h ∈ R.1] η(t). (ii) F (η) = G(η(t1 )... Let us compute the Wiener measure of a cylindrical set. has independent increments.. so that the conclusion follows from Proposition 3... 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).. t ≥ 0. for all η ∈ C0 .. η(tn )). W (t) − W (s) is a Gaussian random variable Nt−s . t ≥ 0..17 W is a Brownian motion in (C0 . B(C0 ).t2 .. η ∈ C0 . Proposition 3. Now we deﬁne a stochastic process W (t)..38 Chapter 3 (i) F (η) = g(η(t0 )).ω)−B(s. .t2 . (iii) F (η) = supt∈[0.A ) = P((B(t1 ).. h ∈ R. . B(tn )) ∈ A). ..18 Let Ct1 . Proof. for all η ∈ C0 . where G : Rn → R is nonnegative Borel and t1 . tn > 0 are given. In fact by (3..16). where g : R → R is nonnegative Borel and t0 > 0 is given.tn . The proof is straightforward. in (C0 .A be a cylindrical set. .. Q) setting W (t)(η) = η(t).16) we have ei(η(t)−η(s))h Q(dη) = C0 Ω 1 2 ei(B(t. called the standard Brownian motion. h ∈ R. t ≥ 0.tn .
. F .. on a probability space (Ω. T ). T ) the set of all decompositions of [0. We say that T is the quadratic variation of B in [0. Proof.Brownian motion 39 3. T ) we set σ := min{tk − tk−1 : k = 1. 2 2 E(Jσ − T 2 ) = E(Jσ ) − 2T E(Jσ ) + T 2 = E(Jσ ) − T 2 . For any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0.. Since Btk −Btk−1 is a real Gaussian random variable with law Ntk −tk−1 . T ].19 We have σ→0 lim Jσ = T in L2 (Ω. P). F . For any T > 0 we denote by Σ(0. T ] σ = {0 = t0 < t1 < · · · < tn = T }. Let us now introduce the quadratic variation of Brownian motion B in [0. setting σ1 ≤ σ2 if and only if σ1  ≤ σ2 . we have E(Jσ ) = T. P). and so. T ]. Then we prove Theorem 3.6 Quadratic variation of the Brownian motion In this section we are given a real continuous Brownian motion B(t). Then for any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. .n − 1}. (3. T ) we deﬁne n Jσ := k=1 B(tk ) − B(tk−1 )2 . We introduce a partial ordering on Σ(0.17) Moreover n 2 EJσ 2 = E k=1 n B(tk ) − B(tk−1 )2 n =E k=1 B(tk ) − B(tk−1 ) + 2 h<k=1 4 EB(th ) − B(th−1 )2 B(tk ) − B(tk−1 )2 . t ≥ 0.
T )} has outer probability zero. Proposition 3. Then for any σ = {0 = t0 < t1 < · · · < . substituting (3.17). (3.20) on (3. since B(th ) − B(th−1 ) and B(tk ) − B(tk−1 ) are independent. In other terms the set VT := {ω ∈ Ω : B(·. ω) ∈ BV (0.20) = 2 k=1 (tk − tk−1 )2 + T 2 . h<k=1 (3.. Let f : [0. 2 =2 k=1 (tk − tk−1 )2 → 0. (3.40 But we have n n Chapter 3 E k=1 B(tk ) − B(tk−1 )4 = 3 k=1 (tk − tk−1 )2 . T ] → R of ﬁnite variation. we obtain n E Jσ − T  as σ → 0. T ] → R. T ) we n set Vσ (f ) = k=1 f (tk ) − f (tk−1 ) and deﬁne V (f ) := supσ∈Σ Vσ (f ). Now.19) Therefore n n EJσ 2 = 3 k=1 n (tk − tk−1 )2 + 2 n (th − th−1 )(tk − tk−1 ) h<k=1 2 = 2 k=1 n (tk − tk−1 ) + k=1 2 (tk − tk−1 ) . BV (0.. T ) is the set of all functions f : [0. (2) .18) and.20 We have P∗ (VT ) = 0.. we have n n EB(th ) − B(th−1 ) B(tk ) − B(tk−1 ) = h<k=1 2 2 (th − th−1 )(tk − tk−1 ). V (f ) is called the variation of f . tn = T } ∈ Σ(0. In fact the following result holds.19 is that almost all trajectories of the Brownian motion B have not bounded variation (2) . An important consequence of Theorem 3.
21) By the claim the conclusion will follow since P(Λc ) = 0. (ii) lim Jσn (ω) = T for all ω ∈ Λ1 . F . n→∞ We claim that VT ∩ Λ ⊂ Λc . The claim is proved.... ... if n is so large that σn  < δε we have Jσn (ω) ≤ εV (B(·.. ω)). Example 3. Xn (t)). Let (e1 . X1 . for any ε > 0 there exists δε > 0 such that t. t − s < δε =⇒ B(t. A ndimensional Brownian motion is a ndimensional stochastic process B(t) := (B1 (t). .. . Consequently. is called an ndimensional stochastic process.. Xn are said to be independent if for any t1 . Then X(t) := (X1 (t). tn ∈ [0. +∞) the random variables Xi (ti ) are independent.7 Multidimensional Brownian motions Deﬁnition 3.. Then set Bi (t) = Wei 1l[0. .. Bn (t)) is an ndimensional Brownian motion.. en ) be the canonical basis in Rn and choose Ω = H = L2 (0.. 41 so that P(Λ) = 1 because B is continuous.. t ≥ 0. P) there exists a sequence (σn ) ⊂ Σ(0.. Since B(·. T ]. Set Λ := {ω ∈ Ω : B(·... 3. 1 (3. Since limσ→0 Jσ = T in L2 (Ω.22 Let us construct an ndimensional Brownian motion. Then one can check easily that B(t) = (B1 (t).. where Q is any operator in L+ (H) such that Ker 1 Q = {0}.. ω) < ε.Brownian motion Proof. . ∀ t ≥ 0. T ) such that σn  → 0 and a set Λ1 ⊂ F such that (i) P(Λ1 ) = 1. Rn ). Bn are independent Brownian motions. .. . Bn (t)). F .. 1 Let us prove the claim. ω) − B(s. Since ε is arbitrary ω cannot belong to Λ1 .. such that B1 .. +∞.21 Let n ∈ N and let X1 . t ≥ 0. T ].. . F = B(H) and P = NQ . s ∈ [0.. Xn be stochastic processes on a probability space (Ω. Let ω ∈ VT ∩ Λ. ω) is uniformly continuous in [0.. P). . n. . ω) is continuous }. i = 1...t] .
t ≥ 0.25) where A∗ and C ∗ are the adjoint of A and C respectively. Let us check (iii).42 Chapter 3 Let B be a Brownian motion in Rn .23 Prove that for 0 ≤ s < t we have E B(t) − B(s)4 = (2n + n2 )(t − s)2 . t ≥ 0. (ii) E[Bi (t)Bj (t)] = 0 if i = j. Prove that the law of Z(t) in Rd is given by NetA x. where Qt = 0 t ∗ (3. where In represents the identity in Rn . Exercise 3. (i) If t > s. C ∈ L(Rd ) and set t (3.22) E B(t) − B(s) 2 = k=1 E Bk (t) − Bk (s)2 = n(t − s).Qt . (3. Then the following properties are easily checked.24) esA CC ∗ esA ds.23) Z(t) = etA x + 0 e(t−s)A CdB(s). We have n (3. B(t) − B(s) is a Gaussian random variable with law N(t−s)In .24 Let A. (iii) We have E B(t) − B(s)2 = n(t − s). Exercise 3. .
Obviously F0 = {∅.. it is called the natural ﬁltration of W . The family of σ–algebras (Ft )t≥0 is increasing. 4. W (tn )) ∈ A} For any t > 0 we denote by Ct the algebra of all cylindrical sets where 0 ≤ t1 < .··· . Moreover. B(C0 ). stopping time and transition semigroup. ω ∈ C0 .. ω(tn )) ∈ A} = {ω ∈ C0 : (W (t1 ).1 Filtration Ct1 .. . t)} .. +∞) → R introduced in Chapter 3 and Q is the Wiener measure.. B(C0 ).A = {ω ∈ C0 : (ω(t1 ). Q) where C0 is the complete metric space of all continuous functions ω : [0.tn . t ≥ 0. the standard Brownian motion in (C0 . we denote by Ft the σalgebra generated by Ct . ∀ t ≥ 0. Q) deﬁned by W (t)(ω) = ω(t).. Moreover.Chapter 4 Markov property of the Brownian motion Let us consider the probability space (C0 .. tn ≤ t and A ∈ B(Rn ). let W (t). . < tn .. For any t > 0 we deﬁne Ft− = σ{Ft− : 43 ∈ (0. To this purpose we shall introduce some basic concepts as ﬁltration. Ω}. in particular the Markov and strong Markov property and the reﬂexion principle. This chapter is devoted to some sharp properties of the Brownian motion.
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.1 we say that the natural ﬁltration (Ft )t≥0 is left continuous.1.44 where σ ∈(0. It is clear that Ft ⊃ ∈(0. 4. Proof.tn . t ≥ 0. k→∞ k so that I ∈ Ft− as well. Remark 4.1 For all t > 0 we have Ft = Ft− . Let for instance t = 0 and consider the sets An = {ω ∈ Ω : ω(1/n) ≤ 1/n}. so that F0+ = F0 . To prove the converse inclusion it is enough to show that Ct ⊂ Ft− . so that Ft ⊃ Ft− . Let t > 0. . t) and Ft+ : = >0 Ft+ .1 Ft measurable random variables I ∈ B(R) ⇒ X −1 (I) ∈ Ft .··· . Notice that A = {ω ∈ Ω : ω (0) = 0}.2 The ﬁltration (Ft )t≥0 is not right continuous.··· .A ∈ Ct so that tn ≤ t.t) Chapter 4 Ft− is the σalgebra generated by Ft− for ∈ (0. Let in fact I = Ct1 . If tn < t then I belongs to Ft− whereas if tn = t we have I = lim Ct1 . Proposition 4. The following lemma will be frequently used. An ∈ F0+ .A ∈ Ft− . that is Ft+ = Ft for all t ≥ 0.tt− 1 .t) Ft− . Due to Proposition 4. Then An ∈ F1/n and A = n∈N n ∈ N.
j→∞ Since G = B(C0 ) we can set in (4.4 one can easily show that (Ft )t≥0 is both right and left continuous. Denote by G the σalgebra generated by all sets of the form Dt1 . Moreover. we claim that G = B(C0 ).3 Let s2 > s1 ≥ t > 0.Markov property 45 Lemma 4. but this follows from the identity j→∞ lim Dt1 − 1 . Then W (s2 ) − W (s1 ) and ϕ are independent. Then we have P(A ∩ G) = P(A)P(G).1 in Appendix A).. . l Since W is a process with independent increments. in other words that Ft coincides with the set D deﬁned below.h.. ... so that P2 (A) = P(A) which yields P(A) equal to zero or one.I j j j = lim {ω ∈ Ω : (ω(t1 ) − ω(1/j).1) On the other hand. one can show easily that ∞ n=1 An ∈ D. D is a λsystem. To prove the claim it is enough to show that any cylindrical set Ct1 . Proposition 4.. D contains the algebra of all cylindrical set belonging to Ct (which is a πsystem).I .. Proof... It is clear that A is independent of G . where n ∈ N.. By using Proposition 4.tn . Let A ∈ F0+ ... ω(tn + h) − ω(h)) ∈ I}.tn .5 For any t ≥ 0 denote by Ft the σalgebra generated by Ft and all null sets of Ω (called the completion of Ft ). and W has independent increments. since it belongs to all Ft .tn . Remark 4.. Then either P(A) = 1 or P(A) = 0. W (s2 ) − W (s1 ) and 1 A are l independent. I ∈ B(Rn ). 0 < t1 < · · · < tn . .. h > 0. ω(tn ) − ω(1/j)) ∈ I} = Ct1 . In fact if A ∈ D it is obvious that Ac ∈ D. ∀ G ∈ G.. It is enough to show that for any A ∈ Ft . Moreover.... D = {A ∈ Ft : 1 A is independent of W (s2 ) − W (s1 )}.4 (onezero law) Assume that A ∈ F0+ . if (An ) is a sequence in D consisting of disjoint sets.h.I = {ω ∈ Ω : (ω(t1 + h) − ω(h).. (4.1) G = A....tn − 1 . Now the claim follows from Dynkin’s theorem (Theorem A. t > 0. 1 . Proof. Next result shows that F0+ contains only trivial sets. and let ϕ be a real random variable Ft –measurable.I belongs to G ..
I ∩ {tn < τ ≤ t} So. B(C0 ).. τ is Fτ measurable. ω(tn )) ∈ I} = Ct1 . +∞]) random variable τ in (C0 .tn . Remark 4... Moreover.. the σalgebra generated by all Ct1 .. < tn and I∈B(R) we deﬁne Ct1 .tn .I = {ω ∈ Ω : tn (ω) < τ.. We claim that Ct1 ..tn . then {τ > t} and {τ = t} belong obviously to Ft for all t ≥ 0.I is Fτ measurable.. For 0 < t1 < .tn . if A = {τ ≤ s} we have A ∩ {τ ≤ t} = {τ ≤ t ∧ s} ∈ Ft∧s ⊂ Ft . for all t ≥ 0..... where σ(τ ) is the σalgebra generated by τ .2 Stopping times A nonnegative extended (that is with values in [0. In fact ∞ {τ ≤ t} = k=1 τ ≤t+ 1 k ∈ Ft+ . (τ ) (τ ) (τ ) Then τ is not in general a stopping time with respect to (Ft )t≥0 ......6 Let τ be an extended random variable such that {τ < t} ∈ Ft . .. To any stopping time τ we associate the σalgebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}.46 Chapter 4 4.I ∩ {τ ≤ t} = Ct1 .I ∩{tn < τ }... Q) is called a stopping time with respect to the ﬁltration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0. Let us describe the σalgebra Fτ . If τ is stopping time... but it is a stopping time with respect to the ﬁltration (Ft+ )t≥0 .tn . In fact..... In other words we have Fτ ⊃ σ(τ ). In fact (τ ) Ct1 ... (ω(t1 ).I in included in Fτ and one can show that it coincides with Fτ .tn .. .
Then Wτ is Fτ measurable. τ (Ω) = {tk }.2) It is clear that the sequence (τn ) is decreasing.9 Let τ be a stopping time and set Wτ (ω) = W (τ (ω). let A ∈ Fτ . Proposition 4. Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. Then we have A ∩ τn = so that A ∈ Fτn . if t = 2k with k ∈ N we have n {τn = t} = Finally. Show that in this case Fτ is the σ–algebra Fτ : = {A ∈ F : A ∩ {τ = µk } ∈ Fµk for all k ∈ N}. In fact. . n 2 k k−1 ≤τ < n n 2 2 ∈ Ft . (4. Moreover. k 2n =A∩ k−1 k ≤τ < n n 2 2 ∈Fk. (4.Markov property 47 Exercise 4. Proof. that is that τ (Ω) = (µk )k∈N where µk is an increasing sequence of positive numbers. Proposition 4. Assume ﬁrst τ discrete. We start by showing that Wτ is Fτ measurable. Deﬁne for any n ∈ N and ω ∈ Ω τn (ω) = k 2n if k−1 k ≤ τ (ω) < n . Show that τ is a stopping time if and only if {τ = µk } ∈ Fµk for all k ∈ N.3) ∀ t ≥ 0. τn is a stopping time.7 Assume that the nonnegative random variable τ is discrete.8 Let τ be a stopping time. 0 < t1 < · · · < tk < · · · ω ∈ Ω. ∀ k ∈ N. ω). that is A ∩ {τ ≤ t} ∈ Ft . Proof. n 2 2 k ∈ N. We want to extend several properties concerning time t to general stopping times τ .
(4.6. Then {τa > t} = s∈[0. Then we have {τ ≥ t} = s∈[0. k ∈ N. ω ∈ Ω. Fix t ≥ 0. Then {Wτ ∈ I} ∩ {τ ≤ t} = = = ∞ k=1 [{Wtk ∞ k=1 [{Wτ Chapter 4 ∀ω ∈ Ak .t] {W (s) < a} = {W (s) < a} ∈ Ft . Let now τ = inf{t ≥ 0 : W (t) > a}.t] {W (s) ≤ a} = {W (s) ≤ a} ∈ Ft .4) τa = inf{t ≥ 0 : W (t) = a}. τ is a stopping time with respect to ﬁltration {Ft+ }t≥0 . s∈[0.t]∩Q Consequently. τa is a stopping time with respect to the ﬁltration (Ft )t≥0 . the conclusion holds in this case. lim Wτn (ω) = Wτ (ω).2) and set Wτn (ω) = W (τn (ω). k ∈ N.t]∩Q So. s∈[0.10 Let a ∈ R and set (1) for all I ∈ B(R). ω). (1) We use the convention that the inﬁmum of the empty set is +∞. By the previous argument we have {Wτn ∈ I} ∩ {τn ≤ t} ∈ Ft Now the conclusion follows letting n → ∞. Since W is continuous we have n→∞ ω ∈ Ω. by Remark 4. Example 4. Let now τ be arbitrary. Let I ∈ B(R). ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ Ft .48 and set Ak = {τ = tk }. ∞ {k∈N: tk ≤t} [{Wtk So. Then we have Wτ (ω) = W (tk )(ω). let τn be deﬁned by (4. .
is a Brownian motion for any h > 0. τ (Ω) = (tk ) and set Ai = {τ = ti } ∈ Fti . 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. Proof. Now (4. Assume ﬁrst that τ is discrete. . 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. α ∈ R. Continuity of C(t) is obvious. By (4.5) ∀ i ∈ N.2).5) is proved. is a Brownian motion. 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 )) . (4. l Since 1 Ai and W (t + ti ) − W (ti ) are independent. Proposition 4.11 Let τ be a stopping time. 1 2 α ∈ R. Then C(t) := W (t + τ ) − W (τ ).5) follows letting n tend to inﬁnity. We want now to show that the same holds when h is replaced by a stopping time. Let now τ be general and let (τn ) be the sequence of ﬁnite stoppping times deﬁned by (4.Markov property 49 4. For this it is enough to show that for any α ∈ R we have E eiαC(t) = E eiα(W (t+τ )−W (τ )) = e− 2 α t .3 The Brownian motion W (t + τ ) − W (τ ) We recall that W (t + h) − W (t). Then we have ∞ ∞ 1 2 t ≥ 0. We have just proved that E eiα(W (t+τn )−W (τn )) = e− 2 α t .5) it follows that C(t) is a Gaussian random variable Nt . t ≥ 0. Let us ﬁrst prove that the law of C(t) is Nt .
