INTRODUCTION TO STOCHASTIC

ANALYSIS
Giuseppe Da Prato
June 22, 2009
Contents
1 Gaussian measures in Hilbert spaces 3
1.1 Some concepts of Probability . . . . . . . . . . . . . . . . . . 3
1.1.1 Random variables . . . . . . . . . . . . . . . . . . . . . 3
1.1.2 Product measures . . . . . . . . . . . . . . . . . . . . . 5
1.2 Probability measures in Hilbert spaces . . . . . . . . . . . . . 5
1.2.1 Mean and covariance . . . . . . . . . . . . . . . . . . . 5
1.2.2 Finite dimensional projections of measures . . . . . . . 7
1.3 Gaussian probability measures . . . . . . . . . . . . . . . . . . 9
1.3.1 Gaussian probability measures in R . . . . . . . . . . . 9
1.3.2 Gaussian probability measures in R
n
. . . . . . . . . . 10
1.3.3 Gaussian probability measures in H . . . . . . . . . . . 11
1.3.4 Computation of some Gaussian integrals . . . . . . . . 11
1.3.5 The Cameron–Martin space . . . . . . . . . . . . . . . 13
2 Gaussian random variables 17
2.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2 Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2.1 Independent real variables . . . . . . . . . . . . . . . . 18
2.2.2 Independent Gaussian random variables . . . . . . . . 21
2.3 Gaussian random variables defined in a Hilbert space . . . . . 21
2.3.1 Affine changes of variables . . . . . . . . . . . . . . . . 22
2.4 The white noise function . . . . . . . . . . . . . . . . . . . . . 23
2.4.1 Equivalence classes of random variables . . . . . . . . . 23
2.4.2 Definition of the white noise function . . . . . . . . . . 25
3 Brownian Motion 27
3.1 Stochastic Processes . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Brownian motion . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2.1 Construction of a Brownian motion . . . . . . . . . . . 29
3.2.2 Some properties of a Brownian motion . . . . . . . . . 29
3.3 Wiener integral . . . . . . . . . . . . . . . . . . . . . . . . . . 31
i
ii
3.4 Continuity of Brownian motion . . . . . . . . . . . . . . . . . 35
3.5 The standard Brownian motion . . . . . . . . . . . . . . . . . 36
3.5.1 Some properties of C
0
. . . . . . . . . . . . . . . . . . 37
3.5.2 The Wiener measure and the standard Brownian motion 37
3.6 Quadratic variation of the Brownian motion . . . . . . . . . . 39
3.7 Multidimensional Brownian motions . . . . . . . . . . . . . . . 41
4 Markov property of the Brownian motion 43
4.1 Filtration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.1.1 F
t
-measurable random variables . . . . . . . . . . . . . 44
4.2 Stopping times . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.3 The Brownian motion W(t + τ) −W(τ) . . . . . . . . . . . . 49
4.4 Transition semigroup . . . . . . . . . . . . . . . . . . . . . . . 50
4.5 Markov property . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.5.1 Strong Markov property . . . . . . . . . . . . . . . . . 52
4.6 Some consequences of the strong Markov property . . . . . . . 53
4.7 Application to partial differential equations . . . . . . . . . . . 56
4.7.1 The Dirichlet problem in the half-line . . . . . . . . . . 57
4.7.2 The Neumann problem . . . . . . . . . . . . . . . . . . 58
4.7.3 The Ventzell problem . . . . . . . . . . . . . . . . . . . 59
5 The Itˆo integral 61
5.1 Definition of Itˆo’s integral . . . . . . . . . . . . . . . . . . . . 61
5.1.1 Itˆo’s integral for elementary processes . . . . . . . . . . 61
5.1.2 General definition of Itˆo’s integral . . . . . . . . . . . . 63
5.2 Itˆ o integral for mean square continuous processes . . . . . . . 66
5.3 The Itˆo integral as a stochastic process . . . . . . . . . . . . . 67
5.4 Itˆ o integral with stopping times . . . . . . . . . . . . . . . . . 70
5.4.1 Stopping times . . . . . . . . . . . . . . . . . . . . . . 70
5.4.2 Itˆo’s integral with stopping times . . . . . . . . . . . . 71
5.5 Multidimensional Itˆ o integrals . . . . . . . . . . . . . . . . . . 72
6 The Itˆo formula 75
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.1.1 The Itˆ o formula for unbounded functions . . . . . . . . 82
6.2 Itˆ o’ formula for a vector valued process . . . . . . . . . . . . . 84
7 Stochastic evolution equations 89
7.1 Existence and uniqueness . . . . . . . . . . . . . . . . . . . . . 90
7.1.1 Solution of the stochastic differential equation in the
space C
B
([s, T]; L
2m
(Ω; R
d
)). . . . . . . . . . . . . . . 94
1
7.1.2 Examples . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.1.3 Differential stochastic equations with random coefficients 96
7.2 Continuous dependence on data . . . . . . . . . . . . . . . . . 97
7.2.1 Continuous dependence on mean square . . . . . . . . 97
7.3 Almost sure continuity and h¨olderianity of trajectories . . . . 100
7.4 Differentiability of X(t, s, x) with respect to x . . . . . . . . . 101
7.4.1 Existence of X
x
(t, s, x) . . . . . . . . . . . . . . . . . . 101
7.4.2 Existence of X
xx
(t, s, x) . . . . . . . . . . . . . . . . . 102
7.5 Itˆ o Differentiability of X(t, s, x) with respect to s. . . . . . . . 105
7.5.1 The deterministic case . . . . . . . . . . . . . . . . . . 105
7.5.2 The stochastic case . . . . . . . . . . . . . . . . . . . . 106
7.5.3 Backward Itˆo’s formula . . . . . . . . . . . . . . . . . . 107
8 Kolmogorov equations 111
8.1 The deterministic case . . . . . . . . . . . . . . . . . . . . . . 111
8.1.1 The autonomous case . . . . . . . . . . . . . . . . . . . 113
8.2 Stochastic case . . . . . . . . . . . . . . . . . . . . . . . . . . 114
8.3 Basic properties of transition operators . . . . . . . . . . . . . 115
8.4 Parabolic equations . . . . . . . . . . . . . . . . . . . . . . . . 116
8.4.1 Autonomous case . . . . . . . . . . . . . . . . . . . . . 117
8.5 Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
A λ-systems and π-systems 121
B Conditional expectation 123
B.1 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
B.2 Basic properties . . . . . . . . . . . . . . . . . . . . . . . . . . 124
C Martingales 127
C.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
C.2 The basic inequality for martingales . . . . . . . . . . . . . . . 128
C.3 Square integrable martingales . . . . . . . . . . . . . . . . . . 129
D Fixed points depending on parameters 133
D.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
D.2 Gˆ ateaux differentiable mappings . . . . . . . . . . . . . . . . . 134
D.3 The main result . . . . . . . . . . . . . . . . . . . . . . . . . . 135
E Fractional Sobolev spaces and regularity of processes 137
E.1 Fractional Sobolev spaces on [0, 1] . . . . . . . . . . . . . . . . 137
E.2 Processes belonging to W
,2m
(0, T) . . . . . . . . . . . . . . . 138
2
E.3 Multi dimensional Sobolev spaces and regularity of random
fields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Chapter 1
Gaussian measures in Hilbert
spaces
We shall denote by H a real separable Hilbert space (with inner product
¸, ) and norm [ [), and by L(H) the Banach algebra of all linear bounded
operators T : H → H, endowed with the norm
|T| = sup
x∈H, |x|=1
[Tx[.
We recall that T ∈ L(H) is said to be symmetric if ¸Tx, y) = ¸x, Ty) for all
x, y ∈ H, positive if ¸Tx, x) ≥ 0 for all x ∈ H. The set of all symmetric and
positive elements of L(H) will be denoted by L
+
(H).
Finally, we shall denote by C
b
(H) the space of all functions ϕ: H → R
which are continuous and bounded. C
b
(H), endowed with the norm
|ϕ|
0
: = sup
x∈H
[ϕ(x)[,
is a Banach space.
Next section is devoted to some basic facts from Measure Theory and
Probability needed in what follows.
1.1 Some concepts of Probability
1.1.1 Random variables
Let (Ω, F, P) be a probabilty space and let E be a Polish (complete separable
metric) space; we shall denote by B(E) the σ–algebra generated by all closed
(or equivalently open) subsets of E. The elements of B(E) are called Borel
sets.
3
4 Chapter 1
By an E-valued random variable in (Ω, F) we mean a mapping
X: Ω → E, ω → X(ω),
such that
I ∈ B(E) ⇒ X
−1
(I) ∈ F.
The law (or image measure or push-forward measure) of X is the probability
measure X
#
P on (E, B(E)) defined as
(X
#
P)(I) = P(X
−1
(I)), ∀ I ∈ B(E).
Sometimes we shall use the notation X
#
P = P
X
.
Let us prove the following basic change of variables formula.
Theorem 1.1 Let X be an E-valued random variable in (Ω, F, P). Let
moreover ϕ: E →R be a nonnegative Borel function. Then we have
_