ϕ ∈ Bb (H).50 Chapter 4 4. (4. based on Itˆ’s formula.t we have Pt ϕ(x) = E[ϕ(W (t) + x)] = √ 1 2πt +∞ +∞ −∞ e− 2t (x−y) ϕ(y)dy 1 2 (4. ∀ t > 0. ξ2 1 e− 2t . +∞) × R → R. There is a simple deterministic proof based on maximum principle and a stochastic proof. inﬁnitely diﬀerentiable and fulﬁlls ut (t. x ∈ R. x) = 1 uxx (t. Given ϕ ∈ Bb (R) we want to study the evolution in time of ϕ(W (t) + x). ϕ ∈ Bb (R). x ∈ R. is a semigroup of linear operators in Bb (R).13 Prove that for t > s ≥ 0. that is P0 = I and where gt (ξ) = √ Pt+s = Pt Ps . which we will present later.4 Transition semigroup We shall denote by Bb (R) the set of all real. s ≥ 0.8) 2πt We deduce. Remark 4.12 One can show that u(t. 2 u(0. t > 0. x) = Pt ϕ(x) is continuous. t ≥ 0. t ≥ 0. x) = ϕ(x).9) . we deﬁne the transition semigroup Pt ϕ(x) = E[ϕ(W (t) + x)]. Pt−s ϕ(x) = E[ϕ(W (t) − W (s) + x)]. that Pt . ξ ∈ R. x ∈ R.7) = −∞ gt (x − y)ϕ(y)dy. by an explicit computation. is the unique solution of the Dirichlet problem above. x ∈ 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. x). t ≥ 0. o Exercise 4. To this purpose. (4.6) Since the law of W (t) + x is Nx. ∀ t. In fact one checks easily that if ϕ ∈ Cb (R) then the function u : [0. Notice that Pt coincides with the heat semigroup in R. ∀ x ∈ R. (4. x) = Pt ϕ(x). u(t.
5 Markov property In this section we shall use several properties of conditional expectation. Set X(t) = W (t) + x = (W (s) + x) + (W (t) − W (s)) =: U + V.13) h(u) = E[ϕ(u + V )] = E[ϕ(u + W (t) − W (s))] = Pt−s ϕ(u). Equivalently ϕ(X(t))dP = A A t ≥ 0. 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 ].6 it follows that E[ϕ(X(t))Fs ] = E[ϕ(U + V )Fs ] = h(U ).10) is proved. Proof. Notice that U is Fs measurable and V is independent of Fs . So.15 Let s > 0.10) (Pt−s ϕ)(X(s))dP. . (4. To prove the last statement notice that by Proposition B. they are recalled in Appendix A. where (recall Exercise 4. By Proposition B.14 For any t > s > 0 and any ϕ ∈ Bb (H) we have E[ϕ(X(t))Fs ] = (Pt−s ϕ)(X(s)). where x ∈ R. ∀ A ∈ Fs . Show that E[ϕ(W (t) + ηFs ] = (Pt−s ϕ(η)). Exercise 4. η a Fs measurable random variable and ϕ ∈ Bb (R). We are here concerned with the stochastic process X(t) = X(t. (4.Markov property 51 4. x) = W (t) + x. (4.11) Moreover X(·) is a Markov process.
i = 1. (4.52 Chapter 4 4. ∀ A ∈ Fτ .1 Strong Markov property We now consider conditional expectation with respect to Fτ where τ is a stopping time.13) Proof. .16 Let τ be a stopping time and let t ≥ τ and ϕ ∈ Bb (H). n.. Proposition 4. 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. Assume ﬁrst that τ is of the form τ (Ω) = (tk )k∈N . Therefore. so that X(t) = W (t). Therefore. ∞ (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.13) is proved. (4.Then we have E[ϕ(X(t))Fτ ] = (Pt−τ ϕ)(X(τ )). we can write.12) Equivalently ϕ(X(t))dP = A A (Pt−τ ϕ)(X(τ ))dP.10) and taking into account that by the deﬁnition of Fτ we have A ∩ {τ = ti } ∈ Fti . We set x = 0 for simplicity. Let A ∈ Fτ . . by (4..5.. (4.
14) . • m(t) = min B(s). 4. Then we have P(B(t) ≤ a.16) t ≥ 0.Markov property 53 Let now τ be an arbitrary stopping time and let (τn ) be deﬁned by (4.t] b ∈ R. s∈[0. • Tb = inf{t ≥ 0 : B(t) = b}. t ≥ 0. Now the conclusion follows letting n → ∞. Let A ∈ Fτ . (4. t ≥ 0. We have. taking into account that {Ta ≤ t} = {M (t) ≥ a} (4.13) it follows that ϕ(W (t))dP = A A (Pt−τn ϕ)(W (τn ))dP for all A ∈ Fτ .6 Some consequences of the strong Markov property In this section we want to determine the laws of the following important random variables. a ≤ 0. M (t) ≥ a) = P(B(t) ≥ a). Property (4. • M (t) = max B(s). Then by (4. t ≥ 0. s∈[0.12) is called the strong Markov property of W .2). Proof. Lemma 4.17 Let a ≥ 0 and t ≥ 0.15) To ﬁnd the laws of Ta with a ≥ 0 and M (t) the following lemma is useful.8) F τ ⊂ F τn for all n ∈ N.t] Notice that {Ta ≤ t} = {M (t) ≥ a}. and {Ta ≤ t} = {m(t) ≤ a}. Recall that (Proposition 4. a ≥ 0 (4.
By the strong Markov property it follows that P(W (t) ≤ a.a] (a)]dP = {Ta ≤t} E[Pt−Ta 1 [a.+∞) (a)]dP l = {Ta ≤t} E[1 [a.54 P(W (t) ≤ a.+∞) (a). a > 0. W (t) ≤ a) + P(M (t) ≥ a. l since {Ta ≤ t} ∈ FTa . (4.+∞) (W (t))FTa ]dP l = P(W (t) ≥ a. l E[Pt−Ta 1 (−∞.18 (Reﬂection principle) For all a ≥ 0 we have P(M (t) ≥ a) = 2P(W (t) ≥ a). M (t) ≥ a) = {Ta ≤t} ∀ s > 0.a] (W (t))FTa ]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞. Ta ≤ t) = {Ta ≤t} Chapter 4 1 (−∞. Proof.17) . M (t) ≥ a) = P(W (t) ≤ a. W (t) ≥ a). M (t) ≥ a) = {Ta ≤t} E[1 (−∞.a] (W (t))FTa ]dP. l On the other hand. we have. as easily checked. l l Therefore P(W (t) ≤ a.a] (a) = Ps 1 [a.a] (W (t))dP l = {Ta ≤t} E[1 (−∞.a] (W (Ta ))]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞.a] (a)]dP. Ps 1 (−∞. Write P(M (t) ≥ a) = P(M (t) ≥ a. M (t) ≥ a) = P(W (t) ≥ a). Proposition 4.
. Obviously the laws of M (·) and W (·) on C0 ([0. By Proposition 4.Markov property 55 Now. We have in fact by Proposition 4. Remark 4. The following results can be proved similarly. Moreover. the conclusion follows.19) Proof.18 for any a ≥ 0 P(M (t) ≥ a) = 2P(W (t) ≥ a) = √ 2 2πt +∞ a e− 2t dξ ξ2 = P(W (t) ≥ a). though random variables M (t) and W (t) are diﬀerent.19 it follows that at ﬁxed time t the law of M (t) coincides with that of W (t). By (4. W (t) ≥ a) = P(W (t) ≥ a) so. 2πt (4. W (t) ≤ a) = P(W (t) ≥ a). by Lemma 4.+∞) (ξ)dξ.19 (Law of M (t)) For all t ≥ 0 we have ξ2 2 (M (t)# P)(dξ) = √ l e− 2t 1 [0.14) and Proposition 4.18 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. it is clear that P(M (t) ≥ a. Corollary 4. Then we have a2 a ((Ta )# P)(dt) = √ e− 2t dt. in particular M (t) is increasing whereas W (t) is not. η2 a2 d a P(Ta ≤ t) = √ e− 2t dt.17 we have P(M (t) ≥ a. dt 2πt3 which implies the conclusion.18 we can easily deduce the expressions of the laws of M (t) and Ta for all a ∈ R. Corollary 4.20 From Corollary 4.21 (Law of Ta ) Let a ≥ 0 and t ≥ 0.18) Proof. 2πt3 (4. +∞)) are diﬀerent.
∀ t ∈ [0. V (t) is called the Brownian motion . absorbed in 0 t ≥ 0. For any x ≥ 0 we set in this section Moreover we consider the following processes which take values in [0.25 (Law of Ta ) Let a ∈ R and t ≥ 0. Then we have a2 a e− 2t dt. Chapter 4 (4. (ii) U (t) = W (t) + x.23) 4. (4. τx ].20) Proposition 4.56 Lemma 4.24 (Law of m(t)) For all t ≥ 0 we have (m(t)# P)(dξ) = − √ ξ2 2 e− 2t 1(−∞. t ≥ 0. 2πt (4. ((Ta )# P)(dt) = √ 2πt3 (4.22 Let a ≤ 0 and t ≥ 0. Then we have P(W (t) ≥ a. m(t) ≤ a) = P(W (t) ≤ a).21) Corollary 4. U (t) is called the Brownian motion reﬂected in 0 (iii) V (t) = W (t ∧ τx ) + x.23 (Reﬂection principle) For all a ≤ 0 we have P(m(t) ≤ a) = 2P(W (t) ≤ a).22) Corollary 4. x ≥ 0.a] (ξ)dξ. Y (t) is called the Brownian motion killed in 0.7 Application to partial diﬀerential equations τx = inf{t ≥ 0 : W (t) + x = 0} = T−x . +∞). (i) Y (t) = W (t) + x.
x) = 0 [gt (x − y) − gt (x + y)]ϕ(y)dy.24) We are here concerned with the process Y (t) = W (t) + x. Proof. ut (t. E[ϕ(W (t) + x)1 t>τx ] = E[1 t>τx (Pt−τx ϕ)(0)] =: E[ψ(τx )]. (4. x). (4. l l where ψ(λ) = 1 t>λ l 1 2π(t − λ) R x ≥ 0. Proposition 4. t > 0. x) := E[ϕ(W (t) + x)1 t≤τx ]. ξ2 λ > 0. x) is the solution of the Dirichlet problem in [0. 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. +∞)) Ut ϕ(x) := u(t. using the strong Markov property we ﬁnd that. Deﬁne for any ϕ ∈ Bb ([0. t > 0 2 (4. x ≥ 0.8). x) = 1 uxx (t. . +∞). x > 0.25) u(t.26) where g is deﬁned by (4.Markov property 57 4. τx ]. t ≥ 0. e− 2(t−λ) ϕ(ξ)dξ. l t ≥ 0. x) = E[ϕ(W (t) + x)1 t≤τx ] l = Pt ϕ(x) − E[ϕ(W (t) + x)1 t>τx ]. l where ϕ is extended to R by setting ϕ(−x) = ϕ(x).7.1 The Dirichlet problem in the halfline ∀ t ∈ [0. x) = ϕ(x). 0) = 0.26 We have +∞ u(t. x ≥ 0. x ∈ H. We have u(t. We are going to show that u(t. u(0.
by a direct computation.25). x) is the solution of the Dirichlet problem (4. +∞)) we set Qt ϕ(x) = E[ϕ(W (t) + x)] = (2πt)−1/2 R e− x−y2 2t ϕ(y)dy.58 Next. Ut ϕ(x) = u(t. a We recall that Erfc (a) = 2 √ π . for x > 0. 4. Since. Replacing in the last integral y with −y.2 The Neumann problem U (t) = W (t) + x.y ϕ(y)dy.y = − √ e− 2t = −gt (x + y) ∂x 2πt we get u(t. recalling the law of τx (see (4. R where (2) t Gx. x ≥ 0. +∞ −r 2 e dr. s ≥ 0. (x+y)2 1 ∂ Gx. that if ϕ ∈ Cb ([0.23)) 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. +∞)).7. t ≥ 0. Moreover U0 = I and Ut+s = U (t)U (s) for all t. We consider the process For any ϕ ∈ Bb ([0. and the conclusion follows.y = 0 gt−s (y)gs (x)ds = 1 Erfc 2 x + y √ 2t . we see that +∞ Qt ϕ(x) = 0 (2) [gt (x − y) + gt (x + y)]ϕ(y). It is easy to check. x) = R gt (x − y)ϕ(y)dy − R gt (x + y)ϕ(y)dy.
2 ux (t. ∞) × [0. x) = Zt ϕ(x) we see that u is the solution to the Ventzell problem. ∞) × [0.8). +∞)). x). Let us consider the stochastic process. t ≥ 0. ∞) and solves the following Neumann problem ut (t. Therefore Zt ϕ(x) = Ut ϕ(x) + ϕ(0) P(T−x ≤ t). Now it is easy to check that if ϕ ∈ Cb ([0. u(0. where Ut is deﬁned by (4. So. x ≥ 0. x) = 1 uxx (t.3 The Ventzell problem V (t) = W (t ∧ τx ) + x. x ≥ 0. Set Zt ϕ(x) = E[ϕ(W (t ∧ τx ) + x)]. x) = 1 uxx (t. . t > 0. t > 0.7. Zt ϕ(x) = Ω ϕ ∈ Bb ([0. +∞)). ut (t. x). t ≥ 0. x) = ϕ(x). [gt (x − y) − gt (x + y)]ϕ(y)dy + √ 2πt −∞ 0 If ϕ ∈ Cb ([0. where x ≥ 0. 4. ϕ(B(t ∧ τx ) + x)dP ϕ(W (t) + x)dP + ϕ(0)dP. {t≥τx } = {t<τx } since W (τx ) + x = 0. So x y2 ϕ(0) e− 2t dy. Moreover Q0 = I and Qt+s = Q(t)Q(s) for all t. x) = ϕ(x). s ≥ 0. x ≥ 0. 0) = 0. inﬁnitely diﬀerentiable in (0.Markov property 59 where gt is deﬁned by (4. 0) = 0. x) = Qt ϕ(x) is continuous in [0. +∞)) then u(t. ∞). u(0.24). t ≥ 0 2 +∞ Zt ϕ(x) = uxx (t. setting u(t. x ≥ 0. x ≥ 0.
Chapter 4 .60 Moreover Z0 = I and Zt+s = Z(t)Z(s) for all t. s ≥ 0.
ti ) . T ]. < tn . An elementary process F (t). The family of σ–algebras (Ft )t≥0 is increasing. in (Ω.A = {ω ∈ C0 : (B(t1 ). l 61 (5.tn . t ≥ 0 the natural ﬁltration of B augmented with the null sets of P.. Similarly as in Chapter 4.1. T ]..1 Let T > 0.. for any t > 0 we denote by Ct the algebra of all cylindrical sets Ct1 . F . it is called the natural ﬁltration of B. We denote by (Ft )t≥0 the completion of the natural ﬁltration of B with all Pnull sets of Ω. P) is a stochastic process of the form n F = i=1 Fi−1 1 [ti−1 . . t ∈ [0. We say that a stochastic process F (t).1) . is adapted to the Brownian motion B if F (t) is Ft measurable for any t ∈ [0.··· . t ∈ [0.1 Deﬁnition of Itˆ’s integral o Itˆ’s integral for elementary processes o Deﬁnition 5. P). F . 5.1 5.Chapter 5 The Itˆ integral o In all this chapter B represents a Brownian motion in a probability space (Ω. T ]. We call Ft . Moreover. we denote by Ft the σalgebra generated by Ct and all Pnull sets of Ω.. B(tn )) ∈ A} where 0 ≤ t1 < . tn ≤ t and A ∈ B(Rn )..
Let us prove (5. T ]. t ∈ [0. Therefore we have n E[I(F )] = j=1 E[Fj−1 ]E[B(tj ) − B(tj−1 )] = 0 and (5. T ).2) Obviously any elementary process is adapted.3) (5.62 The Itˆ integral o where n ∈ N. We have n E[I(F )] = j=1 E[Fj−1 (B(tj ) − B(tj−1 ))]...3) is proved. 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. 1. (5. 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 )).3. it is independent of B(tj )−B(tj−1 ).4) E 0 F (s)dB(s) = 0 Proof. (5. . 0 = t0 < t1 < · · · < tn = T and Fi is Fti measurable for any i = 0. by Lemma 4. n − 1. F . Since Fj−1 is Fj−1 measurable. Let us prove (5. For any elementary process F (t).. P) and we have T E 0 T F (s)dB(s) 2 T =0 E(F (s)2 )ds.4). 2 Proposition 5. Then I(F ) ∈ L2 (Ω. Notice now that for j < k the random variable Fj−1 Fk−1 [B(tj ) − B(tj−1 )]. We have n E[I(F )2 ] = E j=1 Fj−1 2 [B(tj ) − B(tj−1 )]2 +2E j<k Fj−1 Fk−1 [B(tj ) − B(tj−1 )] [B(tk ) − B(tk−1 )] .3).2 Assume that F ∈ EB (0. .
T ) × F and such that T F ZT := E 0 F (t. B(0. ω) → F (t. The scalar product on Z is deﬁned by T F. T ) × F . 5. 2 2 2 a. T ] × Ω.3 Let F. 2 Exercise 5. (t. F1 = E 0 F (t. Obviously any elementary process F belongs to Z. It follows that E[I(F ) ] = j=1 2 n E[Fj−1 2 ](tj − tj−1 ). G ∈ EB (0. . b ∈ R. ω). Prove that T T T E 0 F (s)dB(s) 0 G(s)dB(s) = 0 E[F (s)G(s)]ds. ·)F1 (t. taking the expectation. as required. ·)dt. T ] × Ω. dt × P) the Hilbert space of all (equivalence classes of) functions F : [0. ·)2 dt < ∞. T ). Hint: Use the identity ab = 1 1 1 (a + b)2 − a2 − b2 . B(0. which are measurable with respect to the product σalgebra.Chapter 5 63 is Fk−1 –measurable and consequently is independent of B(tk ) − B(tk−1 ).2 General deﬁnition of Itˆ’s integral o Let us denote by ZT := L2 ([0. we have E [Fj−1 Fk−1 [B(tj ) − B(tj−1 )][B(tk ) − B(tk−1 )]] = E [Fj−1 Fj−1 [B(tj ) − B(tj−1 )]] E[B(tk ) − B(tk−1 )] = 0. Therefore.1.
(5. .b) .64 In view of (5. b. 2 Processes belonging to EB (0. T ) 2 of EB (0. t ≥ 0 and the following properties are fulﬁlled.5) (5. Note ﬁrst that an elementary process is a linear combination of processes of the form F 1 [a.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. the mapping T 2 EB (0.4).7) We can deﬁne in an obvious way the Itˆ integral o interval [a. b] ⊂ [0. 2 is an isometry. c ∈ [0. FT . for any a. So. We have b F (s)dB(s) in any E a F (s)dB(s) 2 = 0. Moreover. T ] we have c b c F (s)dB(s) = a a F (s)dB(s) + b F (s)dB(s). T ) in ZT . T ]. the Itˆ integral can be uniquely deﬁned by extension for any preo dictable square integrable process F (t).6) E 0 F (s)dB(s) = 0 Moreover. from Exercise 5. l with F Fa measurable. P)F → 0 The Itˆ integral o F (s)dB(s). T ) are called predictable. Let us now present a characterization of predictable processes (that is of 2 space EB (0. T )). b a (5. T ) ⊂ ZT → L2 (Ω. and b b E a F (s)dB(s) = a (EF (s)2 )ds. T E 0 T F (s)dB(s) 2 T =0 E(F (s)2 )ds. Therefore it can be uniquely extended to the closure EB (0.
Exercise 5. 0 Show that F = 0. P. So. We call A × [a. Then we set D = {A ∈ P : 1 A ∈ ΛT }. P. Since any element of L2 ([0. Prove that t t ϕ s F (r)dB(r) = s ϕ F (r)dB(r). l with A Fa measurable. T ]) is precisely L2 ([0. P.1)(iii). P). Now k=1 the conclusion follows by Theorem A. dt × P). For this we shall use the Dynkin Theorem. φn → φ = 1lA in L2 ([0. T ] × Ω.1). l We claim that D is a λsystem. i. let us show (A. T ] × Ω. that it fulﬁlls (A. P.1.e. Let (An ) ⊂ D be mutually disjoint sets and set n φn = k=1 1 Ak . by the monotone convergence theorem.1)(iii) is fulﬁlled. We denote by R the family of all predictable rectangles and by P the σalgebra generated by R.b) . dt × P).5 The closure EB ([0. T ] × Ω. T ] × Ω. 2 Proof. b) a predictable rectangle. it is enough to show that 1lA ∈ ΛT for any A ∈ P. dt×P). (5. l Then.7 Let F ∈ L2 ([0.8) Exercise 5.Chapter 5 65 In turn each F can be approximated by linear combinations of characteristic functions of Fa measurable sets. [s. T ] is a real random variable in the probability space ([0. Properties (B. So. 2 Proposition 5. dt × P). Deﬁnition 5. dt × P) such that T F (s)dB(s) = 0. T ]×Ω.4 A real predictable process in [0. see Appendix A.1)(i)(ii) are clear. We ﬁrst note that R is a πsystem. dt × P) where A = ∞ Ak . T ] and let ϕ ∈ L∞ (Ω. . P. T ] × Ω. dt × P) can be approximated by a monotonic sequence of simple functions. Fs . T ]) in L2 ([0. it is natural to approximate a general predictable process by linear combinations of functions of the form 1 A×[a. P is called the σalgebra of all predictable events. t] ⊂ [0.6 Let F ∈ L2 ([0. Denote by ΛT the closure of EB ([0. P. P. A ∈ D and (A. T ] × Ω.
tn } ∈ Σ(0. T ] and the mapping [0.66 The Itˆ integral o 5.10) Example 5. dt × P).tj ) l and set T n Iσ (F ) := 0 Fσ (s)dB(s) = j=1 F (tj−1 )(B(tj ) − B(tj−1 )). P). For any decomposition σ = {t0 . · · · . 2 2 2 ..8 Let us prove that T 0 1 B(t)dB(t) = (B 2 (T ) − T ). T ] × Ω. tn } ∈ Σ(0. T ) and.. P. L2 (Ω)) the space of all stochastic processes which are mean square continuous and adapted. T ]. 2 (5. . using the continuity of F one can check easily that lim Fσ = F. t1 . (5. T ]. T ). in L2 ([0. T ] → L2 (Ω. T ) consider the elementary process n Fσ := j=1 F (tj−1 )1 [tj−1 . 2 Clearly Fσ ∈ EB (0.9) σ→0 Consequently we have T σ→0 lim Iσ (F ) = 0 F (s)dB(s) in L2 (Ω. F .2 Itˆ integral for mean square continuous o processes We shall denote by CB ([0. is continuous. We recall that if F ∈ CB ([0. P).11) Let σ = {t0 . L2 (Ω)) then F (t) is Ft measurable for all t ∈ [0. t1 . t → F (t). 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 . F . (5..
5. Proposition 5. P)) as the following result shows. k=1 Recalling that the quadratic variation of B is T (Theorem 3. X(t). in L2 (Ω. take for instance t X(t) = 0 B(s)dB(s) = 1 (B 2 (t) − t). we deduce that T 1 B(t)dB(t) = lim Iσ (B) = (B 2 (T ) − T ). However. F . is not a process with independent increments in general (unless f is deterministic). t ≥ 0. We ﬁrst notice that X(t). T ] × Ω. t ∈ [0. σ→0 2 0 Exercise 5. t ≥ 0. in L2 (Ω. 2 and n σ→0 lim B k=1 tk + tk−1 2 (B(tk ) − B(tk−1 )) = 1 2 B (T ). 2 Therefore the deﬁnition of the Itˆ integral depends on the particular form of o the integral sums.Chapter 5 Then we have Iσ (B) = 1 1 2 B (T ) − 2 2 n 67 (B(tk ) − B(tk−1 ))2 . P). T ]. F . Then we have E[(X(t2 ) − X(t1 ))(X(t4 ) − X(t3 ))] = 0 .10 Let 0 ≤ t1 ≤ t2 ≤ t3 ≤ t4 ≤ T . has orthogonal increments (in the sense of L2 (Ω. P). dt × P and set X(t) = 0 F (s)dB(s).9 Prove that n σ→0 lim B(tk )(B(tk ) − B(tk−1 )) = k=1 1 (B 2 (T ) + T ). F .19). P. 2 t ≥ 0.3 The Itˆ integral as a stochastic process o t Let F ∈ L2 ([0.
P). T ] we have t E(X(t) − X(t0 )2 ) = t0 E(F (r)2 )dr . is a Ft –martingale Proof. Moreover. dt×P). Proposition 5. is mean square continuous. Ft . taking into account (5. We show now that X(t). so that t→t0 lim E(X(t) − X(t0 )2 ) = 0. T ]. T ]×Ω. Let t > s. .68 Proof.12 X(t). t ≥ 0. Proof. Then X ∈ CB ([0.t4 ] F (s)dB(s) l = 0 1 [t1 . Proposition 5.11 Let F ∈ L2 ([0.t4 ] E(F 2 (s))ds = 0. Since t X(t) − X(s) = s F (r)dB(r). P. t ∈ [0. For this we ﬁrst prove that it is a martingale with respect to the ﬁltration (Ft ) (see Appendix C). for any t. T ]. we have E[X(t)Fs ] = X(s) + E s t F (r)dB(r)Fs . X(t) ∈ L2 (Ω. is a continuous process.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 . l l We are going to show that X(t). We know that for any t ∈ [0. t0 ∈ [0. The conclusion follows. L2 (Ω)). t ≥ 0. We have in fact. T ].t2 ] 1 [t3 . then that it is a continuous process.t2 ] F (s)dB(s) l 0 1 [t3 .
Theorem 5.12) is proved and the conclusion follows.12) when F is an elementary process. T ) such that Fn → F and set Xn (t) = 0 (1) in L2 ([0. 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.ti ) .13) 2 Proof. t (5.12) Notice that this is not obvious since s F (r)dB(r) is not independent of Fs in general (1) . F . So. We are now ready to prove the continuity of X. T ] × Ω. dt × P) and let t X(t) = 0 F (s)dB(s). T ] × Ω. It is enough to prove (5. T ]. n ∈ N. tn = t and Fi−1 ∈ L2 (Ω. 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 . (5. . P. Let (Fn ) ⊂ EB (0.13 Let F ∈ L2 ([0. Then X has a continuous version and T E sup X(t)2 ≤ 4 t∈[0. because F (r) contains in general the “story” of the Brownian motion from 0 to r. P. n F = i=1 Fi−1 1 [ti−1 . dt × P) t Fn (s)dB(s). In this case.T ] 0 EF (s)2 ds. t ∈ [0. taking into account that Fs ⊂ Fi−1 . l where s = t1 . T ]. t ∈ [0.Chapter 5 So. · · · . (5. P).
which coincides with X(ω) is continuous. F.8. Consequently (Xn )(ω) is Cauchy in C([0.T ] T ≤ 4E(Xn (T ) − Xm (T )2 ) = 4E 0 Fn (s) − Fm (s)2 ds . Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. Taking into account Proposition 5. .12 we see that X(t). Proposition 5.1 Itˆ integral with stopping times o Stopping times We proceed here as in Section 4. P) is called a stopping time with respect to the ﬁltration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0.14 Let τ be a stopping time. The proofs of the two following propositions are completely similar to that of Proposition 4. So. Then by Corollary C.2. Then W (τ ) is Fτ measurable and W (t + τ ) − W (τ ). ω ∈ Ω. A nonnegative extended random variable τ in (Ω. Proposition 5. P). T ]) for almost all ω and its limit.4.4 5. is a continuous Ft –martingale. F. m ∈ N E sup Xn (t) − Xm (t)2 t∈[0. t ≥ 0 is a Brownian motion in (Ω.8 and 4. t ∈ [0.70 The Itˆ integral o Since B(t) is continuous it is clear that Xn (t) is continuous for all n ∈ N. T ]. To any stopping time τ we associate the σalgebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}.15 Let τ be a stopping time and set W (τ )(ω) = W (τ (ω))(ω).6 it follows that for any n. 5. they will be omitted.
tn ). ω ∈ Ω. ω) = X(τ (ω).... The following result reduces a Itˆ’s integral with a stopping time to a o usual one between 0 to T . .. dt × P) and let τ ≤ T be a stopping time.14) Proof. Proposition 5. . λ × P) and set X(t) = 0 F (s)dB(s).. T ]. t ∈ [0. t ∈ [0.. T ].2 Itˆ’s integral with stopping times o t Let F ∈ L2 ([0. T ].4. Then Ai ∈ Fti . .. ¯ Consider now the stochastic process h(s) = 1 {s≤τ } . l (5. τ (Ω) = (t1 . t2 . P.Chapter 5 71 5. P. n. t2 ) we have h(s)(ω) = 1 if ω ∈ A2 ∪ · · · ∪ An . T ] × Ω. Let moreover τ ≤ T be a stopping time. ω). It is enough to prove the result when τ is of the form. i = 1. one can see that X(τ ) is Fτ –measurable. Then we have τ T F (s)dB(s) = 0 0 1 {s<τ } F (s)dB(s). Set Ai := {τ = ti }. s ∈ [0.15 and using the fact that X(t). 0 where X(τ. with 0 < t1 < t2 < · · · < tn ≤ T . t1 ). T ] × Ω.. Deﬁne τ F (s)dB(s) : = X(τ ). . s ∈ [0. If s ∈ [t1 ..16 Let F ∈ L2 ([0. Arguing as in Proposition 5. l We have h(s) = 1. n. has a continuous version. i = 1.
72 so that h(s) = 1 A2 ∪···∪An = 1 Ac .. P. T ] × Ω. l l 1 Similarly.. L(Rm .. T ] × Ω. dt×P.∪An )c . m. g ∈ L2 ([0. . i.. i = 1. P.5 Multidimensional Itˆ integrals o B(t) = (B1 (t). Rd )). tk ) with k ≤ n we have h(s) = 1 (Ak ∪.17 Let f.. We deﬁne the Itˆ o integral of F as the ddimensional process T m T F (t)dB(t) 0 i = j=1 0 Fi. T ] × Ω. L(Rm . Rd ))). Let (Ft )t∈[0.. P. First we need a lemma whose simple proof is left to the reader.. t≥0 Let m ∈ N be ﬁxed and consider a standard mdimensional Brownian motion in the probability space (Ω. j = 1.. (5. F . 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 ). dt×P)). . P. Rd ) (that is such that any matrix element belongs to L2 ([0. dt × P.. if s ∈ [tk−1 . Lemma 5. dt × P).j 0 E[f (s)g(s)]ds.j (t)dBj (t). We shall denote this space by L2 ([0.T ] be the natural ﬁltration of B (augmented with all Pnull sets of Ω) . . d. Then we have T T T E 0 f (s)dBi (s) 0 g(s)dBj (s) = δi.15) Let now F ∈ L2 ([0. l 5. T ]×Ω. We shall deﬁne the Itˆ integral for predictable processes with values o in L(Rm .. .. P). Bm (t)).
i = 1. Then we have T 2 T E 0 F (t)dB(t) = 0 E[Tr (F (t)F ∗ (t))]dt. d. dB(t) = 0 EF (t)2 dt. d m 0 T EI(F ) = i=1 j=1 2 E[Fi.16). Remark 5.17) .16) reduces to T 2 T E 0 F (t). Rd )). In this case we shall write the Itˆ integral of F as o T F (s). P. It follows that d m T 2 EI(F )2 = i=1 E j=1 0 Fi. (5. (5. L(Rm ..Chapter 5 73 Proposition 5.15).18 Let F ∈ L2 ([0..j (t)2 ]dt. T ] × Ω. dB(s) 0 and formula (5. Rm ) is isomorphic to Rm and F becomes a vector F = (F1 . · · · .16) where Tr denotes the trace.19 Assume that d = 1 so that L(Rd . which yields (5. Proof. Then we have m T (I(F ))i = j=1 0 Fi. .j (t)dBj (t). dt × P. taking into account (5. Fm ). Set I(F ) = T 0 F (t)dB(t)..j (t)dBj (t) and.
74 The Itˆ integral o .
P. t ≥ 0.Chapter 6 The Itˆ formula o 6. (6. X is adapted. x∈R 75 . 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). 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. σ ∈ L2 ([0. continuous and continuous in mean square. T ] × Ω. x∈R and k ϕ k = ϕ 0 + j=1 sup Dj ϕ(x). F . We are given two stochastic processes b. B a real Brownian motion. o Given a regular real function ϕ. (Ft )t≥0 the natural ﬁltration of B augmented with the null sets of P and P the σalgebra of all predictable events (also augmented with the null sets of P).1) where x ∈ R.1 Introduction Let (Ω. we are going to give a meaning to the Itˆ’s diﬀerential ϕ (X(t)). o k We need some notations. We set dX(t) = b(t)dt + σ(t)dB(t) and call dX(t) the Itˆ diﬀerential of X.