ϕ(X(ω))P(dω) =
_
E
ϕ(x)(X
#
P)(dx). (1.1)
Proof. Let first ϕ = 1l
I
with I ∈ B(E)
(1)
. In this case we have
ϕ(X(ω)) = 1l
X
−1
(I)
(ω), ∀ ω ∈ Ω.
So,
_

ϕ(X(ω))P(dω) = P(X
−1
(I)) = X
#
P(I) =
_
E
ϕ(x)X
#
P(dx).
Consequently, (1.1) holds for all simple functions ϕ of the form
ϕ =
n

i=1
c
i
1l
I
i
,
with n ∈ N, c
1
, ..., c
n
≥ 0 and I
1
, ..., I
n
∈ B(E). Since any positive Borel
functions is the limit of an increasing sequence of positive simple functions,
the conclusion follows from the monotone convergence theorem.
(1)
1l
I
(ω) is the characteristic function of I; it is equal to 1 if ω ∈ I to 0 if ω / ∈ I.
Gaussian measures 5
1.1.2 Product measures
Let (Ω
i
, F
i
, P
i
), i = 1, ..., n, be probability spaces. Set Ω =

n
i=1

i
. A mea-
surable rectangle of Ω is, by definition, a set of the form R =

n
i=1
A
i
where
A
i
∈ F
i
, i = 1, 2, ..., n. The σ-algebra generated by all measurable rectangles
is called the product σ-algebra of F
i
, ..., F
n
; it is denoted by

n
i=1
F
i
.
For any R =

n
i=1
A
i
we define
P(R) :=
n

i=1
P
i
(A
i
).
One can show that P can be uniquely extended to a probability measure on
(Ω, F) which is called the product probability of P
1
, P
2
, ..., P
n
.
1.2 Probability measures in Hilbert spaces
1.2.1 Mean and covariance
Let µ be a probability measure on (H, B(H)). Assume that µ has finite first
momentum,
_
H
[x[µ(dx) < +∞.
Then the linear functional F : H →R defined as
F(h) =
_
H
¸x, h)µ(dx), ∀ h ∈ H,
is continuous since
[F(h)[ ≤
_
H
[x[µ(dx) [h[, ∀ h ∈ H.
By the Riesz representation theorem there exists m ∈ H such that
¸m, h) =
_
H
¸x, h)µ(dx), ∀ h ∈ H.
m is called the mean of µ. We shall write
m =
_
H
xµ(dx).
Assume now that the second moment of µ is finite,
_
H
[x[
2
µ(dx) < +∞,
6 Chapter 1
(so that the first one is finite as well). Let us consider the bilinear form
G : H H →R defined as
G(h, k) =
_
H
¸h, x −m)¸k, x −m)µ(dx), ∀ h, k ∈ H.
G is continuous since
[G(h, k)[ ≤
_
H
[x −m[
2
µ(dx) [h[ [k[, ∀ h, k ∈ H.
Therefore there is a unique linear bounded operator Q ∈ L(H) such that
¸Qh, k) =
_
H
¸h, x −m)¸k, x −m)µ(dx), ∀ h, k ∈ H.
Q is called the covariance of µ.
In order to state the next result we need the concept of trace class op-
erator. A symmetric and positive operator Q ∈ L(H) is said to be of trace
class if
Tr Q: =

k=1
¸Qe
k
, e
k
) < +∞
for one (and consequently for any) complete orthonormal system (e
k
). One
can show that any trace class operator Q is compact and that Tr Q is the
sum of its eigenvalues repeated according to their multiplicity, see e. g. N.
Dunford and J.T. Schwartz, Linear Operators. Part II, Interscience, 1964.
(2)
Proposition 1.2 The covariance operator Q of µ is symmetric, positive and
of trace class.
Proof. Symmetry and positivity of Q are clear. To prove that Q is of trace
class choose a complete orthonormal system (e
k
) in H. Then we have
¸Qe
k
, e
k
) =
_
H
[¸x −m, e
k
)[
2
µ(dx), k ∈ N.
Therefore, by the monotone convergence theorem and the Parseval identity,
we find that
Tr Q =

k=1
_
H
[¸x −m, e
k
)[
2
µ(dx) =
_
H
[x −m[
2
µ(dx) < +∞.
(2)
It is also possible to define trace-class operators which are not symmetric, but we shall
not need in what follows.
Gaussian measures 7

We shall denote by L
+
1
(H) the set of all positive, symmetric operators in
H of trace class.
We finally define the Fourier transform ´ µ of a probability measure µ
setting
´ µ(h) =
_
H
e
ix,h
µ(dx), ∀ h ∈ H. (1.2)
One checks easily that ´ µ : H →C is continuous.
1.2.2 Finite dimensional projections of measures
We are given a probability measure µ ∈ P(H). Let (e
k
) be a complete or-
thonormal system in H. For any n ∈ N we consider the projection P
n
: H →
P
n
(H) defined as
P
n
x =
n

k=1
¸x, e
k
)e
k
, x ∈ H. (1.3)
We have lim
n→∞
P
n
x = x for all x ∈ H.
For any n ∈ N we consider the measure µ
n
:= (P
n
)
#
µ defined by
_
H
ϕ(P
n
x)µ(dx) =
_
H
n
ϕ(y)µ
n
(dy),
for all ϕ ∈ C
b
(R).
Thus µ
n
is a probability measure on (P
n
(H), B(P
n
(H)), µ
n
). We shall
also consider µ
n
as a probability measure on (H, B(H), µ), setting
µ
n
(I) = µ
n
(I ∩ P
n
(H)), ∀I ∈ B(H).
We want now to show that µ is determined by the sequence (µ
n
). For this
we first need the following result.
Proposition 1.3 Let µ, ν ∈ P(H) be such that
_
H
ϕ(x)µ(dx) =
_
H
ϕ(x)ν(dx), ∀ ϕ ∈ C
b
(H). (1.4)
Then µ = ν.
Proof. Let C ⊂ H be closed and let (ϕ
n
) ⊂ C
b
(H) be such that
(i) lim
n→∞
ϕ
n
(x) = 1l
C
(x) for all x ∈ H.
8 Chapter 1
(ii) |ϕ
n
|
0
≤ 1 for all ∈ N.
A sequence (ϕ
n
) ⊂ C
b
(H) fulfilling (i) and (ii) is provided by,
ϕ
n
(x) =
_
_
_
1 if x ∈ C,
1 −n d(x, C) if d(x, C) ≤
1
n
0 if d(x, C) ≥
1
n
.
Now, by the dominate convergence theorem it follows that
lim
n→∞
_
H
ϕ
n
dµ = lim
n→∞
_
H
ϕ
n
dν = µ(C) = ν(C).
Since closed sets generate the Borel σ–algebra of H this implies that µ = ν.