5) Proof. (6. Writing (dB)2 = dt is justiﬁed by Lemma 6. 2 (6.1 One can deduce formally Itˆ’s formula by proceeding as folo lows. T ]. Tthe following result on quadratic sums of a process is a generalization of Theorem 3. We shall write (6. 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 .2) in the diﬀerential form.2 Let F ∈ CB ([0. P) (6. that is terms with (dt)2 and dt dB(t). k=1 . also as ϕ (X(t)) = ϕ (X(t))dX(t) + 1 2 σ (t)ϕ (X(t))dt. setting ϕ (X(t)) = ϕ (X(t))σ(t)dB(t).3) t ≥ 0. Put (dB)2 = dt and neglet the terms of order greater than dt.19.76 We shall prove the following Itˆ’s formula.4) 1 2 σ (t)ϕ (X(t)) + b(t)ϕ (X(t)) dt. P)) and let η = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. + or. o t Chapter 6 ϕ(X(t)) = ϕ(x) + 0 t ϕ (X(s))σ(s)dB(s) (6.2 below. 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) 1 2 σ (s)ϕ (X(s)) + b(s)ϕ (X(s)) ds. F . T ). F . L2 (Ω. Lemma 6. Set Jη := n F (tk−1 )(B(tk ) − B(tk−1 ))2 . 2 + 0 t ≥ 0. Remark 6. 2 t ≥ 0.
P). obviously n η→0 T lim F (tk−1 )(tk − tk−1 ) = k=1 0 F (s)ds in L2 (Ω. 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.7) = k=1 EF (tk−1 )2 E B(tk ) − B(tk−1 )2 − (tk − tk−1 ) 2 . To prove (6. F . .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 Itˆ formula o It is enough to prove that η→0 77 n 2 = 0. the last sum vanishes. (6.
3 Let ϕ ∈ Cb (R). p − 1. λ1 ]. we have E Jη − k=1 n n 2 Chapter 6 F (tk−1 )(tk − tk−1 ) =2 k=1 E[F (tk−1 )2 ](tk − tk−1 )2 n ≤ 2η k=1 E[F (tk−1 )2 (tk − tk−1 )] → 0.78 since F (tk−1 ) and B(tk ) − B(tk−1 ) are independent. σi are Fti measurable for any i = 0. 1.2) when 3 ϕ ∈ Cb (R). . Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]..8) where p ∈ N. Now we are in position to prove Itˆ’s formula. taking into account that E[B(tk ) − B(tk−1 )2 ] = (tk − tk−1 ). l (6.λi ) .2) in [0.8) and X by (6. l σ= i=1 σi−1 1 [λi−1 . λ1 ] and X(t) = b0 t + σ0 B(t). 3 2 Proof. . Now. The conclusion follows. Then identity (6. In this case we have b(t) = b0 . b and σ given by (6. t ∈ [0. p p b= i=1 bi−1 1 [λi−1 . as η → 0. E[B(tk ) − B(tk−1 )4 ] = 3(tk − tk−1 )2 .2) holds. Since Cb (R) is dense in Cb (R) it is enough to show (6. t] with t ≤ λ1 . σ(t) = σ0 . First we assume that b o and σ are elementary processes.1).. t ∈ [0. 0 = λ0 < λ1 < · · · < λp and bi . 2 Lemma 6.. x ∈ R.λi ) . We start by proving (6. Let η = {t0 = 0 < t1 < · · · < tN = t}.
F .1  ≤ 1 ϕ 2 b0 2 (tk − tk−1 )2 → 0 as η → 0 2 k=1 N .9) Concerning I1 we have N I1 = k=1 ϕ (X(tk−1 ))(b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 )).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. So. (6. P).12) In fact I2.The Itˆ formula o On the other hand. 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 .11) It is easy to check that lim I2.2 + I2. (6.1 = lim I2. t η→0 t lim I1 = 0 ϕ (X(s))b(s)ds + 0 ϕ (X(s))σ(s)dB(s) in L2 (Ω.2 = 0 in L1 (Ω. F .1 + I2.3 . P) η→0 η→0 (6. (6.
ϕ (ξk ) − ϕ (X(tk−1 )) ≤ ϕ 0 (1 − ξ)X(tk ) − X(tk−1 ).80 and (1) N Chapter 6 EI2. We have N 1 Rη = k=1 0 (1 − ξ)[ϕ (ξk ) − ϕ (X(tk−1 ))](X(tk ) − X(tk−1 ))2 dξ. where ξk = (1 − ξ)X(tk−1 ) + ξX(tk ). .13) So. so that.14). 3 Since ϕ ∈ Cb (R) we have by the mean value theorem. (6. the conclusion will follow provided η→0 lim ERη  = 0. N Rη  ≤ ϕ Consequently N 3 k=1 X(tk ) − X(tk−1 )3 . (6.2 it follows that t η→0 lim 2I2. we deduce setting 1 − ξ ≤ 1. N Rη  ≤ 3 ϕ 3 b0 3 k=1 (1) tk − tk−1 3 + 3 ϕ 3 σ0 3 k=1 B(tk ) − B(tk−1 )3 since EB(t) ≤ [EB 2 (t)]1/2 = t1/2 . P).3 = 0 ϕ (X(s))σ 2 (s)ds in L2 (Ω.2  ≤ ϕ 2 b0  σ0  k=1 N (tk − tk−1 )EB(tk ) − B(tk−1 ) ≤ ϕ 2 b0  σ0  k=1 (tk − tk−1 )3/2 → 0 as η → 0. by Lemma 6.14) Let us prove (6. Moreover. F .
.2) holds for all t ∈ [0. The proof is complete when t ≤ λ1 .16) 1 σj (s)ϕ (Xj (s)) + bj (s)ϕ (Xj (s)) ds.10)) j→∞ lim Xj = X in CB ([0. for any j ∈ N. T ].4 Let x ∈ R. 2 + 0 Now the conclusion follows by the dominated convergence theorem letting j → ∞. 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. P. 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. T ]. T ] × Ω. b. j→∞ lim σj = σ in L2 ([0. as η → 0. dt × P) and ϕ ∈ Cb (R). Taking expectation in the Itˆ formula we ﬁnd a useful identity which o allows to estimate the expectation of ϕ(X(t)). L2 (Ω)). (6. Then identity (6.15) Then we have (see (5. Set.2) we have t ϕ(Xj (t)) = ϕ(x) + 0 t ϕ (Xj (s))σj (s)dB(s). Moreover by (6. s ∈ [0. (2) Since EB(t)3 ) ≤ [E(B(t)6 )]1/2 = √ 15. Proof.The Itˆ formula o and so (2) 81 . T ] × Ω. (6. Let (bj ) and (σj ) be sequences of elementary processes such that j→∞ lim bj = b. We ﬁnally prove 2 Theorem 6. dt × P). t t Xj (t) = x + 0 bj (s)ds + 0 σj (s)dB(s). σ ∈ L2 ([0.
P.17) also holds without the assumption that ϕ is bounded. Then t E(X(t)2 ) = x2 + E 0 (σ 2 (s) + 2X(s)b(s))ds. Example 6.18) and assume in addition that t E 0 ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)ds < +∞. (6.17) holds. dt × P) and 2 ϕ ∈ Cb (R). P. . Then condition (6. T ] × Ω. σ ∈ L2 ([0. b. b. T ]. Then E[ϕ(X(t))] = ϕ(x) + 1 E 2 t [ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)]ds.19) becomes t E 0 σ 2 (s) + 2X(s)b(s)ds < +∞ which is clearly fulﬁlled.7 Take ϕ(x) = x2 . dt × P) and ϕ ∈ C 2 (R).17) 6.6 Assume that x ∈ R.19) Then E[ϕ(X(t))] < +∞ and (6. T ] × Ω.1 The Itˆ formula for unbounded functions o We want now to show that formula (6. t ∈ [0.1. σ ∈ L2 ([0. 2 Cb (R) Proof of Proposition 6. t ∈ [0. (6.82 Chapter 6 Proposition 6. T ]. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s). provided the integrand in the right hand side is summable. Proposition 6. 0 (6.6. ϕR (x) = 0 if x ≥ R + 1. For any R > 0 consider a function ϕR ∈ such that ϕ(x) if x ≤ R. Let t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s).5 Assume that x ∈ R.
21) and the dominated convergence theorem.21) Now.22) Taking expectation we obtain E[ϕ(X(t ∧ τR ))] − ϕ(x) 1 = E 2 t (6. t∈[0. Let now τR be the stopping time inf{t ∈ [0. m > 1. 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. l (6. ω) is continuous for almost all ω ∈ Ω. (6. (6. applying Itˆ’s formula (6.s. t∈[0. l 2 0 Now.6 let us estimate E where F is predictable and m ∈ N. As an application of Proposition 6. ω) attains the maximum. we can let R → ∞ obtaining the conclusion.23) 1 s<(t∧τR ) [ϕ (X(s))σ (s) + 2ϕ (X(s)b(s)]ds. Then we have τR (ω) = T for all R > M (ω).2) to ϕR (X(t)). For such a ω.T ] T if sup X(t) < R.19). So. say M (ω).T ] τR = It is clear that τR is increasing and bounded by T . T ] : X(t) ≥ R} if sup X(t) ≥ R. We know that X(·.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). in view of Proposition 5. by the assumption (6. X(·. R→∞ lim τR = T P–a. T 0 2m F (s)dB(s) .The Itˆ formula o Then..20) t ϕR (X(s)))σ(s)dB(s).
by Proposition 6. P. b ∈ L2 ([0. So. dt × P. It is enough to prove (6.24) is proved for m = 2. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dW (s). dt × P). T ] × Ω. T ] × Ω. P. 4 and so on. and set t X(t) = 0 F (s)dB(s). (6. yields T T 1/2 T 1/2 EX(t) dt ≤ 6T E 0 0 T 4 X(t) dt T 4 E 0 F (t) dt 4 .6 we have t E[X(t)4 ] = 6E 0 X(s)2 F (s)2 ds . P. Assume that x ∈ Rd .26) From which 0 EX(t)4 dt ≤ 36T 2 0 EF (t)4 dt.24) Proof. P. Then X ∈ L2m ([0. dt × P) and we have T E[X(T ) 2m ] ≤ [m(2m − 1)] T m m−1 0 E F (t)2m dt. T ] × Ω. dt × P) is dense in L2m ([0.84 Chapter 6 Proposition 6. Then (6. 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 . Rd ) and σ ∈ L2 ([0. Substituting this in (6. We can now easily iterate the previous argument taking successively m = 3. T ] .25) Integrating between 0 and T . We start from the case m = 2. m ∈ N. L(Rm . t ∈ [0. P. 6. (6. dt × P)). P. (6. dt × P. T ] × Ω. setting ϕ(x) = x4 .19) holds so that.25) yields T E[X(t)4 ] ≤ 36T E 0 F (t)4 dt. T ] × Ω. m ∈ N. t ∈ [0.24) when F is bounded (because L∞ ([0. (6. Rd )).8 Assume that F ∈ L2m ([0. T ].2 Itˆ’ formula for a vector valued process o Let d. T ] × Ω.
. . F . (6. So. in L2 (Ω. o t 85 ϕ(X(t)) = ϕ(x) + 0 t Dϕ(X(s)).27) for all t ∈ [0.2. σ(s)dB(s) . σ(t)dB(t) + 1 Tr[(σσ ∗ )(t)D2 ϕ(X(t))] + b(t).. (6. T ]. Then we have n σ E[(Ii. Dϕ(X(s)) 2 + 0 ds. m}. We shall write (6. L2 (Ω)) and let i. Lemma 6. T ].29) f (s)ds. = δi. 1 Tr[(σσ ∗ )(s)D2 ϕ(X(s))] + b(s).29) follows from Lemma 6. Let us start with a preliminary lemma. 2..j 0 Proof. T ].j := k=1 f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )). Dϕ(X(t)) 2 dt. (6.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.The Itˆ formula o We are going to prove the following Itˆ’s formula. Then we have n σ→0 lim f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )) k=1 T (6. P).9 Let f ∈ CB ([0. we shall only sketch some points of the proof.j )2 ] = E h. t ≥ 0. Let η = {0 = t0 < t1 < · · · < tn = T } be a decomposition of [0. If i = j. j ∈ {1.27) in the diﬀerential form ϕ (X(t)) = Dϕ(X(t)).28) The proof is similar to that of the onedimensional case seen before. Let i = j and set n η Ii.
3.31) Concerning I1 we have N I1 = k=1 (3) Dϕ(X(tk−1 )). o p p b= i=1 bi−1 1 [λi−1 . X(tk ) − X(tk−1 ) + 1 2 N D2 ϕ(X(tk−1 ))(X(tk ) − X(tk−1 )). h and D2 ϕ(x)(h. 3 Proof. We have b(t) = b0 . Fti . b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 ) . t ∈ [0. Fti .30) where p ∈ N. Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]. (3) On the other hand. t] with t ≤ λ1 . X(t) = b0 t + σ0 B(t).30). (6. Rd )) i = 0.10 Let ϕ ∈ Cb (Rd ).6) in [0. taking ϕ ∈ Cb (Rd ) and proving (6. 1. Now we prove Itˆ’s formula when b and σ are elementary processes as.λi ) . Let η = {t0 = 0 < t1 < · · · < tN = t}. l σ= i=1 σi−1 1 [λi−1 . . Rd ) and σi ∈ L2 (Ω. . k for all x. We use the notations Dϕ(x)h = Dϕ(x). λ1 ]. and σ(t) = σ0 . l (6.27) holds. p − 1. Then identity (6. x ∈ Rd and let b and σ given by (6. P. by Taylor’s formula we can write N ϕ(X(t)) − ϕ(x) = k=1 Dϕ(X(tk−1 )). k) = D2 ϕ(x)h. λ1 ] t ∈ [0.. 2 Lemma 6. X(tk ) − X(tk−1 ) + Rη k=1 =: I1 + I2 + I3 .86 Chapter 6 as σ → 0. L(Rm . P.. k ∈ Rd . 0 = λ0 < λ1 < · · · < λp bi ∈ L2 (Ω.. We proceed as in the proof of Lemma 6. h.λi ) .
j ϕ(X(s)) σi.β (Bβ (tk ) − Bβ (tk−1 )). P).1 = lim I2.α (s)σi.3 . we see that η→0 lim ERη  = 0. σ(B(tk ) − B(tk−1 )) k=1 N d m 2 Di.j ϕ σi. b(s) ds+ 0 Dϕ(X(s)). P) η→0 (6. (6.34) Moreover. we have N 2I2. σ(s)dB(s) in L2 (Ω.The Itˆ formula o So. b0 (tk − tk−1 )2 N +2 k=1 N D2 ϕ(X(tk−1 ))b0 .α (Bα (tk ) − Bα (tk−1 )) σi.3 = = 0 Tr [D2 ϕ(X(s))(σσ ∗ (s))]ds. taking into account Lemma 6.j=1 α=1 t lim 2I2. (6. F . σ0 (B(tk ) − B(tk−1 )) (tk − tk−1 ) + k=1 D2 ϕ(X(tk−1 ))σ0 (B(tk )−B(tk−1 )). proceeding as before.2 = 0 in L1 (Ω.3 = = D2 ϕ(X(tk−1 ))(σ(B(tk ) − B(tk−1 ))). (6.j=1 α.9 we have t η→0 d m 2 Di. k=1 i.β=1 Therefore.2 +I2.33) It is easy to check that η→0 lim I2. σ0 (B(tk )−B(tk−1 )) =: I2.β (s)ds 0 i.1 +I2. t η→0 t 87 lim I1 = 0 Dϕ(X(s)).35) . F . Now.32) Concerning I2 we write N 2I2 = k=1 D2 ϕ(X(tk−1 ))b0 .
.. σk ∈ L2 ([0. Set m t t X(t) = 0 b(s)ds + k=1 0 σk (s)dBk (s). b. T ] × Ω. σ ∈ L2 ([0. σd ). Let moreover ϕ ∈ Cb (Rd ). Let ϕ ∈ 2 Cb (R).. T ].4 we obtain the result Theorem 6. P. T ] × 2 Ω.27) holds for any t ∈ [0.. proceeding as we did for the proof of Theorem 6.11 Let b ∈ L2 ([0. dt × P).36) dϕ(X(t)) = ϕ (X(t))dX(t) + where σ(t) = (σ1 (t). x ∈ Rd and ϕ ∈ Cb (Rd ). .. 2 (6. m ∈ N. The general case can be treated in the same way taking into account that bk−1 and σk−1 are independent of B(tk ) − B(tk−1 ).. 2 = . dt × P : Rd ). 2. i = 1. Then identity (6. P.37) . Exercise 6. 2 where σ = (σ1 . . m. dt × P). σ(t) dt. dX(t) + 1 D2 ϕ(X(t))σ(t). Finally. dt × P : L(Rm .. σm (t)).88 Chapter 6 The proof is complete when t ≤ λ1 .. Prove that dϕ(X(t)) = Dϕ(X(t)).. Prove that 1 ϕ (X(t))σ(t)2 dt.. m = 1 bi . P. d. Rd )). T ] × Ω.12 Let d = 1.. σi ∈ L2 ([0.13 Let d ∈ N. Set X(t) = b(t)dt + σdB(t). . k = 1.. T ] × Ω. 2 (6. Exercise 6. P. i = 1.
3) 89 .1) on the interval [s. X(u))du + s σ(u. By a solution of equation (7. We denote by (Ft )t≥0 the natural ﬁltration of B(t) (augmented with all Pnull sets of Ω). X(t))dB(t). We shall write (7. Rd ) G(t) 2 HS E a G(t)dB(t) = a E dt. b : [0.1) where s ∈ [0. Rd ) with the Hilbert–Schmidt norm. (7. P). This suggests to endow L(Rr . in a probability space (Ω. T ]. b is called the drift and σ the diﬀusion coeﬃcient of the equation. X(t))dt + σ(t. R ))) and 0 ≤ a < b ≤ T. In order to solve (7. (7. T ] × Rd → Rd and σ : [0. t ≥ 0. T ]. X(u))dB(u). η ∈ L2 (Ω. T ]. Rd ).2) X(s) = η. based on the identity b 2 b E a G(t)dB(t) 2 r = a d E [Tr (G(t)G∗ (t))] dt. P.Chapter 7 Stochastic evolution equations We are given two positive integers r. d and an rdimensional standard Brownian motion B(t).1) in diﬀerential form as dX(t) = b(t. for all G ∈ CB ([0. T ] we mean a function X ∈ CB ([s. Let us consider the following integral equation t t X(t) = η + s b(u. T ). T ] × Rd → L(Rr . F . setting S and to write b HS : = [Tr(SS ∗ )]1/2 . L2 (Ω. L(R . Fs . t ∈ [s. Rd ). Rd )) that fulﬁlls equation (7. 2 b S ∈ L(Rr . L (Ω. (7.1).1) we shall use a ﬁxed point argument.
y ∈ Rd . X = η + γ1 (X) + γ2 (X) = γ(X). L2 (Ω. T ]. x. x)2 + σ(t. y) and b(t. We are going to solve (7.1) by a ﬁxed point argument in the space CB := CB ([s. η ∈ L2 (Ω. P. t ∈ [s. Step 1. we have b(t.1 Existence and uniqueness The standard assumptions for the wellposedness of problem (7. Hypothesis 7. Rd )).1) are the following. (7. s X ∈ CB . σ(u. x) − σ(t. X ∈ CB . y)2 + σ(t. Deﬁne γ1 (X)(t) := s t t b(u.4) ≤ M 2 (1 + x2 ).5) is a consequence of (7. Theorem 7. Fs . X ∈ CB .1) has a unique solution X ∈ CB ([s. T ).1 Assume that Hypothesis 7. T ] γ2 (X)(t) := and set γ(X) := η + γ1 (X) + γ2 (X).1 (i) b and σ are continuous on [0. T ]. L2 (Ω. γ1 and γ2 map CB into itself. t ∈ [s. Proof. Then equation (7.1 holds and let s ∈ [0. (ii) There exists M > 0 such that for all t ∈ [0. T ]. X(u))du.5) Notice that.1) is equivalent to the following. x) 2 HS 2 HS ≤ M 2 x − y2 (7. Then problem (7. Rd )). T ] × Rd . (7. (7.90 Chapter 7 7. x) − b(t. Rd ). T ]. X(u))dB(u).4). after possibly changing the constant M .6) .
≤ M 2 (t − s) X − Y . X(u)) − σ(u. Let X. T ].5). Y ∈ CB (7.4). γ is Lipschitz continuous. Step 2. γ1 (X) − γ1 (Y ) Furthermore CB ≤ M (T − s) X − Y CB . Y (u)) 2 HS )du 2 CB .3) and (7. X(u))2 du ≤ M 2 (t − s) s 2 CB ). t γ1 (X)(t) − γ1 (Y )(t)2 ≤ (t − s) s t 2 s b(u. using again the H¨lder inequality and taking o into account (7. Concerning γ2 we have taking into account (7. X(u)) − b(u.5). using the H¨lder inequality and taking into aco count (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 t γ1 (X)(t)2 ≤ (t − s) s b(u.Stochastic evolution equations 91 Concerning γ1 we have. X(u)) 2 HS )du ≤ M2 s (1 + X(u)2 )du ≤ M 2 (t − s)(1 + X 2 CB ) So. γ1 maps CB into itself and γ1 (X) CB ≤ M (t − s)(1 + X CB ). 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 Eγ2 (X)(t) = s t 2 E( σ(u. we see that γ2 maps CB into itself. We have. X. Y ∈ CB .7) t Eγ2 (X)(t) − γ2 (Y )(t)2 = s E( σ(u.
η). Then Z solves the problem dZ(t) = b(t.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. X(r.9) does not hold we choose T1 ∈ (s. Y ∈ CB . Z(t))dt + σ(t. 0 ≤ s ≤ r ≤ t ≤ T. If (7. Now we repeat the proof with T1 replacing s and in a ﬁnite number of steps we arrive to the conclusion.1 it follows that Z(t) = X(t. By the uniqueness part of Theorem 7. T ])) and so it is a continuous process.1 holds and let η ∈ L2 (Ω. Proposition 7. Rd ). and so.3 Assume that Hypothesis 7.1).1) on [s. s. X(r. Z(r) = X(r. s.7) and (7. Fs . s. r. it possesses a unique ﬁxed point. s. Then X(t. r. Then by the previous argument there is a unique solution to (7. η)). (7. s. Whe shall use greek letters for stochastic initial data and latin letters for deterministic ones.92 and so.8) By (7. γ2 (X) − γ2 (Y ) CB Chapter 7 ≤M √ T −s X −Y CB . η)). X. C([s. t ∈ [s. P. Remark 7. Z(t))dB(t). T ]. η).9) γ is a 1/2–contraction on CB . Now if T − s is such that √ M T − s + T − s ≤ 1/2.2 By Theorem 5. In the following we shall denote by X(·. η) = X(t.10) Proof. η) which belongs to L2 (Ω. T ] such that M T1 − s + T1 − s ≤ 1/2. s.13 it follows that there exists a version of the solution X(·. CB . Let us prove the cocycle law. s. as required. . (7. T1 ]. s. Y ∈ CB . η) = X(t. Deﬁne Z(t) = X(t. (7. η) the solution of problem (7.
XN (u.. η ∈ L2 (Ω. We claim that n XN (t. s. (7.1 holds and that n η= k=1 xk 1 Ak . s. XN (u. ... η) of problem (7. Fs . s. . η). XN (u. x ∈ Rd . s. s. T ]. s. x). Then we have b(u. s.. XN (u. s. x) is a Markov process. s.11) Then we have N →∞ lim XN (·. s. s. XN (u. xn ∈ Rd . η))dB(u). Assume that it holds for a given N ∈ N. .11)..14) Proof. k = 1. Rd ) and X(t. Rd )). the conclusion follows letting N tend to inﬁnity. l (7.13) where x1 . η)) = b(u. k = 1.4 By the contraction principle it follows that the solution X(t.. Let us proceed by recurrence. xk )1 Ak . l ∀ N ∈ N. Proposition 7. s. n. . s.. Equality (7..1) can be obtained as a limit of successive approximations.... η)) = σ(u. η) = n X(t. η) in CB ([s.15) is clear for N = 0. xk )1 Ak .15) is proved... xk )) in Ak . η) = XN (t. s. η))du + s σ(u. . Then we have X(t. xk ) in Ak . s. so that XN (t. s. P. n. t t XN +1 (t. Let XN be deﬁned by (7. η) = k=1 XN (t. (7. gives some information about the relationship between X(t. More precisely. . s. η) = η and for any N ∈ N. XN (u. s. σ(u. xk )) in Ak . l k=1 (7. deﬁne X0 (t..15) Once (7. (7. s. and A1 . which as we shall see plays an important rˆle in proving that o X(·. η) = η + s b(u. η) = X(·.Stochastic evolution equations 93 Remark 7.. n. An are mutually disjoints sets in Fs such that n Ω= k=1 Ak . k = 1.12) Next result. s.5 Assume that Hypothesis 7. L2 (Ω.
94 so that b(u. XN (u. XN (u. C ∈ L(Rr . Rd )). Rd )). s.1. We proceed as in the proof of Theorem 7. s. T ].7 Consider the stochastic diﬀerential equation dX = AXdt + CdB(t). s.8. 7. L2m (Ω. s. 7. s. P. η) ∈ CB ([s. xk )du s n + s σ(u. Rd ) and x ∈ Rd . Theorem 7. T ]. In particular X(·.16) . s. l Consequently n t XN +1 (t.24) proved in Proposition 6. T ]. So.2 Examples Example 7.1 holds and let m ∈ N. X(0) = x. η)) = k=1 n Chapter 7 n 1 Ak b(u. xk )). XN (u. η)) = k=1 1 Ak σ(u. the conclusion follows. Rd ). T ). xk ) + l t b(u.1) has a unique solution X(·. Proof. xk ) l and (7. XN (u.1.15) holds for N + 1. XN (u. Fs .1 by a ﬁxed point argument in the space m CB := CB ([s. XN (u. L2m (Ω. Rd )). Rd )). s ∈ [0. L2m (Ω. T ]. Then problem (7. s. s. ∀ x ∈ Rd .6 Assume that Hypothesis 7. s. l σ(u. (7. s. using inequality (6. L2m (Ω. where A ∈ L(Rd ). x) ∈ CB ([s. xk )). η ∈ L2m (Ω. xk ))dB(u) = k=1 1 Ak XN +1 (t. η) = k=1 1 Ak X0 (t. s.1 Solution of the stochastic diﬀerential equation in the space CB ([s.
(7.20) For this we check that X(t) given by (7.12. By substituting Y (t) in (7. thanks to Proposition 3. Y (0) = 0. T ]. t t e(t−s)A CdB(s) = CB(t) + A 0 0 t e(t−s)A CB(s)ds. t ≥ 0. X(0) = x.8 Let r = d = 1 and consider the stochastic diﬀerential equation dX = aXdt + cXdB(t). We want to show that the solution of (7.1 applies.19). T ].Stochastic evolution equations 95 Clearly Theorem 7.19) where a. which can be easily solved by the method of variation of constants.19) is given by 1 2 X(t) = et(a− 2 c ) ecB(t) x. We obtain t Y (t) = 0 e(t−s)A (x + CB(s))ds. (7.18) Example 7.17) yields t X(t) = A 0 e(t−s)A (x + CB(s))ds + x + CB(t). Y fulﬁlls the equation Y (t) = AY (t) + x + CB(t). t ∈ [0. c. T ]. x ∈ R.17) Setting t Y (t) = 0 X(s)ds. Taking into account that. (7. Again Theorem 7. Write X(t) = eF (t) where F (t) = t a − 1 c2 + cB(t). Then we have 2 dF (t) = a− 1 2 c dt + cdB(t) 2 . t ∈ [0.1 applies so that (7.16) has a unique solution X(t) which fulﬁlls the integral equation t X(t) = x + A 0 X(s)ds + CB(t). t ∈ [0.20) solves (7. (7. we ﬁnd X(t) = e x + 0 tA e(t−s)A CdB(s).
23) Here η ∈ L2 (Ω. ω ∈ Ω. Rd ) × Ω → Rd are such that: Hypothesis 7. (7.25) (ii) For any Y ∈ CB ([0. Y (t. Fs . Rd ).1. Rd )) and V ∈ CB ([0. ω). y. x. V (t.22) 7.21) where A. ω)2 + σ(t. T ]. t t X(t. (7. Rd )) we have U ∈ CB ([0. (7. x ∈ Rd and AC = CA. ω)). ω)2 + σ(t.24) ≤ M 2 (1 + x2 ). ω)du + s σ(u. X(0) = x. x. ω) − b(t. T ] × L(Rr . ω) = σ(t. L(Rr . x.1. ω) 2 HS 2 HS ≤ M 2 x − y2 (7.4) one deals with stochastic diﬀerential equations having random coeﬃcients. T ]. X(u. ω) = η(ω) + s b(u. ω) − σ(t. b : [0. C ∈ L(Rd ). T ]. ω). L2 (Ω. T ]. ω). L2 (Ω. ω ∈ Ω b(t. X(u. ω)dB(u). ω). ω) = b(t. y ∈ Rd . U (t. The following result can be proved as Theorem 7. ω)).21) is given by 2 X(t) = et(A−C /2) eCB(t) x. . x. ω) and b(t. x. Rd ))) where. T ] × Rd × Ω → Rd and σ : [0. L2 (Ω. Show that the solution of (7. 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).3 and 7.9 Let r = 1 and consider the diﬀerential stochastic equation dX = AXdt + CXdB(t). y. for all t ∈ [0. T ]. Y (t. (7.2 (i) There exists M > 0 such that for all t ∈ [0.96 and. by Itˆ’s formula. Exercise 7.3 Diﬀerential stochastic equations with random coeﬃcients In some situations (see Subsections 7.
27) solves (7. First we show that EX(t. dB(t) = X(t) F (t). Example 7.10 Assume that Hypothesis 7. . T ) and η ∈ L2 (Ω. L2 (Ω.2 7. dB(t) .10 applies and so there exists a solution X of (7.2. t ≥ 0. t ∈ [0. s and Lipschitz o continuous on η in mean square. = eH(t) F (t).26). Rd )).Stochastic evolution equations 97 Theorem 7. 7.27) For this we check that X(t) given by (7. T . s. η)2 is bounded. T ]. Let us show that X(t) = e− 2 1 Rt 0 Rt F (s)2 ds+ 0 F (s).26) X(0) = x. s.2 holds. eH(t) F (t)2 dt t ≥ 0. T ]. dB(t) .23) has a unique solution X ∈ CB ([s.1) is H¨lder continuous on t. Let s ∈ [0.27) is proved.26). η) to (7.1 Continuous dependence on data Continuous dependence on mean square We assume here that Hypothesis 7. t ≥ 0. We are going to prove that the solution X(t. dB(t) .1 holds. So. 2 Now by Itˆ’s formula we ﬁnd o dX(t) = eH(t) dH(t) + 1 2 1 2 t t F (s)2 ds + 0 0 F (s). (7. Rd )). Rd ). dB(s) . L∞ (Ω.11 Let d = 1 and consider the stochastic diﬀerential equation dX(t) = X(t) F (t). Then problem (7. Write X(t) = eH(t) where H(t) = − Then we have 1 dH(t) = − F (t)2 dt + F (t). Fs . (7. (7. where F ∈ CB (0.dB(s) x. Now it is easy to check that Theorem 7.
E(η2 ))(t − t1 ). η)2 ≤ 3[E(η2 ) + M 2 ((T − s)2 + (T − s)]e3M Proof. (7. Fs . s. (7. E(η2 )).12 Assume that Hypothesis 7. X(u)) 2 HS )du. s. P. η) with respect to t. Rd ). s. X(u))du +3 s E( σ(u. Let 0 ≤ s ≤ t1 < t ≤ T and η ∈ L2 (Ω.1 holds. Rd ) we have E X(t. Fs . Consequently E (X(t)2 ) ≤ 3E(η2 ) + 3M 2 ((T − s)2 + (T − s)) t +3M ((T − s) + 1) s 2 E X(u)2 du. Proposition 7. there exists a constant C(T. s.29) We start with the regularity of X(t. T ] and η ∈ L2 (Ω. Then for all s ∈ [0. We now study the regularity of X(t. By Hypothesis 7. We note that. η) = X(t). 0 ≤ s < t ≤ T. s.1 holds.98 Chapter 7 Lemma 7.12.1(ii) and the H¨lder inequality we deduce that o t E (X(t)2 ) ≤ 3E(η2 ) + 3M 2 (t − s) s t (1 + E X(u)2 )du +3M 2 s (1 + E X(u)2 )du. we have t 2 2 (T −s+1) . E(η2 )) such that we have E X(t. by Lemma 7. (7. s.28) E (X(t) ) ≤ 3E(η ) + 3E s t 2 2 b(u.13 Assume that Hypothesis 7. s. Writing for short X(t. E(η2 )) such that E X(t. η)2 ≤ C(T. η)2 ≤ C1 (T. η) with respect to t. η) − X(t1 . s. The conclusion follows from the Gronwall lemma. Then there exists a constant C1 (T.30) . η.
s. E X(t.η > 0 such that E X(t.4) we obtain E (X(t.η s − s1 .32) . s. s. Rd ). Fs . s. Let us study the regularity of X(t. s.1 holds. s. ζ)2 ≤ 3η − ζ2 t 2 2 (T −s+1)(t−s) E(η − ζ2 ).31) +3 s (b(u. s1 . (7. η) with respect to s. s. s. Then there exists a constant CT. (1 + E X(u. s. and η ∈ L2 (Ω. Taking expectation and using (7. s.1 holds. s. η)2 ≤ 2M 2 ((t − t1 )2 + t − t1 )(1 + C 2 (T. s. P. ζ))dB(u) .15 Assume that Hypothesis 7. η) − σ(u. η) − X(t1 . Rd ). s. η) with respect to η. η) − b(u. E(η2 ))) and the conclusion follows. We have X(t.Stochastic evolution equations Proof. We ﬁnally study the regularity of X(t. ζ)2 du and the conclusion follows from the Gronwall lemma. let 0 ≤ s < t ≤ T and η. X(u. Proposition 7. We have t 99 E X(t. η) − X(t. ζ))du t 2 +3 s (σ(u. (7. s. η) − X(t. ζ)2 ) ≤ 3E(η − ζ2 ) + 3M 2 (T − s + 1) t × s E X(u. η)2 )du. s. s. ζ ∈ L2 (Ω. ζ)2 ≤ 3e3M Proof. s. η) − X(u. X(u. X(u. η) − X(t. Fs . Then E X(t. s. s. let 0 < s < s1 < t ≤ T. η)2 du t 2 t1 + 2M Consequently. η)2 ≤ 2M 2 (t − t1 ) t1 (1 + E X(u. η) − X(t. η)2 ≤ CT. s. X(u. Proposition 7. η) − X(t1 .14 Assume that Hypothesis 7. s.