We can now prove the announced result.
Proposition 1.4 Let µ, ν ∈ P(H). If (P
n
)
#
µ = (P
n
)
#
ν for any n ∈ N we
have µ = ν.
Proof. Let ϕ ∈ C
b
(H). Then, using the dominated convergence theorem and
the change of variables formula, we have
_
H
ϕ(x)µ(dx) = lim
n→∞
_
H
ϕ(P
n
x)µ(dx) = lim
n→∞
_
P
n
(H)
ϕ(ξ)((P
n
)
#
µ)(dξ)
and
_
H
ϕ(x)ν(dx) = lim
n→∞
_
H
ϕ(P
n
x)ν(dx) = lim
n→∞
_
P
n
(H)
ϕ(ξ)((P
n
)
#
ν)(dξ).
Since (P
n
)
#
µ = (P
n
)
#
ν by assumption, we conclude that
_
H
ϕ(x)µ(dx) =
_
H
ϕ(x)ν(dx)
for all ϕ ∈ C
b
(H). Therefore, in view of Proposition 1.3 we have µ = ν.
As an application of Proposition 1.4 we prove that the Fourier transform
of µ determines µ.
Proposition 1.5 Let µ, ν ∈ P(H) be such that ´ µ(h) = ´ ν(h) for all h ∈ H.
Then µ = ν.
Gaussian measures 9
Proof. We assume as granted the result when H is finite-dimensional
(3)
. In
the general case we have by (1.1) for any h ∈ H and n ∈ N,
´ µ(P
n
h) =
_
H
e
ix,P
n
h
µ(dx) =
_
P
n
(H)
e
iP
n
ξ,P
n
h
(P
n
)
#
µ(dξ) =

(P
n
)
#
µ(P
n
h)
and
´ ν(P
n
h) =
_
H
e
ix,P
n
h
ν(dx) =
_
P
n
(H)
e
iP
n
ξ,P
n
h
(P
n
)
#
ν(dξ) =

(P
n
)
#
ν(P
n
h).
Therefore measures (P
n
)
#
µ and (P
n
)
#
ν have the same Fourier tranforms and
so they coincide. The conclusion follows from Proposition 1.4.
1.3 Gaussian probability measures
We first recall the definition of Gaussian measure on (R, B(R)), then we go
to the general case.
1.3.1 Gaussian probability measures in R
For any pair of real numbers (m, q) with m ∈ R and q ≥ 0 we define a
probability measure N
m,q
on (R, B(R)) as follows. If q = 0 we set
N
m,0
= δ
m
,
where δ
m
is the Dirac measure at m, defined for all B ∈ B(R) by
δ
m
(B) =
_
_
_
1 if m ∈ B,
0 if m / ∈ B.
If q > 0 we set
N
m,q
(B) =
1

2πq
_
B
e

(x−m)
2
2q
dx, for all B ∈ B(R).
N
m,q
is a probability measure since
N
m,q
(R) =
1

2πq
_
+∞
−∞
e

(x−m)
2
2q
dx =
1


_
+∞
−∞
e

x
2
2
dx = 1.
(3)
See e.g. M. M´etivier, Notions fondamentales de la th´eorie des probabilit´ees, Dunod
Universit´e, 1968.
10 Chapter 1
If q > 0, N
m,q
is absolutely continuous with respect to the Lebesgue measure

1
(dx) = dx in (R, B(R) and
N
m,q
(dx) =
1

2πq
e

(x−m)
2
2q
dx.
When m = 0 we shall write for short N
q
instead N
0,q
.
It is easy to see that m is the mean and q the covariance of N
m,q
. Moreover,
its Fourier transform is given by

N
m,q
(h) :=
_
R
e
ihx
N
m,q
(dx) = e
imh−
1
2
qh
2
, h ∈ R. (1.5)
1.3.2 Gaussian probability measures in R
n
We are going to define a Gaussian measure N
m,Q
for any m = (m
1
, ..., m
n
) ∈
R
n
and any Q ∈ L
+
(R
n
).
Let Q ∈ L
+
(R
n
) and let (e
1
, ..., e
n
) be an orthonormal basis on R
n
such
that Qe
k
= λ
k
e
k
, k = 1, ..., n, for some λ
k
≥ 0. Then we define a probability
measure N
a,Q
on (R
n
, B(R
n
)) by setting
N
m,Q
=
n

k=1
N
m
k

k
.
When m = 0 we shall write N
Q
instead of N
m,Q
for short.
The proof of the following proposition is easy; it is left to the reader.
Proposition 1.6 Let m ∈ R
n
, Q ∈ L
+
(R
n
) and µ = N
m,Q
. Then we have
_
R
n
xµ(dx) = m,
_
R
n
¸y, x −a)¸z, x −a)µ(dx) = ¸Qy, z), y, z ∈ R
n
.
Moreover the Fourier tranform of N
a,Q
is given by
¯
N
a,Q
(h) :=
_
R
n
e
ih,x
µ(dx) = e
ia,h−
1
2
Qh,h
, h ∈ R
n
.
Finally, if the determinant of Q is positive, N
a,Q
is absolutely continuous
with respect to the Lebesgue measure in R
n
and we have
N
a,Q
(dx) =
1
_
(2π)
d
det Q
e

1
2
Q
−1
(x−a),x−a
dx.
Therefore m is the mean and Q the covariance operator of N
a,Q
.
Gaussian measures 11
1.3.3 Gaussian probability measures in H
Let m ∈ H and Q ∈ L
+
1
(H). We denote by N
m,Q
the probability measure on
(H, B(H)) of mean m, covariance Q and Fourier transform given by

N
m,Q
(h) = e
im,h−
1
2
Qh,h
, h ∈ H. (1.6)
One can show that such a measure does exist
(4)
; it is unique thank’s to
Proposition 1.5.
1.3.4 Computation of some Gaussian integrals
To compute some integrals with respect to a Gaussian measure µ = N
m,Q
in
an infinite dimensional Hilbert space H it is useful to reduce the computation
to integrals on a sequence (H
n
) of finite dimensional vector spaces convergent
to H and then to let n → ∞.
More precisely, given µ = N
m,Q
∈ P(H), we shall proceed as follows.
Since Q is compact there exists an orthonormal complete system (e
k
) in H
and a sequence of nonnegative numbers (λ
k
) such that
Qe
k
= λ
k
e
k
, ∀ k ∈ N.
For any n ∈ N we set m
n
:= ¸m, e
n
),
P
n
x =
n

k=1
¸x, e
k
)e
k
, ∀ x ∈ H
and identify P
n
(H) with R
n
through the isomorphism,
P
n
(H) →R
n
, x =
n

k=1
¸x, e
k
)e
k
→ (¸x, e
1
), ..., ¸x, e
n
)).
Exercise 1.7 Prove that
µ
n
= (P
n
)
#
µ =
n

i=1
N
m
k

k
.
Hint. Show that the Fourier transform of µ
n
is given by
´ µ
n
(h) = e
i
P
n
k=1
m
k
h
k
e

1
2
P
n
k=1
λ
k
h
2
k
.
(4)
see e.g. G. Da Prato, An introduction to infinite-dimensional analysis. Springer-
Verlag, Berlin, 2006.
12 Chapter 1
We shall assume (which is always true after a rearrangement) that λ
1

λ
2
≥ λ
n
≥ .
To formulate the next result notice that for any ε <
1
λ
1
, the linear operator
1 − εQ is invertible and (1 − εQ)
−1
is bounded. We have in fact, as easily
checked,
(1 −εQ)
−1
x =

k=1
1
1 −ελ
k
¸x, e
k
)e
k
, x ∈ H.
In this case we can define the determinant of (1 −εQ) by setting
det(1 −εQ): = lim
n→∞
n

k=1
(1 −ελ
k
) :=

k=1
(1 −ελ
k
).
Exercise 1.8 Prove that

k=1
(1 −ελ
k
) > 0.
Hint. Write
log
_

k=1
(1 −ελ
k
)
_
=

k=1
log(1 −ελ
k
)
and show that the series is convergent since


k=1
λ
k
< +∞.
Proposition 1.9 Let ε ∈ R. Then we have
_
H
e
ε
2
|x|
2
µ(dx) =
_
_
_
[det(1 −εQ)]
−1/2
e
ε
2
(1−εQ)
−1
m,m
, if ε <
1
λ
1
,
+∞, otherwise.
(1.7)
Proof. For any n ∈ N we have, taking into account Exercise 1.7
_
H
e
ε
2
|P
n
x|
2
µ(dx) =
_
P
n
(H)
e
ε
2
|P
n
ξ|
2
µ
n
(dξ) =
n

k=1
_
R
e
ε
2
ξ
2
k
N
m
k

k
(dξ
k
).
Since [P
n
x[
2
↑ [x[
2
as n → ∞ and, by an elementary computation,
_
R
e
ε
2
x
2
k
N
m
k

k
(dx
k
) =
1

1 −ελ
k
e

ε
2
m
2
k
1−ελ
k
,
the conclusion follows from the monotone convergence theorem.
Gaussian measures 13
Exercise 1.10 Prove that for all m ∈ N
J
m
:=
_
H
[x[
2m
µ(dx) < ∞
and compute J
m
.
Hint. Notice that J
m
= 2
m
F
(m)
(0), where
F(ε) =
_
H
e
ε
2
|x|
2
µ(dx), ε > 0.
Proposition 1.11 We have
_
H
e
h,x
µ(dx) = e
a,h
e
1
2
Qh,h
, h ∈ H. (1.8)
Proof. For any ε > 0 we have
e
h,x
≤ e
|x| |h|
≤ e
ε|x|
2
e
1
ε
|h|
2
.
Choosing ε <
1
λ
1
, we have, by the dominated convergence theorem, that
_
H
e
h,x
µ(dx) = lim
n→∞
_
H
e
h,P
n
x
µ(dx) = lim
n→∞
_
P
n
(H)
e
h,P
n
ξ
µ
n
(dx)
= lim
n→∞
e
P
n
m,h
e
1
2
P
n
Qh,h
= e
m,h
e
1
2
Qh,h
.