X(·. (7.18 Assume that Hypothesis 7.1 holds. s. η)) − X(t. T ]) almost surely.31) there exists CT > 0 such that 2 E (X(t.3 Almost sure continuity and h¨lderianity o of trajectories In this section we show that X(·. x)2m < +∞. s. By (7. (7. 0 ≤ s ≤ t ≤ T . First. Let x ∈ Rd . 1/2). s. x) − X(t. Taking into account the cocycle law (7. we consider almost sure regularity of X(t. x) − X(t1 . .1 it follows that Proposition 7. Finally. s. x) belongs to C −1/(2m) (7. Let 0 ≤ s ≤ t1 < t ≤ T. s. η) − η2 ) 2 = CT E (X(s1 .16 Assume that Hypothesis 7. whose deﬁnition is recalled in Appendix E below. Lemma 7. First we need a lemma. s1 . y)2m ≤ C(T )x − y2m . η). s1 . x) belongs to a suitable Sobolev space.3 and the Sobolev embedding theorem E. s.24). η) − X(t. s. η)2 ) ≤ CT E (X(s1 . s. let 0 ≤ s < t ≤ T and x. s. η) − X(t. The conclusion follows now from (7. Then the Sobolev embedding theorem (also stated in Appendix E) will imply that X(·. we can write Chapter 7 X(t.1 holds. Then there exists a constant C1 (T. X(s1 . x)2m ≤ C1 (T.30).100 Proof.13 using (6.17 Assume that Hypothesis 7. s. s1 . m ∈ N and ∈ (0. ·). η)2 ) . η) = X(t. s1 . x2 ))(t − t1 )m . s. x ∈ Rd and m ∈ N.34) ([s. x) is H¨lder o continuous almost surely.1 holds. arguing as in the proof of Proposition 7. x) such that E X(t. y ∈ Rd . s.10). s. which can be proved as Proposition 7. Then there is a constant C(T ) > 0 such that E X(t. 7.35) .2m Moreover. Then we have E X(·.14 we have Lemma 7. s. s. η) − X(s.33) Now from Proposition E.
s.2m Moreover. Then for any s ∈ [0.Stochastic evolution equations Now from Proposition E. X(t. s. T ] the mapping Rd → CB . s. Dx σ and Dx σ are continuous on [0. (ii) We have (1) sup ([b(t.1 holds. ·)]2 + [σ(t. x. x) is the solution to the stochastic diﬀerential equation with random coeﬃcients.3 it follows that 101 Proposition 7. (7. dB(t)) h η (s. x) = h. ·) belongs to C −d/(2m) (7. besides Hypothesis 7. x). x) with respect to x In this section we assume. X(t. X(t. s.19 Assume that Hypothesis 7. T ] × Rd . s. s. x). s. 1]d ) almost surely. is continuously Gateaux diﬀerentiable and its Gateaux derivative is given by Xx (t.38) where η h (t. x → X(·.37) We set CB = CB ([s. L2 (Ω. x))(η h (t. x). h ∈ Rd . h dη (t. 1) we have E X(t. s. x)dt (7. s.4 Diﬀerentiability of X(t. 1]d . T ]. (1) Recall the notations given at the beginning of Chapter 6. x)) · η h (t. Dx b. 7.T ] (7. ·)2m < +∞. x) · h = η h (t. s. T ]) =: CB ([s. 7. x) = bx (t. x) Theorem 7.4.1 and 7. Rd )). s. y ∈ [0. ·)]2 ) < ∞. s. s. Then for any m > 1 and ∈ (0. that Hypothesis 7.20 Assume that Hypotheses 7.36) ([0.1 Existence of Xx (t. .3 hold.1.3 2 2 (i) Dx b.39) +σx (t. t∈[0. let 0 ≤ s < t ≤ T and x. . s.
X1 ) − F (x. 7. that is F (x. (7. X(x) coincides with the solution X(·. s. X(r))Y (r)dB(r). (the straightforward proof is left to the reader) and that for each x ∈ Rd . X(r))Y (r)dr+ s σx (r.39) fulﬁll Hypothesis 7. is twice diﬀerentiable with respect to x in any couple of directions (h. X) = I.10. x) of (7. Then the mapping Rd → CB . T1 ]. X2 ) CB ≤ (7. T1 ]) and deﬁne a mapping F : Rd × CB → CB . 1 X1 − X2 2 CB for all X1 .k (t. Note that the coeﬃcients of equation (7. X)](t) : = x + s b(r. X.4.102 Chapter 7 Proof. k) in Rd . x. s.1 and 7.3 hold.21 Assume that Hypotheses 7. k) = ζ h.3. s. x) with respect to x. x)(h.6 from Appendix D (with Λ = Rd and E = CB ). x ∈ Rd . We set CB = CB ([s. s.2). setting t t [F (x.42) . h ∈ Rd . So.1 so that it possesses a unique ﬁxed point X(x) ∈ CB . t t [FX (x. X(r))dr + s σ(r. t ∈ [s. (7. setting Xxx (t.41) Then F fulﬁlls Hypothesis D. so it possesses a unique solution by Theorem 7. t ∈ [s. x ∈ Rd . x) We now prove the existence of the second derivative of X(t. Moreover. It is not diﬃcult to check that F is Gateaux continuously diﬀerentiable. s. x → X(·.2 Existence of Xxx (t. s. To prove the theorem we use Theorem D. the conclusion follows from Theorem D. X2 ∈ CB . Y ∈ CB we have Fx (x.40) where T1 > s is chosen such that F (x. x). which depends continuously on x. X(r))dB(r). X(x)) = X(x). T1 ]. x). Theorem 7. X)·Y ](t) = s bx (r.6.
44) + s σx (r. s. s. X(t.Stochastic evolution equations 103 ζ h. x))(η h (t.k ζ (s. s.45) η(t. x) = bx (t. dB(t)) h. By using (7. s. x))η(r. We have. x)4 ≤ C. x))η(r. s. x)dr (7. s. x) ∈ CB ([s. T ). x). Then η(·. s. (7. X(t. X(r. s. x). x)dr 4 +27 s σx (r. .37) and the H¨lder inequality we see that there exists a constant o C1 such that t η(t. s. x ∈ Rd . x)dB(r). x)4 dr 4 +C1 s σx (r. Proof. x). T ]. X(r. s. L2 (Ω)) be the solution of the equation t η(t. T ]. x) ∈ CB ([s.k (t. dB(s)) +σxx (t. (7. x))η(r. s. X(t. x)dB(r) . x) is the solution to the stochastic diﬀerential equation (with random coeﬃcients) h. x))η(r.k (t. x)dt +bxx (t. x)dB(r) . s. s. x))η(r. s. s. x) = 0.k (t. s. x) = 1 + s t bx (r. x).43) We shall prove the theorem when n = r = 1 for simplicity. s. s. x)) · (η h (t. η k (t. We ﬁrst prove a lemma. s. X(r.22 Let η(·. x)4 ≤ 27 + C1 s t η(r. x) 4 ≤ 27 + 27 s t bx (r. s.k d ζ (t. s. X(r. X(t. s. s. Lemma 7. X(r. x))dt +σx (t. x))(ζ h. x)) · ζ h. s. η k (t. t 4 ∀ s ∈ [0. s. s. s. L4 (Ω)) and there exists C > 0 such that Eη(·. s. s. s.
49) From this identity it is easy to show the existence of ηx (·.50) . x). L (Ω)). s. x) = Xx (·. r. s. (7. x) := ζ(·.46) Notice that. x) = (1 − T (x))−1 (1). x) belongs to CB and fulﬁlls equation (7. L4 (Ω)) and it results t (T (x)Z)(t) = − s t bxx (r. 0 ≤ s ≤ t ≤ T. s. where C2 is another constant.44).48) is given by η(·. Thus the solution of (7. s.8. For any x ∈ R we deﬁne a linear bounded operator T (x) from CB into CB setting for all t ∈ [s. s. s. s. x)dB(r). x)). x))Z(r)η(·. x) = (1 − T (x))−1 (T (x)η(·.44) as η(·. The conclusion follows from the Gronwall lemma. Now we write equation (7. X(r. X(r. X(r. x) ∈ CB ([s. Proof of Theorem 7. T ]. s. T1 ]) as before. X(r. s. s. x)4 dr). x ∈ R. We choose T1 as in (7. s. s. We have in fact.48) ≤ 1/2.41) it follows that T (x) L(CB ) (7.20 we know that X(t. x) = 1 + T (x)η(·. ∀ x ∈ R. (7. T (x)Z is diﬀerentiable with respect to x for any Z ∈ CB ([s.21. s. s. s. s. we ﬁnd that t Eη(t. x) is diﬀerentiable with respect to x and that its derivative η(·. x))Z(r)η(·. x)dr (7. T ]. (7. x))Z(r)dr − s 4 σx (r. x)4 ≤ C2 (1 + s Eη(r. x))Z(r)dB(r).47) − s σxx (r. By Theorem 7. T1 ].104 Chapter 7 Now. by a straightforward computation ηx (·. taking expectation on both sides of this inequality and using Corollary 6.41) and CB = CB ([s. r. t t (T (x)Z)(t) = − s bx (r. x) By (7. since η(·. s.
X(r.50) it follows that t ηx (t. s. x) the solution of (7. s.5 Itˆ Diﬀerentiability of X(t. s. 7. . x)dB(r). s. s. x) with reo spect to s. x))η 2 (·. s. r.53) with respect to r yields 0 = Xs (t. x))η 2 (·. s. x)dr t + s σxx (r.52). x) = X(t. X(r. x)b(s.5. X(r. x) = −Xx (t. x)(t) = s bxx (r. s. s. T ]. s.1 The deterministic case t ∈ [s. Write X(t. X(r.3 with σ = 0. X(r. s. x)) + Xx (t. Setting r = s we ﬁnd Xs (t. Now by (7. s. X(s) = x. under Hypotheses 7. 7. x) (it is well known that X(t. X(r. s. (7. x))η 2 (·. x)dr (7.Stochastic evolution equations where t 105 T (x)η(·. s. x) is C 1 in all variables). s. x). It is useful to recall ﬁrst some results in the deterministic case. s. s. X(t)). s.1 and 7. X(r. s. x)) · Xt (r. x).52) Let us consider the problem X (t) = b(t. x))η 2 (·.53) Diﬀerentiating (7. s. r. Let us compute Xs (t. x) − T (x)ηx (·. Denote by X(t.51) t + s σxx (r. s. x)(t) = s bxx (r. x)). r. (7. x)dB(r). t ≥ r ≥ s. s. and the conclusion follows.
11). s. x) is not Fs measurable. s.2). x) with respect to s in a sense to be precised. Then X1 (t. k=1 where η = {s = t0 < t1 < · · · < tn = t}. s. Then B(t2 )−B(t1 ) and ϕ are independent. For this we need the following result which can be proved as Lemma 4. x) is Fs+ –measurable. T ]. s ∈ [0. x) is Fs+ measurable. x) is Fs+ measurable. We end the proof by recurrence.. A diﬃculty arises since the process s → X(t. s.1 holds. 0 ≤ s ≤ s1 < . Lemma 7. It happens. Then X(t. s. x)du + s σ(u.T ] is called the future ﬁltration of B. x) = x + s b(u.2 The stochastic case Here we want to study the diﬀerentiability of X(t. . s. x) is not adapted. r. T ].106 which is equivalent to t Chapter 7 X(t. x) = x + s Xx (t. 7. B(sn (ω)) − B(s(ω))) ∈ A} . x) be deﬁned by (7. N ∈ N. s. Proof. x)dB(u)... that for any s ∈ [0.. Let XN (t. 0 ≤ s ≤ t ≤ T. however. s. Proposition 7. The family (Fs+ )s∈[0. < sn ≤ T and A ∈ B(Rn ). s. (7. X(t. where n ∈ N. We have in fact t t X1 (t.3. x) of (7. x)(B(tk ) − B(tk−1 )). x)b(r. P). because X(t. Since s t n σ(u. s. 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)).5.23 Assume that Hypotheses 7. x)dB(u) = lim η→0 σ(tk−1 . Fs+ . then X1 (t. x)dr. Let x ∈ Rd .54) In the next subsection we are going to generalize this formula for the solution X(t. s. and let ϕ ∈ L2 (Ω.24 Let t1 < t2 ≤ s. Now we introduce the backward Itˆ integral for a process wich is adapted o to the future ﬁltration.. .
L(Rr . T ]. L(Rr .55) in L2 (Ω). Rd ))). o Exercise 7.56) and T E 0 T 0 F (s)dB(s) = 0 E F (s) 2 HS ds. T ]. r.25 For any F ∈ CB + ([0. (7. L(Rr . L2 (Ω. (7. x))]dr s (7. dB(r)) . s. L(Rr . x) · b(r. x). x).27 Assume that Hypotheses 7. L(Rr . T ]. L2 (Ω.Stochastic evolution equations 107 We deﬁne CB + ([0. Rd ))) by a straightforward generalization of the space CB ([0.3 Backward Itˆ’s formula o t Theorem 7. 2 T (7. x)(σ(r.26 Let t > s. Theorem 7. x)(σ(r. . Let F ∈ CB + ([0.5. x)dr t 1 + 2 t TR [Xxx (t. L2 (Ω. x) − x = s Xx (t.3 hold. L2 (Ω. r. σ(r.1 and 7. 2 7. Rd )) are called stochastic processes adapted to the future ﬁltration (Ft+ ) and continuous in quadratic mean. T ]. T ]. T ].10). L2 (Ω. Rd ))) there exists the limit T σ→0 lim Iσ (F ) =: 0 F (s)dB(s).58) + s Xx (t. The elements of CB + ([0. Rd ))) deﬁned in Chapter 5. Prove that t B(r)dB(r) = s 1 (B(t)2 − B(s)2 + (t − s)).57) F (s)dB(s) is called the backward Itˆ integral of the function F in [0. Moreover we have T E 0 F (s)dB(s) = 0. Then we have X(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. r.
sk−1 . We take d = r = 1 for simplicity. sk . t) we have n X(t. X(sk . σ(r. X(r. x) − X(t. x)] =− k=1 n [X(t.59) =− k=1 n Xx (t. X(r. x)(x − X(sk . sk−1 . k=1. sk . σ(r. x)) − 1 2 Xxx (t.. sk−1 . sk−1 . . x))2 + o(η). x))] (7. sk ..n If η ∈ Σ(s. x)(σ(r.s. sk . s... t) we set η = max (tk − tk−1 ). x)ek . x). x) − X(t. r. k=1 Arguing as in the proof of Itˆ’s formula one can show.. For any η ∈ Σ(s. after some tedious but o straighforward computations. sk−1 . x))dB(r) = b(sk . x)(σ(r. x)ek ) and (ek ) is any orthonormal basis in Rd . x)(x − X(sk . x)(B(sk ) − B(sk−1 )) + o(sk − sk−1 ). x) − x = − k=1 n [X(t. sk−1 . r. x)(sk − sk−1 ) + σ(sk . Proof.60) + sk−1 σ(r.108 where d Chapter 7 TR [Xxx (t. sk−1 . x))dr (7. Pa. On the other hand we have sk X(sk . x) − x = sk−1 sk b(r. that η→0 lim o(η) = 0. x))] = k=1 Xxx (t. sk .
x)dB(r). σ(r.) Substituting (7. In a similar way one can prove the following backward Itˆ formula. o 2 Theorem 7. The other terms I3 (η) and o1 (η) can be handled as in the proof of Itˆ’s o formula. x) where ξk is any point in [sk−1 .61) n 1 + 2 Xxx (t. since b is deterministic. x)]dr s (7. sk ]. x)(B(sk ) − B(sk−1 )) (7. we note that it is an integral sum corresponding to the backward Itˆ integral since Xx (t. x)b(sk . r. x) with b(ξk . one can replace in (7. b(r. Concerning I2 (η). x)dr. Then for any 0 ≤ s < t ≤ T. x))].Stochastic evolution equations 109 (Notice that. Obviously t η→0 lim I1 (η) = s Xx (r. s. x) − x = k=1 n Xx (t. sk . s. r. we have t ϕ(X(t. r. x)σ 2 (sk .23. x)) − ϕ(x) = s Dx [ϕ(X(t. x))]σ(r. x) dr 1 + 2 t t 2 Tr [Dx [ϕ(X(t. sk . sk . Therefore we have t η→0 lim I2 (η) = s Xx (r. x)σ(sk .60) in (7.28 Let ϕ ∈ Cb (Rd ).60) b(sk . x)σ ∗ (r. x) is Fs+ measurable by Proposition o k 7. sk . x))].59) we ﬁnd that n X(t. x)σ(r. x)dB(r).62) + s Dx [ϕ(X(t. x)(B(sk ) − B(sk−1 ))2 k=1 +I1 (η) + I2 (η) + I3 (η) + o1 (η). x)b(r. x)(sk − sk−1 ) + k=1 Xx (t. .
110 Chapter 7 .
(8. u. T ]. X(t)). s. T ]. T ] × Rn → Rn fulﬁlls the following hypothesis. As well known. x) − b(t. y) ≤ M x − y. x ∈ Rn . T ] × Rn . s. x) + Xx (t. and it holds X(t. X(s) = x ∈ Rn . T ] × Rn . x) = 0. x) ∈ C 1 ([s. (8.1 problem (8. s. y ∈ Rn .1 (i) b is continuous on [0. x)). x) · b(s. T ]. s. X(u. x)).2) Morever. x) = X(t.4) . 0 ≤ s ≤ u ≤ t ≤ T. s.1 The deterministic case t ∈ [s.Chapter 8 Kolmogorov equations 8. (8.t ϕ(x) = ϕ(X(t. Hypothesis 8. where s ∈ [0. s. Rn ). x.3) Of great interest for the applications is the transition evolution operator Ps. t ∈ [0. 111 x ∈ Rn .t .1) has a unique solution X(·) = X(·. x ∈ Rn . under Hypothesis 8. T ) and b : [0. T ]. (iii) b is diﬀerentiable with respect to x and bx is continuous on [0. 0 ≤ s ≤ t ≤ T.1) We consider here the problem X (t) = b(t. (ii) There exists M > 0 such that b(t. t ∈ [0. diﬀerentiating (8. T ]. (8. t ∈ [0. s. deﬁned on the space Cb (Rn ) by Ps. s.2) with respect to u and setting u = s we ﬁnd Xs (t.
ϕx (x) .t ϕ(x). x)). dt and d Ps. We have. T ] × Rn → Rn . Let us prove (8.5) 1 Proposition 8. x) → Ps. x) · b(s.t . s. x) = 0. Let us now consider the following partial diﬀerential equation called transport equation zs (s. We have t≥s (8. From (8. Xx (t. ϕx (X(t.t L(t)ϕ(x) = b(t. d d Ps. (s.7). x)).t ϕ(x).t ϕ = Ps. Moreover for any ϕ ∈ Cb (Rn ) the mapping [0. u ∈ [0. x)). zx (s.t ϕ = −L(s)Ps. s. x) = ϕ(x). ϕx (X(t.t is a linear bounded operator on Cb (Rn ).3). s. x)) = − ϕx (X(t. s. ds L(t)ϕ(x) = b(t.2) it follows immediately the cocycle property Ps.112 Kolmogorov equations As easily checked. T ]. d d Ps.t ϕ. X(t.t L(t)ϕ. T ] × [0. t.8) where 1 ϕ ∈ Cb (Rn ).t = Ps. x)) dt dt and Ps. x)) . s. s.7) (8. x ∈ Rn .u Pu. x).t ϕ(x) = ϕ(X(t. is continuous. x). 1 where ϕ ∈ Cb (Rn ) and T > 0 is ﬁxed.6) t ≥ s. (8.1 For any ϕ ∈ Cb (Rn ) we have d Ps. X(t.6) follows. x)) = b(t. Ps. s.9) z(T. s. so that (8. . x) + b(s. s ∈ [0. T ] (8. s. (8. t.t ϕ(x) = ϕ(X(t. taking into acccount (8. x) ds ds = −L(s)Ps. Proof.
12) so that by (8.T ϕ(x) = ϕ(X(T. Uniqueness. u. n (8. b(s. Xt (s.6). x)) = 0.10) Proof Existence. X(T. If z is a solution of problem (8. s. x)).t−s . u. It is enough to notice that z.14) (8.1 and 1 let ϕ ∈ Cb (Rn ). x) = zt (s. given by (8.15) 1 ϕ ∈ Cb (Rn ). Setting s = T and s = u we ﬁnd that z(T. x)). u. x) = b(x) and consider the problem X (t) = b(X(t)). u. (8.9) by (8. X(0) = x ∈ R . x)) as required. Deﬁne Pt ϕ(x) = ϕ(X(t. X(s.13) Pt is called the transition semigroup associated with (8. X(u.1 The autonomous case We assume here that b(t.9) has a unique solution z. x ∈ Rn .Chapter 8 113 Theorem 8. x). X(s. t ≥ 0. T ] × Rn → Rn fulﬁlls Hypothesis 8. X(s. (8. u. we have Ps. u. X(s. x) = Ps. X(s. x)) which implies z(u. ϕx (x) .11). s ∈ [0. where Lϕ(x) = b(x).11) whose solution we denote by X(·. u.5) it follows the semigroup law Pt+s = Pt Ps . x)) ds = zt (s. x)). . u. x)) + zx (s. x)) = z(u. X(s. 8. t. t ≥ 0. Therefore z(s.t = P0. x)) is constant in s. In this case it is easy to check that for any t > s ≥ 0. By Proposition 8.1.2 Assume that b : [0. X(s. T ]. z is given by z(s. u. x ∈ Rn .9) we have d z(s. t≥0 (8.3 For any ϕ ∈ Cb (Rn ) we have Dt Pt ϕ = Pt Lϕ = LPt ϕ. u. s ≥ 0.1 we deduce 1 Proposition 8. x)).10). s. x) = ϕ(X(T. ϕ ∈ Cb (Rn ). Then problem (8. (8. is a solution of (8. x ∈ Rn . x)) + zx (s.
T ] × Rn .2 (i) b : [0. t.2 Stochastic case We consider the stochastic evolution equation dX(t) = b(t.2 we have Kolmogorov equations 1 1 Theorem 8. x) the solution of (8. (8.t . By Chapter 6 we know that the mapping (s. x))]. by Theorem 8.16) u(0. Ps. T ] × Rn → Rn and σ : [0. is called the transition evolution operator associated with (8.t ϕ(x). ux (t. .18) corresponding to η = x ∈ Rn . X(t))dB(t) X(s) = x ∈ Rd (8.t ϕ(x) = E[ϕ(X(t. t ≥ 0. x)−σ(t. (8.4 Assume that b ∈ Cb (Rn ) and let ϕ ∈ Cb (R). We denote as before by X(·. Hypothesis 8.18) and assume that the following hypothesis holds. x)). x ∈ Rn . x) → Ps.17) 8. x ∈ Rn . 0 ≤ s ≤ t ≤ T. t ∈ [0. For all t. y ∈ Rn . (ii) There exists M > 0 such that b(t.t is a linear bounded operator on Cb (Rn ). x.114 Finally. x) = Pt ϕ(x) = ϕ(X(t. y)+ σ(t. s. Rn ) are continuous. x ∈ Rn (8.19) As easily checked. s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ Cb (Rn ) we set Ps. 0 < s ≤ t ≤ T.18). T ]. is continuous for all ϕ ∈ Cb (Rn ). T ] × Rn → L(Rr . X(t))dt + σ(t. x) = ϕ(x). s. x ∈ Rn . has a unique solution given by u(t. x) . (iii) b and σ have ﬁrst and second partial derivatives with respect to x continuous and bounded in [0. y) HS ≤ M x−y. Then problem ut (t. Ps. x) = b(x). x)−b(t. t ≥ 0.
22).t ϕ is diﬀerentiable in s and we have d Ps.t ϕ(x) = ϕ(x) + s t Pr. 2 Proposition 8. x))] = ϕ(x) + s E[(L(r)ϕ)(X(r.21) dt ϕ(X(t. dt Proof. x)) + ϕx (X(t.21). x)] + b(s. 2 Proposition 8. s. yields t E[ϕ(X(t. x).2 holds and let ϕ ∈ Cb (Rn ). ds t ≥ 0. Then Ps.t ϕ = Ps. ϕx (x) .t ϕ(x) − ϕ(x) = s L(r)Ps. which coincides with (8. s.t ϕ = −L(s)Ps.3 Basic properties of transition operators 1 Tr [ϕxx (x)σ(s. s. By the Itˆ formula we have that o t ≥ 0. The second basic identity is the following.r ϕ(x)dr.t L(t)ϕ.62) we ﬁnd o t Ps. x)) = (L(t)ϕ)(X(t. Integrating with respect to t and taking expectation. s.t (L(r)ϕ)(x)dr. s. that is Ps.2 holds and let ϕ ∈ Cb (Rn ).5 Assume that Hypothesis 8. s. 2 Let us introduce the Kolmogorov operator (L(s)ϕ)(x) = 2 ϕ ∈ Cb (Rn ). x)σ ∗ (s.20) The ﬁrst basic identity is the following. σ(t. (8. (8.6 Assume that Hypothesis 8. Taking expectation in the backward Itˆ formula (7. x)). . Then Ps.t ϕ is diﬀerentiable in t and we have d Ps.t ϕ. x))dB(t) . (8.22) Proof. which yields (8. X(t.Chapter 8 115 8. x))]dr.
zx .7 Assume that Hypothesis 8. 2 Theorem 8. Let z be a solution to (8. ·)))(x) + zx (s. x))]. u.22) it follows that z(s. x) = E[ϕ(X(T. x) = ϕ(x). T ]. Exercise 8. x))ds + (L(s)z(s.2 holds and let ϕ ∈ Cb (Rn ). x))dB(s) .23). X(s. x) = Ps.t = Ps. taking expectation we ﬁnd z(u. and fulﬁlls (8. X(s. x) = E[ϕ(X(t. (8. = u zx (s. u.25) . x)) = ϕ(X(t. We have o ds z(s. ·)))(x) = 0. x ∈ R . and let 0 ≤ u ≤ s ≤ T.23). X(s. x)) − z(u. u. u. X(s.23). since z fulﬁlls (8. u. x)).24) Proof. (8. 2 0 < s ≤ T. u. u. Then there exists a unique solution z of problem (8. u. ϕ ∈ Cb (Rn ).23). fulﬁlls (8. z is given by z(s. u. x))dB(s).23) if z is continuous and bounded together with its partial derivatives zt . x))]. X(s. x) t s ∈ [0. Existence. u. X(s. Now. x))dB(s) = zx (s.8 Prove the cocycle law Ps.r Pr. (8. X(s. X(s. Let us compute the Itˆ diﬀerential of z(s. u. u. u. X(s. x)) = zs (s. x)). Uniqueness. x)). x ∈ Rn .T ϕ(x). Integrating in s between u and T yields z(T. u. By (8. s.116 Kolmogorov equations 8. x))σ(s.4 Parabolic equations 0 ≤ s < T. X(s.23) We consider here the parabolic equation zs (s. σ(s. z(T.t for 0 ≤ s ≤ t ≤ t ≤ T. X(u. X(T. x)) − z(u. σ(s. zxx .23). x) + (L(s)(z(s. T ] × Rn → R is a solution to (8. n We say that a function z : [0.
Setting B1 (t) = B(t + a) − B(a) we see that Y (t) fulﬁlls equation (8. t. t ≥ 0 is a semgroup of linear operators in Cb (Rd ). σ(t.Chapter 8 117 8.26) X(s) = x ∈ Rn . x). s + a.25)it follows that. Lϕ(x) = Then for any and a > 0 the laws of X(t. Proof.27) Then by Theorem 8. t − s. x ∈ Rn . Now the conclusion follows. 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 r − a = ρ yields t t Y (t) = x + s b(Y (ρ))dρ + s σ(Y (ρ))d[B(ρ + a) − B(a)]. x) = u(t. s. P0 = 1. By the proposition and the cocycle law (8. x) = b(x). we have Pt+s = Pt Ps . Set Y (t) = X(t + a. ϕ ∈ Cb (Rn ). x ∈ R (8. v(0. x) = σ(x). Setting v(s. x) and X(t + a. x) coincide.t . t ≥ 0. t]. t].7 we ﬁnd the result . problem (8. x). s ∈ [0. s ≥ 0. x) = x+ s+a b(X(r. x) be the solution of the stochastic evolution equation dX(t) = b(X(t))dt + σ(X(t))dB(t) (8. t ≥ 0. s + a.26) but with the Brownian motion B(t) replaced by B1 (t).9 Let X(t. x ∈ Rn . 2 Proposition 8. x). x) = ϕ(x). s. The we have t+a t+a X(t+a. Thus Pt . ϕx (x) . s+a. x ∈ Rn .23) becomes vs (s. s ∈ [0. setting Pt = P0. s+a.1 Autonomous case b(t. s+a.4. x) = Lv(s. x))dr + s+a σ(X(r. x))dB(r).
34) So.10 Assume that b. s ∈ [0. (8. x)] + Ax + ux (t. x) = e x + 0 tA e(t−s)A QdB(s). P) taking values in Rn . σ : R → R are Lipschitz continuous and of 2 class C 2 . ∗ t ≥ 0. x ∈ R. Then. the transition semigroup Pt looks like Pt ϕ(x) = Rn ϕ(y)NetA x.32) esA QesA ds. Q ∈ L(Rn ). problem (8.29) is given by u(t.30) where B is a standard Brownian motion in a probability space (Ω. for any ϕ ∈ Cb (R).27) has a unique solution given by v(s. (8.5 Examples Example 8. The corresponding stochastic diﬀerential equation is √ dX(t) = AX(t)dt + Q dB(t). Q is symmetric and Qx. x) = Pt ϕ(x). (8.118 Kolmogorov equations Theorem 8. (8. t ≥ 0.Qt (dy). . x) = 2 Tr [Quxx (t.33) where A∗ is the adjoint of A. where Qt = 0 t (8. t].11 Consider the parabolic equation in Rn 1 ut (t. x) = Pt−s. (8.31) Therefore the law of X(t.30) is given by the variation of constants formula t X(t. x) u(0.29) where A.Qt . The solution of (8.t ϕ(x) = Pt ϕ(x). G . x) = ϕ(x). x) is given by X(t. (8. the solution of (8. Consequently.28) 8. x)# P = NetA x. X(0) = x. x ≥ 0 for all x ∈ Rn .
36) where q > 0 and a ∈ R.39) . (8. x) = ϕ(x). (8.(y−etA x) t ϕ(y)dy. x) 2 u(0.12 Consider the parabolic equation in R ut (t. x) = e(a−q/2)t+ Therefore 1 Pt ϕ(x) = √ 2πt +∞ −∞ √ q B(t) x.35) Example 8. x) = (2π)−n/2 [det Qt ]−1/2 Rn 119 e− 2 1 Q−1 (y−etA x). (8. (8.37) where B is a real Brownian motion in is a real Brownian motion in some probability space (Ω. The solution of (8. (8. The corresponding stochastic diﬀerential equation is √ dX(t) = aX(t)dt + q X(t)dB(t). P). F .38) e− 2t ϕ(e(a−q/2)t+ y2 √ qy x)dy. det Qt > 0 we have u(t. in particular.Chapter 8 If. x) + axux (t. x) = 1 qx2 uxx (t.37) is given by X(t. X(0) = x.
120 Kolmogorov equations .
which will imply the theorem. where σ(R) is the σ algebra generated by R. ∅ ∈ D. We are going to show that D0 is a σ–algebra. 121 (A. If in particular. B ∈ R =⇒ A ∩ B ∈ R. D ⊂ σ(R) we have σ(R) = D. Then we have σ(R) ⊂ D.1 Let R be a πsystem and let D be a λsystem including R. a λsystem if (i) Ω. Moreover. (ii) A ∈ D =⇒ Ac ∈ D. Obviously any algebra is a πsystem. i=1 Let us prove the following Dynkin theorem. 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). that the following inclusion holds A.1) ∞ i=1 Ai ∈ D. Theorem A. For this it is enough to show. A non empty family R of parts of Ω is called a πsystem if A.Appendix A λsystems and πsystems Let Ω be a non empty set.2) . B ∈ D0 =⇒ A ∩ B ∈ D0 . Let D0 be the minimal λsystem including R. as remarked before. if D is a λsystem such that A. Proof. B ∈ D =⇒ A ∩ B ∈ D then it is σ–algebra. (iii) (Ai ) ⊂ D mutually disjoint =⇒ (A.
We claim that H (B) is a λsystem. we have that F ∪ B c ∈ D0 as required. by Corollary A. It remains to show that if F ∩ B ∈ D0 then F c ∩ B ∈ D0 or. equivalently. the following implication holds R ∈ R. B ∈ D0 ⇒ R ∩ B ∈ D0 . which yields R ⊂ H (B) and (A. Therefore H (R) = D0 by the minimality of D0 . If we show that H (B) ⊃ R. It is clear in fact that A is a πsystem.1 it follows that P1 = P2 . Let P1 and P2 be probability measures on (Ω.3) then we conclude that H (B) = D0 by the minimality of D0 and (A. Consequently. F ) such that P1 (I) = P2 (I). On the other hand it is clear that if R ∈ R we have R ⊂ H (R) since R is a πsystem. ∀ I ∈ A .3) is fulﬁlled. In fact. . In fact properties (i) and (iii) are clear. since F ∪ B c = (F \ B c ) ∪ B c = (F ∩ B) ∪ B c and F ∩ B and B c are disjoint.122 For any B ∈ D0 we set λsystems and πsystems H (B) = {F ∈ D0 : B ∩ F ∈ D0 }.2) is proved. So. Example A. It is easy to see that D is a λsystem which contains D. Deﬁne D = {B ∈ F : P1 (B) = P2 (B)}. ∀B ∈ D0 (A. Using the Dynkin theorem we can show that P1 = P2 . that F ∪ B c ∈ D0 .2 Let A be an algebra of subsets of Ω and let F be the σalgebra generated by A .
Show that E(XG ) coincides with the orthogonal projection of X into the closed subspace L2 (Ω.1 Deﬁnition We are given a probability space (Ω.1) E(XG ) is characterized by XdP = G G E(XG )dP. Therefore. It is clear that X is not G measurable in general.2) Exercise B. G . P). F . In all this appendix by random variable we mean an equivalence class of random variables with respect to the usual equivalence relation. (1) 123 . We say that X is G measurable if I ∈ B(R) ⇒ X −1 (I) ∈ F . ∀ G ∈ G. P) (1) . F . P) such that µ(G) = G XdP = G Y dP. (B.1) The G measurable random variable Y is called the conditional expectation of X given G . Let us consider the signed measure µ(G) = G XdP.Appendix B Conditional expectation B. P) of L2 (Ω. by the RadonNikodym Theorem there exists a unique Y ∈ L1 (Ω. F . G ∈ G. G . (B. P) and a σalgebra G included in F . F .1 Assume that X ∈ L2 (Ω. it is denoted by E(XG ). P). ∀ G ∈ G. It is clear that µ is absolutely continuous with respect to the restriction of P to G . In view of (B. Let X : Ω → R be a real random variable on (Ω.