1.3.5 The Cameron–Martin space
We are given a Gaussian measure µ = N
Q
, where Q ∈ L
+
1
(H). We say that
µ is non degenerate if Ker Q := ¦x ∈ H : Qx = 0¦ = ¦0¦. Thus, if H is
finite-dimensional µ is non degenerate if and only if det Q > 0.
Assume now that H is infinite-dimensional and that µ is non degenerate.
We denote by (e
k
) a complete orthonormal system in H such that Qe
k
=
λ
k
e
k
, k ∈ N, where (λ
k
) are the eigenvalues of Q and we set x
k
= ¸x, e
k
), k ∈
N.
We notice that the inverse Q
−1
of Q (which is well defined since Ker
Q = ¦0¦) is not continuous because,
Q
−1
e
k
=
1
λ
k
e
k
, k ∈ N
and λ
k
→ 0 as k → ∞. Consequently, recalling the closed graph theorem,
we see that the range Q(H) does not coincide with H. However, it is dense
in H as the following lemma shows.
14 Chapter 1
Lemma 1.12 Q(H) is a dense subspace of H.
Proof. In fact if x
0
is an element of H orthogonal to Q(H), we have
¸Qx, x
0
) = ¸x, Qx
0
) = 0, ∀ x ∈ H,
which yields Qx
0
= 0, and so x
0
= 0 because Ker(Q) = ¦0¦.
It is useful to introduce the operator Q
1/2
defined as
Q
1/2
x =

k=1
_
λ
k
¸x, e
k
)e
k
, x ∈ H.
Its range Q
1/2
(H) is called the Cameron–Martin space of the measure µ.
Arguing as before we see that Q
1/2
(H) is a subspace of H different of H and
dense in H. Moreover it is clear that x ∈ Q
1/2
(H) if and only if,

k=1
λ
−1
k
x
2
k
< +∞.
It is important to notice that the measure of the Cameron–Martin space
is zero.
Proposition 1.13 We have µ(Q
1/2
(H)) = 0.
Proof. For any n, k ∈ N set
U
n
=
_
y ∈ H :

h=1
λ
−1
h
y
2
h
< n
2
_
= ¦y ∈ Q
1/2
(H) : [Q
−1/2
y[ < n¦,
and
U
n,k
=
_
y ∈ H :
2k

h=1
λ
−1
h
y
2
h
< n
2
_
.
Clearly U
n
↑ Q
1/2
(H) as n → ∞, and for any n ∈ N, U
n,k
↓ U
n
as k → ∞.
So, it is enough to show that
µ(U
n
) = lim
k→∞
µ(U
n,k
) = 0. (1.9)
We have in fact
µ(U
n,k
) =
_
¦
y∈H:
P
2k
h=1
λ
−1
h
y
2
h
<n
2
¦
2k

h=1
N
λ
k
(dy
k
),
Gaussian measures 15
which, setting z
h
= λ
−1/2
h
y
h
is equivalent to
µ(U
n,k
) =
_
¦
z∈R
2k
:|z|<n
¦
N
I
2k
(dz),
where I
2k
is the identity in R
2k
. Let us compute µ(U
n,k
). We have
µ(U
n,k
) =
µ(U
n,k
)
µ(H)
=
_
n
0
e

r
2
2
r
2k−1
dr
_
+∞
0
e

r
2
2
r
2k−1
dr
=
_
n
2
/2
0
e
−ρ
ρ
k−1

_
+∞
0
e
−ρ
ρ
k−1

.
Therefore
µ(U
n,k
) =
1
(k −1)!
_
n
2
/2
0
e
−ρ
ρ
k−1
dρ ≤
1
(k −1)!
_
n
2
/2
0
ρ
k−1
dρ =
1
k!
_
n
2
2
_
k
,
and (1.9) follows.
16 Chapter 1
Chapter 2
Gaussian random variables
2.1 Notations
Let (Ω, F, P) be a probability space, H a separable Hilbert space, X: Ω → H
a random variable such that
_

[X(ω)[
2
P(dω) < ∞.
We denote by X
#
P the law of X, by m(X) the mean of X
#
P and by Q(X)
the covariance of X
#
P.
By the change of variables formula it follows that the Fourier transform
of X
#
P is given by

X
#
P(h) =
_

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

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

¸X(ω) −m(X), h) ¸X(ω) −m(X), k)P(dω), ∀ h, k ∈ H.
Definition 2.1 We say that X
#
P is a Gaussian random variable if X
#
P is
a Gaussian measure, that is if

X
#
P(h) = e
im(X),h
e

1
2
Q(X)h,h
, ∀ h ∈ H.
In this case we call m(X) the mean and Q(X) the covariance of X.
17
18 Chapter 2
Example 2.2 Let n ∈ N, X
1
, ..., X
n
be real random variables on (Ω, F, P).
Then X = (X
1
, ..., X
n
) is a R
n
-valued random variable. So, m(X) is a vector
of R
n
denoted by (m(X)
1
, ..., m(X)
n
) and Q(X) is a n n matrix denoted
Q(X)
i,j
, i, j = 1, ..., n.
More precisely, let (e
1
, ..., e
n
) be the canonical basis in R
n
. Then for any
k = 1, ..., n we have
m(X)
k
= ¸m(X), e
k
) =
_

X
k
(ω)P(dω) = m(X
k
)
and for any j, k = 1, ..., n we have
Q(X)
j,k
= ¸Q(X)e
j
, e
k
) =
_

(X
j
(ω) −m
j
(X
j
))(X
k
(ω) −m
k
(X
k
))P(dω).
In particular, if j = k we find
Q(X)
k,k
= Q(X
k
), k = 1, ..., n.
Example 2.3 Assume that X = (X
1
, ..., X
n
) is a n-dimensional Gaussian
random variable. Then X
1
, ..., X
n
are real Gaussian random variables. In
fact if k = 1, ..., n and a ∈ R we have
_

e
iaX
k
(ω)
P(dω) =
_

e
iae
k
,X(ω)
P(dω)
= e
iae
k
,m(X)
e

1
2
a
2
Q(X)e
k
,e
k

= e
iam(X
k
)
e

1
2
a
2
Q(X
k
)
.
Notice that, if conversely X
1
, ..., X
n
are real Gaussian random variables, then
X = (X
1
, ..., X
n
) is not necessarily Gaussian.
2.2 Independence
In this section we introduce the basic concept of independence.
2.2.1 Independent real variables
Definition 2.4 Let n ∈ N and let X
1
, ..., X
n
be real random variables in
(Ω, F, P). Consider the R
n
-valued random variable
X(ω) = (X
1
(ω), ..., X
n
(ω)), ω ∈ Ω.
random variables 19
We say that X
1
, ..., X
n
are independent if
X
#
P =
n

j=1
(X
j
)
#
P.
Let (X
i
) be a sequence of real random variables. They are called independent
if X
i
1
, . . . , X
i
n
are independent for any choice of n and of positive integers
i
1
< i
2
< < i
n
.
A necessary and sufficient condition for the independence is provided by
the following proposition.
Proposition 2.5 Let X
1
, ..., X
n
, n ∈ N, be real independent random vari-
ables in (Ω, F, P). Let moreover ϕ
1
, ..., ϕ
n
be Borel positive functions. Then
we have
_

ϕ
1
(X
1
(ω)) ϕ
n
(X
n
(ω))P(dω)
=
_

ϕ
1
(X
1
(ω))P(dω)
_

ϕ
n
(X
n
(ω))P(dω).
(2.1)
Conversely, if (2.1) holds for any choice of positive Borel functions ϕ
1
, ..., ϕ
n
,
then X
1
, ..., X
n
are independent.
Proof. Set X = (X
1
, ..., X
n
) and let ψ: R
n
→R be defined as
ψ(ξ
1
, ..., ξ
n
) = ϕ
1

1
) ϕ
k

n
), (ξ
1
, ..., ξ
n
) ∈ R
n
.
Then by the change of variable formula we have, taking into account the
independence of X
1
, ..., X
n
,
_

ϕ
1
(X
1
(ω)) ϕ
n
(X
n
(ω))P(dω) =
_

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

1
)((X
1
)
#
P)(dξ
1
)
_
R
ϕ
k

n
)((X
n
)
#
P)(dξ
n
)
=
_

ϕ
1
(X
1
(ω))P(dω)
_

ϕ
n
(X
n
(ω))P(dω).
Assume conversely that (2.1) holds for any choice of functions ϕ
1
, ..., ϕ
n
positive Borel. To prove independence of X
1
, ..., X
n
it is enough to show that
(X
#
P)(I
1
I
n
) = ((X
1
)
#
P)(I
1
) ((X
n
)
#
P)(I
n
), ∀ I
1
, ..., I
n
∈ B(R).
But this follows immediately setting in (2.1)
ϕ
i
= 1l
I
i
, i = 1, ..., n.