Proposition B. one has E(XG ) ≥ 0. Y.8) and (B. (B. Then we have E(XY G ) = XE(Y G ).s. Also if X ≥ 0. E(αX + βY G ) = αE(XG ) + βE(Y G ). P). Then we have E(XH ) = E E(XG ) H .4) for all α. (B.124 Conditional expectation B. Proposition B. F . Setting G = Ω in (B. Then 1 A and X are independent so that l XdP = A Ω (B. P). (B.3 Let H be a σalgebra included in G . P) and let G be σalgebra included in F .. Let A ∈ G .8) and XdP = A A E(XG )dP = A E E(XG ) H dP. Assume that X is G measurable.2 Assume that X is independent of G . we have E(XG ) = X. XY ∈ L1 (Ω. comparing (B. β ∈ R and all X.9) we see that E(XH )dP = A A XdP = A E E(XG ) H dP. one can check easily the linearity of conditional expectation. From this one deduces the inequality E(XG ) ≤ E(X G ).6) 1 A XdP = P(A)E(X) = l A E(XG )dP. F . Let A ∈ H .2) yields E[E(XG )] = E(X). (B. It is obvious that if X is G measurable.s.10) . Then we have E(XG ) = E(X). Y ∈ L1 (Ω. Pa.5) (B.4 Let X. Proposition B.9) So.7) E(XH )dP (B. Then we have XdP = A A (B. Proof.2 Basic properties Let X. Proof. F . Pa. Y ∈ L1 (Ω.3) Moreover.
XY ∈ L1 (Ω.2 we ﬁnd. Y )) = E(Zh(X)).14) Denote by µ the law of the random variable (X. This is clearly equivalent to E(Zφ(X. (B. y)µ(dx. Then we have E(XY G ) = XE(Y ). P). Y. 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. ∀Z ∈ L1 (Ω. dy. (B. F . Then we have E(φ(X. Proof. Z) with values in R3 µ = (X. E(Zφ(X.5 Let X. P). Proposition B. Y ∈ L1 (Ω.15) . Y )) = R3 zφ(x. l for any G ∈ G . Y )dP = G G (B. P) and let φ : R2 → R be bounded and Borel.10) for X = 1lA where A ∈ G . Y. Y )].11) x ∈ R. G . Assume that X is G measurable and Y is independent of G . (B. Assume that X is G measurable and that Y is independent of G .6 Let X.Appendix B 125 Proof. We have to show that φ(X. Z)# P. Y. Let us prove now a useful generalization of this Corollary. ∀ G ∈ G.13) h(X)dP. It is enough to show (B. Recalling Proposition B. dz). So. F .12) where h(x) = E[φ(x. Let now G ∈ G . Y )G ) = h(X). Corollary B.
7 Let F. dz) = E(Zh(X)). H. Y )) = R2 z R φ(x. (B.8 Let g : R → R be convex and let F. y)λ(dy) ν(dx. g(F ) ∈ L1 (Ω.17) . dy. P). P) and Z = E(HG ). F .126 Conditional expectation Since X and Z are G measurable and Y is independent of G . dz) = (X. zφ(x. Prove that E(F H) = E(F Z). Using the Fubini Theorem we get ﬁnally E(Zφ(X. dz). dz) = R2 zh(x)ν(dx. the random variables (X. where ν(dx. Z)# P(dx. dz)λ(dy). as required. Prove the Jensen inequality E(g(F )G ) ≥ g(E(F G )). Therefore we can write (B.15) as E(Zφ(X. Z) and Y are independent so that µ(dx. (B. Exercise B. dz) = ν(dx.16) Exercise B. Y )) = R3 λ(dy) = Y# P(dy). dz)λ(dy). F H ∈ L1 (Ω. y)ν(dx. G .
∀ 0 ≤ s < t ≤ T.Appendix C Martingales C. a submartingale if E[M (t)Fs ] ≥ M (s). ∀ 0 ≤ s < t ≤ T. 127 . A ∈ Fs . ∀ 0 ≤ s < t ≤ T. P). t ∈ [0. ∀ 0 ≤ s < t ≤ T.T ] with M (t) ∈ L1 (Ω.1 Deﬁnitions Let (Ω. Thus (M (t))t∈[0.T ] is said to be a martingale (with respect to the ﬁltration (Ft )t≥0 ) if E[M (t)Fs ] = M (s). F . and a supermartingale if and only if M (s)dP ≤ A A M (t)dP. (M (t))t∈[0. ∀ 0 ≤ s < t ≤ T. A ∈ Fs . a stochastic process. ∀ 0 ≤ s < t ≤ T. Ft . A ∈ Fs . T ]. a supermartingale if E[M (t)Fs ] ≤ M (s). P) be a probability space. (Ft )t≥0 an increasing family of σalgebras included in F and (M (t))t∈[0. a submartingale if and only if M (s)dP ≥ A A M (t)dP.T ] is a martingale if and only if M (s)dP = A A M (t)dP.
(See Exercise B. Set A+ = {ω ∈ Ω : M (s)(ω) > 0}. C.. 1≤i≤n Let M (t) be a martingale. Clearly A+ and A− belong to Fs . A ∈ Fs . A− = {ω ∈ Ω : M (s)(ω) ≤ 0}. let 0 < t1 < t2 < .. Exercise C.8). Proposition C. l A so that B(t)dP = A A B(s)dP. {S≥λ} (C.128 Martingales Proposition C. 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))) = 0.3 Using Jensen’s inequality prove that any convex function of a martingale is a submartingale.2 The basic inequality for martingales S = sup M (ti ). In fact.1 If M is a martingale then M  is a submartingale. < tn ≤ T and set We are going to prove an important estimate (due to Kolmogorov) of S in terms of M (tn ).1) . Proof. Let 0 ≤ s < t ≤ T.4 For all λ > 0 we have P(S ≥ λ) ≤ 1 λ M (tn )dP. Example C. let t > s and A ∈ Fs . This shows that M  is a submartingale. 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.2 The Brownian motion B is a martingale.
. n. . We have obviously M (tn )dP ≥ λP(An ).. i = 1. F .3 Square integrable martingales In this section we are given a martingale M (t) such that M (t) ∈ L2 (Ω. An−1 Proceeding in a similar way we obtain M (tn )dP ≥ λP(Ak ).. 1≤i≤n We are going to estimate of E[S 2 ] in terms of E[M 2 (tn )]. sets A1 .2) Summing up on k from 1 to n the conclusion follows.. .. . Ak k = 1. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·· An = {M (t1 ) < λ. We have. P) for all t ∈ [0.. 129 Clearly. Set A1 = {M (t1 ) ≥ λ}. and we have n {S ≥ λ} = i=1 Ai .Appendix C Proof. Let 0 < t1 < t2 < . (C. M (tn ) ≥ λ}. . n. An Now we estimate martingale. . A2 = {M (t1 ) < λ. Therefore M (tn )dP ≥ λP(An−1 ). . M (t2 ) ≥ λ}. An are mutually disjoint. < tn ≤ T and set as before S = sup M (ti ). Let us estimate {S≥λ} M (tn )dP..... T ]. . Moreover Ai ∈ Fti .. . recalling that M (t) is a sub– λP(An−1 ) ≤ An−1 M (tn−1 )dP ≤ An−1 M (tn )dP. C. An−1 X(tn )dP.
(C. So. Corollary C.5 We have E Proof.+∞)×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 . by (C. t∈[0.130 Proposition C.1) and the Fubini Theorem we have ∞ E(S ) ≤ 0 2 1 √ t √ {S≥ t} M (tn )dP dt = [0.6 Let M be a square integrable continuous martingale. Now the conclusion follows easily.4) E(S 2 ) = 0 P(S 2 > t)dt = 0 P(S > √ t)dt. Then for any T > 0 we have sup M (t)2 ≤ 4E[M 2 (T )].1) we have F (t) ≤ Consequently ∞ ∞ Martingales sup M (ti )2 1≤i≤n ≤ 4E(M (tn )2 ).T ] E (C. {S≥t} (C. By (C. 1 t M (tn )dP.5) . Set F (t) = P(S > t).3) t ≥ 0.
s∈[0. by the arbitrariness of the sequence s1 . . .Appendix C 131 Proof. By Proposition C. sup M (s)2 ≤ 4E M (T )2 . s2 . 1≤i≤m Since M is continuous it follows. that E as required. .5 it follows that E sup M (si )2 ≤ 4E M (T )2 . . Let 0 < s1 < s2 < · · · < sm = T.T ] . sm .
132 Martingales .
Theorem D.1 There exists κ ∈ [0. x. (λ.1 (i).2) λ → x(λ).1) (ii). y) ≤ κx − y. x) which are only continuously Gˆteaux diﬀerentiable. E be Banach spaces (norms  · ). a 133 .Appendix D Fixed points depending on parameters D. (D. 1) such that F (λ. then x is of class C 1 and x (λ) = Fλ (λ. x) and assume that Hypothesis D. x(λ)). We are given a continuous mapping The following result (contraction principle) is classical. x(λ))x (λ). y ∈ E. ∀ λ ∈ Λ. (D. There exists a unique continuous mapping x : Λ → E. x) − F (λ. such that x(λ) = F (λ. We want to generalize the second part of this result to mappings F (λ. x(λ)) + Fx (λ.1 Introduction F : Λ × E → E. x) → F (λ. Let Λ. ∀ λ ∈ Λ. If in addition F is of class C 1 .
a → DΦ(a) is continuous then Φ is diﬀerentiable. (1) Example D. We shall need the following result. y ∈ L2 (0. ξ ∀ a. a → DΦ(a).4 Let A. a → DΦ(a)c is continuous we say that Φ is continuously Gˆteaux diﬀerentiable.3 It is well known that if the mapping A → L(A.3) Proof. e . 1) and Φ(x) = sin x. c ∈ A.2 We say that Φ is Gˆteaux diﬀerentiable if there exists a a mapping DΦ : A → L(A. Deﬁnition D. ∀ x. (as one can see) Φ is not diﬀerentiable in any point. However. a Remark 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.5 Let Φ : A → B be continuously Gˆteaux diﬀerentiable. Then one can check easily that Φ is continuously Gˆteaux diﬀerentiable and a DΦ(x)y = y cos x. 1). Then we have F (ξ) = DΦ((1 − ξ)a + ξc)(c − a)dξ. If in addition for all c ∈ A the mapping A → B. Set F (ξ) = Φ((1 − ξ)a + ξc). 1]. B = L2 (0. B). and the conclusion follows just integrating this identity between 0 and 1. (1) ξ ∈ [0. a Then the following identity holds 1 Φ(c) − Φ(a) = 0 DΦ((1 − ξ)a + ξc)(c − a)dξ.134 Fixed points D. One also says that Φ is Fr´chet diﬀerentiable. B). such that ξ→0 lim 1 (Φ(a + ξc) − Φ(a)) = DΦ(a)c. Proposition D. (D.
x(λ)+ξ(x(λ+hµ)−x(λ)))·zdξ. ∀ λ ∈ Λ. h)z = Gz := 0 Fx (λ+ξhµ. (D. ∀ z ∈ E. . x(λ)). µ ∈ Λ and h ∈ R. x(λ)) 1 (D. µ. x). Then G ∈ L(E) and by Hypothesis D. (λ.7) Set now 1 G(λ.4) and (D. equivalently x (λ) · µ = Fλ (λ. (D. Proof.4) λ → x(λ). x(λ)) · µ.Appendix D 135 D.6 Assume that Hypotheses D. z ∈ E.1 Gz ≤ κz.5) (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. Then x(·) is continuously Gˆteaux diﬀerena a tiable as well and we have x (λ) · µ = (1 − Fx (λ. Let λ. x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ + 0 Fx (λ + ξhµ. Theorem D. x(λ))(x (λ) · µ).6) =h 0 1 Fλ (λ + ξhµ. From (D.1 is fulﬁlled and that F is continuously Gˆteaux diﬀerentiable. x. x(λ) + ξ(x(λ + hµ) − x(λ))) · (x(λ + hµ) − x(λ))dξ. x(λ)) · µ + Fx (λ.3) it follows that x(λ + hµ) − x(λ) = F (λ + hµ. We assume that Hypothesis D. such that x(λ) = F (λ. x(λ)))−1 Fλ (λ.1 is fulﬁlled and denote by x the mapping x : Λ → E. x) → F (λ. x(λ + hµ)) − F (λ.
Letting h → 0 we ﬁnd x (λ) · µ = (1 − Fx (λ. h))(x(λ + hµ) − x(λ)) 1 Fixed points =h 0 Fλ (λ + ξhµ. x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ. x(λ))(x (λ) · µ) = Fλ (λ.136 Then from equation (D. Therefore x (λ) · µ − Fx (λ. x.7) we have (1 − G(λ. x. . x(λ)). which implies 1 x(λ + hµ) − x(λ)) = (1 − G(λ. x(λ)))−1 Fλ (λ. µ. x(λ)). x(λ) + ξ(x(λ + hµ) − x(λ))) · µdξ. µ. h))−1 h 1 × 0 Fλ (λ + ξhµ.
Let us compute E( B p W . T ]).2m W . We ask the question whether B(·) belongs to W . < Theorem E. Deﬁne f := [0.1 (Sobolev embedding) Assume that > 1/(2m).2m (0.T ]2 f (t) − f (s)2m dt ds t − s1+2m .p ) = E [0. then B 2m W .2m Let ∈ (0.2m E =E [0.Appendix E Fractional Sobolev spaces and regularity of processes E.T ]2 = cm [0.T ]2 B(t) − B(s)p dt ds t − s1+p Take for simplicity p = 2m. (E.T ]2 t − sm dt ds = cm t − s1+2m 137 . 1] 2m .1) Example E. Then the following inclusion holds with continuous embedding. m ∈ N. T ) is by deﬁnition the space of all f : [0.T ]2 B(t) − B(s)2m dt ds t − s1+2m t − sm−1−2m dt ds [0. W . 1).2 (The Brownian motion) Let > 0 and let p ≥ 1. T ) ⊂ C −1/(2m) ([0.1 Fractional Sobolev spaces on [0. T ) or not.p (0. T ] → R such that f +∞.2m (0.
3) ([0. be a real stochastic process on (Ω.4 Kolomogorov test It is a generalization Proposition E. 1/2). since ∈ (0. This does not imply that B(·) is continuous. 1+b . F .T ]2 t − sm−1−2m dt ds < ∞. Therefore 1 if 1 < < 1 we conclude by the Sobolev embedding that B(·) ∈ C − 4 (0. Then we have E X2m < +∞. T ]. Remark E.4 (0. T ]. . P). s ∈ [0. One situation often encountered is when the following estimate holds for some m > 1. and cm > 0 E[X(t) − X(s)2m ] ≤ cm t − sm .4) Then X has αH¨lder continuous trajectories with α < o . T ) for < 2 . o Proposition E. P) be probability space and let X(t).2 Processes belonging to W . (E. ∀ t.2m Moreover. T ]. T ]) for almost ω ∈ Ω. a (E.2) This estimate (provided m > 1) allows us to conclude that trajectories of X are H¨lder continuous almost surely. F . We have in fact E X 2m . ∈ (0. ≤ cm [0. 2 1 For instance taking m = 1 we conclude that B(·) ∈ W .3 Assume that there is m > 1. 1/2) and m − 1 − 2m > −1. s ∈ [0. 1/2). b > 0 such that E[X(t) − X(s)1+a ] ≤ cm t − s1+b ∀ t. 4 2 Arguing similarly taking larger m we conclude that B(·) ∈ C α (0. T ) again for < 2 .2m (0. and cm > 0 (E.3. T ). 1 But if we take m = 2 we have B(·) ∈ W . such that (E.2m −1/(2m) ∈ (0.138 Fractional Sobolev spaces The integral is ﬁnite if and only if < 1 . The last statement follows from the Sobolev embedding theorem. Assume that there is a > 0. ω) belongs to C Proof. 1/2).2 (0.2) is fulﬁlled. t ∈ [0. as the next proposition shows. T ) for any α ∈ (0. T ) Let (Ω. E. X(·.
m ∈ N. (E. 1). Deﬁne f W f . Assume that there is m > 1. T ]) for almost ω ∈ Ω. P). 1).2m < +∞. x − yd+2m Let ∈ (0. 1/2) and m − 1 − 2m > −1.2m 2m . (E.7) ([0. that (E. T ]d → R such that . 1). T ]d . Then the following inclusion holds with continuous embedding. T ]. ∀ t. d ∈ N. T ]d ) is by deﬁnition the space of all f : [0.6) This estimate implies that almost all trajectories of X are H¨lder continuous o almost surely.6 Assume that there is m > 1.2m ) −d/(2m) ∈ (0.2m := [0.2) is fulﬁlled.3 Multi dimensional Sobolev spaces and regularity of random ﬁelds f (x) − f (y)2m dx dy. F . and cm > 0 E[X(x) − X(y)2m ] ≤ cm t − s2m . . X(·. s ∈ [0. and cm > 0 such (E.Appendix F 139 E. . F . W .5) Let (Ω.2m Moreover. Then we have E X2m < +∞. ∈ (0.T ]2d ([0. We have in fact E( X 2m . P) be probability space and let X(x). T ]d ). Proposition E. ≤ cm [0. since ∈ (0. T ]d ) ⊂ C −d/(2m) ([0. Theorem E.5 (Sobolev embedding) Assume that > d/(2m).T ]2 t − sm−1−2m dt ds < ∞. The last statement follows from the Sobolev embedding theorem.2m ([0. be a random ﬁeld on (Ω. ω) belongs to C Proof. x ∈ [0.
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