20 Chapter 2
Exercise 2.6 Let X
1
, ..., X
n
be real independent random variables in (Ω, F, P).
Show that
_

X
1
X
n
dP =
_

X
1
dP
_

X
n
dP
and
V (X
1
+ + X
n
) = V (X
1
) + + V (X
n
).
The following useful result is left to the reader as an exercise.
Proposition 2.7 Let X
1
, ..., X
n
be real random variables in (Ω, F, P) and
let X = (X
1
, ..., X
n
). Then X
1
, ..., X
n
are independent if and only if

X
#
P(h) =
n

k=1

(X
k
)
#
P(h
k
), ∀ h = (h
1
, ..., h
n
) ∈ R
n
.
Definition 2.8 Let (Ω, F, P) be a probability space and A
1
, ..., A
n
∈ F.
We say that the sets A
1
, ..., A
n
are independent if the random variables
1l
A
1
, ..., 1l
A
n
are so.
Exercise 2.9 Show that sets A
1
, ..., A
n
are independent if and only if
P(A
j
1
∩ ∩ A
j
k
) = P(A
j
1
) P(A
j
k
),
for all k = 1, ..., n and k different positive integer j
1
, ..., j
k
less or equal to n.
Proposition 2.10 Let X
1
, ..., X
n
be real independent random variables in
(Ω, F, P) and let X = (X
1
, ..., X
n
). Then the covariance matrix Q(X) is
diagonal.
Proof. We have in fact (by Exercise 2.6) for i, j = 1, ..., n
Q(X)
i,j
=
_

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

(X
i
(ω) −m
i
(X))P(dω)
_

(X
j
(ω) −m
j
(X))P(dω) = 0.
The converse of Proposition 2.10 does not hold in general.
random variables 21
2.2.2 Independent Gaussian random variables
Let X
1
, ..., X
n
be real random variables in (Ω, F, P) and let X = (X
1
, ..., X
n
).
Proposition 2.11 Assume that X
1
, ..., X
n
are independent Gaussian ran-
dom variables. Then X = (X
1
, ..., X
n
) is Gaussian.
Proof. In fact, let h = (h
1
, ..., h
n
) ∈ R
n
. Then, taking into account the
independence of (X
1
, ..., X
n
),

X
#
P(h) =
_

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

k=1
_

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

1
2
(Q(X
1
)h
2
1
+···+Q(X
n
)h
2
n
)
.

Proposition 2.12 Assume that X
1
, ..., X
n
are real random variables and
that X = (X
1
, ..., X
n
) is Gaussian. Then X
1
, ..., X
n
are independent if and
only if Q(X) is diagonal.
Proof. If X
1
, ..., X
n
are independent the conclusion follows from Proposition
2.11. Assume now that Q(X) is diagonal. By Proposition 2.7 it is enough to
show that

X
#
P(h) =
n

i=1

(X
k
)
#
P(h),
for each h = (h
1
, ..., h
n
) ∈ H.
We have in fact

X
#
P(h) = e
im(X),h
e

1
2
Q(X)h,h
= e
im(X),h
e

1
2
P
n
k=1
Q(X)
k,k
h
2
k
= e
im(X),h
e

1
2
P
n
k=1
Q(X
k
)h
2
k
=
n

i=1

(X
k
)
#
P(h).

2.3 Gaussian random variables defined in a
Hilbert space
We now consider the case when (Ω, F, P) coincides with (H, B(H), µ), where
H is a separable Hilbert space and µ = N
m,Q
with m ∈ H and Q ∈ L
+
1
(H).
22 Chapter 2
2.3.1 Affine changes of variables
Let b ∈ K and A ∈ L(H, K) where K is another separable Hilbert space.
Let us consider the affine transformation
T(x) = Ax + b, x ∈ H.
Proposition 2.13 T is a Gaussian random variable and its law T
#
µ is given
by N
Aa+b,AQA
∗, where A

is the transpose of A.
Proof. We have in fact
_
K
e
ik,y
T
#
µ(dy) =
_
H
e
ik,T(x)
µ(dx) =
_
H
e
ik,Ax+b
µ(dx)
= e
ik,b
_
H
e
iA

k,x
µ(dx) = e
ik,Aa+b
e

1
2
AQA

k,k
, k ∈ K.

Example 2.14 Let µ = N
m,Q
and n ∈ N, f
1
, ..., f
n
∈ H. Let F : H → R
n
be defined as
F(x) := (¸x, f
1
), ..., ¸x, f
n
)), x ∈ H.
Then by Proposition 2.13 F is a Gaussian random variable with mean m(F)
and covariance Q(F) given by,
m(F) = F(m) = (¸m, f
1
), ..., ¸m, f
n
))
and
Q(F) = FQF

.
On the other hand, the linear operator F

: R
n
→ H is given by
F

(ξ) =
n

k=1
f
k
ξ
k
, ∀ ξ = (ξ
1
, ..., ξ
n
) ∈ R
n
.
Therefore
QF

(ξ) =
n

k=1
Qf
k
ξ
k
, ∀ ξ = (ξ
1
, ..., ξ
n
) ∈ R
n
and
FQF

(ξ) =
__
n

k=1
Qf
k
ξ
k
, f
1
_
, ...,
_
n

k=1
Qf
k
ξ
k
, f
n
__
random variables 23
so that
Q(F)
h,k
= ¸Qf
h
, f
k
). (2.2)
Therefore, F
1
, ..., F
n
are independent if and only if
¸Qf
h
, f
k
) = 0, h, k = 1, ..., n,
if h ,= k.
2.4 The white noise function
In order to define the white noise function (which will play an important role
in what follows), we shall deal with equivalence class of random variables
(rather than random variables), which we briefly discuss in the next sub-
section.
2.4.1 Equivalence classes of random variables
Let (Ω, F, P) be a probability space and let H be a separable Hilbert space.
We denote by R(H) the set of all H-valued random variables.
Definition 2.15 We say that X, Y ∈ R(H) are equivalent (and write X ∼
Y ) if
P(¦ω ∈ Ω : X(ω) = Y (ω)¦) = 1.
One can easily check that X ∼ Y, X, Y ∈ R(H) is an equivalence relation,
so that the set R(H) is disjoint union of equivalences classes.
We notice that if X ∼ Y then the laws of X and Y coincide. In fact set
K = ¦ω ∈ Ω : X(ω) ,= Y (ω)¦,
so that P(K) = 0. Since for any I ∈ B(H) we have
X
−1
(I) ⊂ Y
−1
(I) ∪ K,
it follows that P(X
−1
(I)) ≤ P(Y
−1
(I)) and, exchanging X and Y we see that
P(X
−1
(I)) = P(Y
−1
(I)).
Consequently, all random variables belonging to a fixed equivalence class
˜
X have the same law, which is called the law of
˜
X.
In the following we shall not distinguish between a random variable X
and the equivalence class
˜
X including X, except when needed.
24 Chapter 2
By L
p
(Ω, F, P; H), p ≥ 1, we mean the space of all equivalence class of
random variables X: Ω → H such that
_

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

[X(ω)[
p
P(dω)
_
1/p
,
is a Banach space. We shall write L
p
(Ω, F, P; H) = L
p
(Ω, P; H) for brevity.
We prove now that the limit of a convergent sequence in L
2
(Ω, P; H) of
Gaussian random variables is Gaussian.
Proposition 2.16 Let (X
n
) ⊂ L
2
(Ω, P; H) be a sequence of Gaussian ran-
dom variables convergent to X in L
2
(Ω, P; H). Then X is a Gaussian random
variable and
¸m(X), h) = lim
n→∞
¸m(X
n
), h), h ∈ H,
and
¸Q(X)h, k) = lim
n→∞
¸Q(X
n
)h, k), h, k ∈ H.
Proof. Since X
n
→ X in L
2
(Ω, P; H) we have
lim
n→∞
¸m(X
n
), h) = lim
n→∞
_

¸X
n
(ω), h)P(dω) =
_

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

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

¸X(ω) −m(X), h) ¸X(ω) −m(X), k)P(dω) = ¸Q(X)h, k).
Let us show now that X is a Gaussian random variable. We have in fact
_
H
e
ix,h
(X
#
µ)P(dy) =
_

e
iX(ω),h
P(dω) = lim
n→∞
_

e
iX
n
(ω),h
P(dω)
= lim
n→∞
e
im(X
n
),h
e

1
2
Q(X
n
)h,h
= e
im(X),k
e

1
2
Q(X)h,h
.

random variables 25
2.4.2 Definition of the white noise function
In this section we assume that the Hilbert space H is infinite dimensional and
consider a non degenerate Gaussian measure µ = N
Q
in H (Ker (Q) = ¦0¦).
Since Q is compact there exists a complete orthonormal basis (e
k
) on H and
a sequence of positive numbers (λ
k
) such that
Qe
k
= λ
k
e
k
, k ∈ N.
Let us define a mapping
W : Q
1/2
(H) → C(H), z → W
z
where
W
z
(x) = ¸x, Q
−1/2
z), ∀ x ∈ H.
Here Q
1/2
(H) is the Cameron–Martin space and C(H) the space of all real
continuous functions on H.
Lemma 2.17 For all z
1
, z
2
∈ Q
1/2
(H) we have
_
H
W
z
1
(x)W
z
2
(x)µ(dx) = ¸z
1
, z
2
). (2.3)
Proof. We have in fact
_
H
W
z
1
(x)W
z
2
(x)µ(dx) =
_
H
¸x, Q
−1/2
z
1
)¸x, Q
−1/2
z
2
)µ(dx)
= ¸QQ
−1/2
z
1
, QQ
−1/2
z
2
) = ¸z
1
, z
2
).

Since Q
1/2
(H) is dense in H, the mapping W can be uniquely extended
as a mapping from H into L
2
(H, µ) which we denote still by W and call the
white noise function.
W
f
is linear in the sense that for all α, β ∈ R we have
W
f
(αx + βy) = αW
f
(x) + βW
f
(y), x, y µ a.e..
Remark 2.18 Given z ∈ H (not belonging to Q
1/2
(H)) it would be tempt-
ing to define the random variable W
z
by setting,
W
z
(x) = ¸Q
−1/2
x, z), x ∈ Q
1/2
(H).
However this definition is meaningless because µ(Q
1/2
(H)) = 0, by Proposi-
tion 1.13
26 Chapter 2
Proposition 2.19 Let z ∈ H. Then W
z
is a real Gaussian random variable
with mean 0 and covariance [z[
2
.
Proof. We have to show that
_
H
e
iηW
z
(x)
µ(dx) = e

1
2
η
2
|z|
2
, ∀ η ∈ R.
Let (z
n
) ⊂ Q
1/2
(H) be a sequence such that z
n
→ z in H. Then, by the
dominated convergence theorem, we have
_
H
e
iηW
z
(x)
µ(dx) = lim
n→∞
_
H
e
iηQ
−1/2
z
n
,x
µ(dx) = lim
n→∞
e

1
2
η
2
|z
n
|
2
= e

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

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

1
2

1
z
j
1
+···+ξ
n
z
j
n
|
2
= e

1
2

1
z
1
+···+ξ
n
z
n
|
2
= e

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

j
ξ
k
.

Chapter 3
Brownian Motion
3.1 Stochastic Processes
We are given a probability space (Ω, F, P). We denote by P

the outer
measure of P. We recall that a null set of Ω is a set of outer measure zero.
For any integrable real random variable F we note
E(F) =
_

F(ω)P(dω).
So, in particular we have
F
#
P(I) = E(1l
I
(F)), ∀ I ∈ B(R).
We say that a property π concerning elements of Ω holds P-a.s. if the set
where π does not hold is a null set.
Definition 3.1 A family X = (X(t))
t≥0
of real random variables in (Ω, F, P)
is called a real stochastic process in [0, +∞). For any ω ∈ Ω, X(, ω) is called
a trajectory of X.
• X is Gaussian if for any n ∈ N and any 0 ≤ t
1
< < t
n
the n-
dimensional random variable (X(t
1
), ..., X(t
n
)) is Gaussian.
• X is continuous if X(, ω) is continuous P-a.s.
• X is p-mean continuous, p ≥ 1, if
(i) X(t) is p-integrable for any t ≥ 0.
(ii) We have
lim
t→t
0
E[[X(t) −X(t
0
)[
p
] = 0, ∀ t
0
≥ 0. (3.1)
27
28 Chapter 3
We notice that a p-mean continuous process is not continuous in general.
We say that two stochastic processes X and Y are equivalent if for all
t ≥ 0 we have
X(t, ω) = Y (t, ω), P-a.s..
When X and Y are equivalent we also say that Y is a version of X (or that
X is a version of Y ).
3.2 Brownian motion
Definition 3.2 A real Brownian motion B = (B(t))
t≥0
on (Ω, F, P) is a
real stochastic process such that
(i) B(0) = 0 and if 0 ≤ s < t, B(t) − B(s) is a real Gaussian random
variable with law N
t−s
.
(ii) If 0 < t
1
< ... < t
n
, the random variables,
B(t
1
), B(t
2
) −B(t
1
), , B(t
n
) −B(t
n−1
)
are independent.
We express condition (ii) by saying that B is a process with independent
increments.
Lemma 3.3 Let t, s > 0. Then
E[B(t)(B(s)] = min¦t, s¦. (3.2)
Proof. Let for instance t > s. Then we have
E[B(t)B(s)] = E[(B(t) −B(s))B(s)] +E[B
2
(s)].
On the other hand, B(t) −B(s) is independent of B(s) so that
E[(B(t) −B(s))B(s)] = E[B(t) −B(s)]E[B(s)] = 0.
Since the law of B(s) is N
s
we conclude that E[B(t)B(s)] = s as required.
Brownian motion 29
3.2.1 Construction of a Brownian motion
Consider the probability space (H, B(H), µ), where H = L
2
(0, +∞) and
µ = N
Q
, Q being an arbitrary (but fixed) non degenerate Gaussian measure
in H.
Define
B(t) = W
1l
[0,t]
, t ≥ 0, (3.3)
where
1l
[0,t]
(s) =
_
_
_
1 if s ∈ [0, t],
0 otherwise,
and W is the white noise function defined in Chapter 2.
More precisely, for any t ≥ 0 we choose an arbitrary element in the
equivalence class of B(t) which we still denote by B(t).
Clearly, for any t ≥ 0, B(t) is a Gaussian random variable N
t
and for any
t > s ≥ 0, B(t) −B(s) = W
1l
(s,t]
is a Gaussian random variable N
t−s
. So, B
fulfills Definition 3.2(i). Let us prove (ii). Since the system of elements of H,
(1l
[0,t
1
]
, 1l
(t
1
,t
2
]
, ..., 1l
(t
n−1
,t
n
]
),
is orthogonal, we have by Proposition 2.20 that the random variables
B(t
1
), B(t
2
) −B(t
1
), , B(t
n
) −B(t
n−1
)
are independent. Thus (ii) is proved as well.
3.2.2 Some properties of a Brownian motion
Proposition 3.4 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F, P).
Then B is a Gaussian process. Moreover, if 0 < t
1
< ... < t
n
the law of
(B(t
1
), ..., B(t
n
)) is given by
P((B(t
1
), ..., B(t
n
)) ∈ I)
= (2π)
−n/2
(t
1
(t
2
−t
1
) (t
n
−t
n−1
))
−1/2
_
I
e

η
2
1
2t
1


2
−η
1
)
2
2(t
2
−t
1
)
−·−

n
−η
n−1
)
2
2(t
n
−t
n−1
)
dη,
(3.4)
for all I ∈ B(R
n
).
Proof. Let 0 < t
1
< ... < t
n
and set
X := (B(t
1
), B(t
2
) −B(t
1
), ..., B(t
n
) −B(t
n−1
))
Z := (B(t
1
), ..., B(t
n
)).
30 Chapter 3
Since random variables B(t
1
), B(t
2
) − B(t
1
), ..., B(t
n
) − B(t
n−1
) are inde-
pendent, by Proposition 2.11 it follows that X is a n-dimensional Gaussian
random variable with mean 0 and covariance operator
Q(X) = diag (t
1
, t
2
−t
1
, ..., t
n
−t
n−1
).
Now, consider the linear mapping T ∈ L(R
n
) defined by,
T(x
1
, ..., x
n
) = (x
1
, x
1
+ x
2
, ..., x
1
+ + x
n
), ∀ (x
1
, ..., x
n
) ∈ R
n
.
It is clear that Z = T(X). Therefore by Proposition 2.13 Z is Gaussian with
mean 0 and covariance Q(Z) = TQ(X)T

where T

is the transpose of T.
It remain to show (3.4). If I ∈ B(R
n
) we have
P(Z ∈ I) = (2π)
−n/2
(det Q(Z))
−1/2
_
I
e

1
2
(Q(Z))
−1
η,η
dη.
Since det T = det T

= 1, as easily checked, we have
det Q(Z) = det Q(X) = t
1
(t
2
−t
1
) (t
n
−t
n−1
).
Moreover, since
T
−1
η = (η
1
, η
2
−η
1
, ..., η
n
−η
n−1
),
we have
¸(Q(Z))
−1
η, η) = ¸Q
−1
T
−1
η, T
−1
η) =
η
2
1
t
1


2
−η
1
)
2
(t
2
−t
1
)
− −

n
−η
n−1
)
2
(t
n
−t
n−1
)
and so, the conclusion follows.
Proposition 3.5 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F, P).
Then B is p-mean square continuous for all p ≥ 1.
Proof. It is enough to show the result for p = 2m, m ∈ N. Let t > t
0
≥ 0.
Since B(t) −B(t
0
) is a Gaussian random variable N
t−t
0
, we have
E([B(t) −B(t
0
)[
2m
) =
_
R
[ξ[
2m
N
t−t
0
(dξ) =
(2m)!
m!2
m
(t −t
0
)
m
.
Therefore
lim
t→0
E([B(t) −B(t
0
)[
2m
) = 0
and the conclusion follows.
Exercise 3.6 Let B(t) be a Brownian motion in a probability space (Ω, F, P).
Prove that the following are Brownian motions.
Brownian motion 31
(i) B
1
(t) = B(t + h) −B(h), t ≥ 0, where h > 0 is given.
(ii) B
2
(t) = αB(α
−2
t), t ≥ 0, where α > 0 is given.
(iii) B
3
(t) = tB(1/t), t > 0, B
3
(0) = 0.
(iv) B
4
(t) = −B(t), t ≥ 0.
3.3 Wiener integral
Let B(t), t ≥ 0, be a Brownian motion in (Ω, F, P) and let f ∈ L
2
(0, T)
with T > 0. We want to define the stochastic integral:
_
T
0
f(s)dB(s).
We start with step functions. Let 0 = t
0
< t
1
< < t
n
= T, f
0
, f
1
, ..., f
n−1

R and set
f =
n

j=1
t
j−1
1l
(t
j
−t
j−1
]
.
Then define
_
T
0
f(s)dB(s) :=
n

j=1
f
t
j−1
(B(t
j
) −B(t
j−1
)).
Let us prove two basic identities.
Lemma 3.7 We have
E
__
T
0
f(s)dB(s)
_
= 0 (3.5)
and
E
_
__
T
0
f(s)dB(s)
_
2
_
=
n

j=1
[f(t
j−1
)[
2
(t
j
−t
j−1
) =
_
t
0
f
2
(s)ds. (3.6)
Proof. Identity (3.5) is obvious. Let us prove (3.6). We have
E([I
σ
(f)[
2
) = E
_
n

j=1
[f(t
j−1
)[
2
[B(t
j
) −B(t
j−1
)]
2
_
+2E
_
n

j<k
f(t
j−1
)f(t
k−1
)[B(t
j
) −B(t
j−1
)][B(t
k
) −B(t
k−1
)]
_
.
(3.7)
32 Chapter 3
Now the conclusion follows taking into account that B(t
j
) −B(t
j−1
) is a real
Gaussian random variable N
t
j−1
−t
j
and that B(t
j
) − B(t
j−1
) is independent
of B(t
k
) −B(t
k−1
) for k ,= j.
Denote by S(0, T) the linear space of all step functions. By (3.6) it follows
that the linear mapping I
S(0, T) ⊂ L
2
(0, T) → L
2
(Ω, F, P), f → I(f) =
_
T
0
f(s)dB(s),
is continuous. Since S(0, T) is dense in L
2
(0, T) it can be uniquely extended
to the whole L
2
(0, T). We still denote by I(f) =
_
T
0
f(s)dB(s) this estension.
It is clear that for any f ∈ L
2
(0, T) we have
E
__
T
0
f(s)dB(s)
_
= 0, (3.8)
and
E
_
__
T
0
f(s)dB(s)
_
2
_
=
_
t
0
f
2
(s)ds. (3.9)
The random variable (more precisely, the equivalence class of random
variables)
_
T
0
f(s)dB(s), which belongs to L
2
(Ω, F, P), is called the Wiener
integral of f in [0, T].
We define in an obvious way the Wiener integral
_
b
a
f(s)dB(s) for any
a, b ≥ 0. It is easy to see that if a, b, c ≥ 0 we have
_
b
a
f(s)dB(s) +
_
c
b
f(s)dB(s) =
_
c
a
f(s)dB(s).
Exercise 3.8 Let f, g ∈ L
2
(0, T). Show that
E
__
T
0
f(s)dB(s)
_
T
0
g(s)dB(s)
_
=
_
T
0
f(s)g(s)ds.
Proposition 3.9 Let f ∈ L
2
(0, T). Then I(f) =
_
T
0
f(s)dB(s) is a real
Gaussian random variable N
q
with q =
_
T
0
[f(s)[
2
ds.
Proof. It is enough to prove the result for f of the form
f =
n

i=1
f
t
i−1
(t
i
−t
i−1
),
Brownian motion 33
where n ∈ N, 0 = t
0
< t
1
< ... < t
n−1
= T, so that
I(f) =
n

i=1
f
t
i−1
(B(t
i
) −B(t
i−1
)).
Since random variables
B(t
1
), B(t
2
) −B(t
1
), , B(t
n
) −B(t
n−1
),
are independent, we have that I(f) is a real Gaussian random variable N
q
with
q =
n

i=1
f
2
(t
i−1
)(t
i
−t
i−1
).

We now show a relation between the white noise function and the Wiener
integral.
Example 3.10 We use here notations of Section 3.2.1. Let f ∈ L
2
(0, ∞).
Then we have
W
f
=
_

0
f(s)dB(s). (3.10)
It is enough to show (3.10) when
f =
n

k=1
f
t
k−1
1l
(t
k−1
,t
k
]
,
where 0 ≤ t
0
< < t
n
. In this case we have in fact
_

0
f(s)dB(s) =
n

k=1
f
t
k−1
W
1l
(t
k−1
,t
k
]
= W
P
n
k=1
f
t
k−1
1l
(t
k−1
,t
k
]
= W
f
.
Let f : [0, ∞) →R such that it is integrable in all interval [0, T], T0. Let
us introduce a stochastic process setting
F(t) =
_
t
0
f(s)ds, ∀ t ≥ 0.
Proposition 3.11 The process F(t), t ≥ 0 is p-mean continuous for any
p ≥ 1.
34 Chapter 3
Proof. Let p = 2m, m ∈ N and t > t
0
≥ 0. Then by Proposition 3.9 we
have that
F(t) −F(t
0
) =
_
t
t
0
f(s)dB(s)
is a real Gaussian random variable with mean 0 and covariance
_
t
t
0
f
2
(s)ds.
Therefore
E[F(t) −F(t
0
)[
2m
=
(2m)!
m!2
m
__
t
t
0
f
2
(s)ds
_
q
,
so that
lim
t→t
0
E[F(t) −F(t
0
)[
2m
= 0.
We note finally, that if f ∈ C
1
([0, T]) then it is possible to express the
Wiener integral
_
T
0
f(s)dB(s) in terms of a Riemann integral as the following
integration by parts formula shows.
Proposition 3.12 If f ∈ C
1
([0, T]) we have
_
T
0
f(s)dB(s) = f(T)B(T) −
_
T
0
f

(s)B(s)ds, P-a.e. ω ∈ Ω. (3.11)
Proof. Let σ = ¦t
0
, t
1
, , t
n
¦ ∈ Σ. Then we have
I
σ
(f) =
n

k=1
f(t
k−1
)(B(t
k
) −B(t
k−1
))
=
n

k=1
(f(t
k
)B(t
k
) −f(t
k−1
)B(t
k−1
))

n

k=1
(f(t
k
) −f(t
k−1
))B(t
k
)
= f(T)B(T) −
n

k=1
(f(t
k
) −f(t
k−1
))B(t
k
)
= f(T)B(T) −
n

k=1
f


k
)B(t
k
)(t
k
−t
k−1
),
where α
k
are suitable numbers in the interval [t
k−1
, t
k
], k = 1, ..., n. It follows
that
lim
|σ|→0
I
σ
(f) = f(T)B(T) −
_
T
0
f

(s)dB(s)ds, P-a.s..

Brownian motion 35
3.4 Continuity of Brownian motion
Let B(t), t ≥ 0, be a Brownian motion on a probability space (Ω, F, P). We
are going to show that B possesses a continuous version. To this purpose we
shall use a representation formula for B proved in the next proposition.
Proposition 3.13 For any α ∈ (0, 1/2) we have
B(t) =
sin πα
π
_
t
0
(t −σ)
α−1
Y
α
(σ)dσ, (3.12)
where
Y
α
(σ) =
_
σ
0
(σ −s)
−α
dB(s). (3.13)
Notice that the Wiener integral Y
α
is meaningful since α ∈ (0, 1/2).
Proof. We start from the following elementary identity which is valid for
any α ∈ (0, 1).
_
t
s
(t −σ)
α−1
(σ −s)
−α
dσ =
π
sin πα
, 0 ≤ s ≤ σ ≤ t, (3.14)
where α ∈ (0, 1). To check (3.14) it is enough to set σ = r(t −s) +s so that
(3.14) becomes
_
1
0
(1 −r)
α−1
r
−α
dr = β(α, 1 −α) =
π
sin πα
.
Now since, obviously, B(t) =
_
s
0
dB(s) we can write
B(t) =
sin πα
π
_
t
0
__
t
s
(t −σ)
α−1
(σ −s)
−α

_
dB(s).
Exchanging integrals
(1)
, yields
B(t) =
sin πα
π
_
t
0
dξ(t −σ)
α−1
__
σ
0
(σ −s)
−α
dB(s)
_
.

We can now prove the result.
Theorem 3.14 Let B(t), t ≥ 0, be a Brownian motion on a probability
space (Ω, F, P). Then B possesses a continuous version.
(1)
This requires a proof which is left to the reader.
36 Chapter 3
Proof. Choose a version Y
α
(, ω) of the stochastic process Y
α
which is 2m-
integrable with 2m > 1/α. This is possible in view of Proposition 3.11. Now
set
B(t, ω) =
sin πα
π
_
t
0
(t −σ)
α−1
Y
α
(σ, ω)dσ, ∀ t ≥ 0.
Then B(, ω) is a continuous version of B thanks to the following analytic
lemma.
Lemma 3.15 Let α ∈ (0, 1/2), m ∈ N with 2m > 1/α and f ∈ L
2m
(0, T).
Set
F(t) =
_
t
0
(t −σ)
α−1
f(σ)dσ, t ∈ [0, T].
Then F ∈ C([0, T]; H).
Proof. By H¨ older’s inequality we have
[F(t)[ ≤
__
t
0
(t −σ)
(α−1)
2m
2m−1

_
2m−1
2m
[f[
L
2m
(0,T;H)
. (3.15)
(Notice that (α − 1)
2m
2m−1
> −1.) Therefore F ∈ L

(0, T; H) and F is con-
tinuous at 0. Let us prove that F is continuous on [
t
0
2
, T] for any t
0
∈ (0, T].
Let us set for ε <
t
0
2
,
F
ε
(t) =
_
t−ε
0
(t −σ)
α−1
f(σ)dσ, t ∈ [0, T].
F
ε
is obviously continuous on [
t
0
2
, 1]. Moreover, using again H¨ older’s inequal-
ity, we find
[F(t) −F
ε
(t)[ ≤ M
_
2m−1
2mα −1
_2m−1
2m
ε
α−
1
2m
[f[
L
2m
(0,T;H)
.
Thus lim
ε→0
F
ε
(t) = F(t), uniformly on [
t
0
2
, T], and F is continuous as re-
quired.
Exercise 3.16 Prove that B possesses an H¨ older continuous version with
any exponent β < 1/2.
3.5 The standard Brownian motion
Let us consider a Brownian motion B(t), t ≥ 0, in a probability space
(Ω, F, P) such that B(, ω) is continuous for all ω ∈ Ω. We denote by B
the mapping
B : Ω → C
0
, ω → B(, ω),
where C
0
= ¦η ∈ C([0, +∞)) : η(0) = 0¦.
Brownian motion 37
3.5.1 Some properties of C
0
First we notice that, as easily checked, C
0
, endowed with the metric,
d(η
1
, η
2
) :=

k=1

1
−η
2
|
k
2
k
(1 +|η
1
−η
2
|
k
)
,
is a complete metric space. We have set for any k ∈ N,
|η|
k
= sup¦[η(t)[ : t ∈ [0, k]¦, ∀ η ∈ C
0
.
Let us now consider the σ-algebra B(C
0
). It is important to notice that
B(C
0
) is generated by the cylindrical subsets of C
0
that we shall introduce
now.
For n ∈ N, 0 < t
1
< < t
n
and A ∈ B(R
n
) we define
C
t
1
,t
2
,...,t
n
;A
:= ¦η ∈ C
0
: (η(t
1
), ..., η(t
n
)) ∈ A¦ .
Note that
C
t
1
,t
2
,...,t
n
;A
= C
t
1
,t
2
,...,t
n
,t
n+1
,...,t
n+k
;A×R
k, k, n ∈ N.
Using this identity one can easily see that C is an algebra. Moreover, the
σ-algebra generated by C coincides with B(C
0
) since any ball (with respect
to the metric of C
0
) is a countable intersection of cylindrical sets.
3.5.2 The Wiener measure and the standard Brownian
motion
We come back to the mapping B
B : Ω → C
0
, ω → B(, ω)
and we denote by Q its law (which is a probability measure on (C
0
, B(C
0
)).
Q is called the Wiener measure on (C
0
, B(C
0
)).
So, for any nonnegative Borel mapping
F : C
0
→R, η → F(η),
we have
E[F(B())] =
_

F(B(, ω))P(dω) =
_
C
0
F(η)Q(dη). (3.16)
Some examples of mappings F are the following.
38 Chapter 3
(i) F(η) = g(η(t
0
)), for all η ∈ C
0
, where g : R → R is nonnegative Borel
and t
0
> 0 is given.
(ii) F(η) = G(η(t
1
), ..., η(t
n
)), for all η ∈ C
0
, where G : R
n
→R is nonneg-
ative Borel and t
1
, ..., t
n
> 0 are given.
(iii) F(η) = sup
t∈[0,1]
[η(t)[, for all η ∈ C
0
.
Now we define a stochastic process W(t), t ≥ 0, in (C
0
, B(C
0
), Q) setting
W(t)(η) = η(t), η ∈ C
0
, t ≥ 0.
Proposition 3.17 W is a Brownian motion in (C
0
, B(C
0
), Q), called the
standard Brownian motion.
Proof. The proof is straightforward. Let us show for instance that for
t > s ≥ 0, W(t) − W(s) is a Gaussian random variable N
t−s
. For this it is
enough to show that the Fourier transform of W(t) −W(s)
ψ(h) :=
_
C
0
e
i(η(t)−η(s))h
Q(dη), h ∈ R,
is given by e

1
2
(t−s)h
2
, h ∈ R.
In fact by (3.16) we have
_
C
0
e
i(η(t)−η(s))h
Q(dη) =
_

e
i(B(t,ω)−B(s,ω))h
P(dω)
= E[e
i(B(t)−B(s))
] = e

1
2
(t−s)h
2
, h ∈ R.
In an analogous way one can prove that W(t), t ≥ 0, has independent incre-
ments.
Let us compute the Wiener measure of a cylindrical set.
Proposition 3.18 Let C
t
1
,t
2
,...,t
n
;A
be a cylindrical set. Then we have
Q(C
t
1
,t
2
,...,t
n
;A
)
=
1
_
(2π)
n
t
1
(t
2
−t
1
) (t
n
−t
n−1
)
_
A
e

ξ
2
1
2t
1


2
−ξ
1
)
2
2(t
2
−t
1
)
−···−

n
−ξ
n−1
)
2
2(t
n
−t
n−1
)
dξ.
Proof. We simply note that, thanks to (3.16), we have
Q(C
t
1
,t
2
,...,t
n
;A
) = P((B(t
1
), ..., B(t
n
)) ∈ A),
so that the conclusion follows from Proposition 3.4.
Brownian motion 39
3.6 Quadratic variation of the Brownian mo-
tion
In this section we are given a real continuous Brownian motion B(t), t ≥ 0,
on a probability space (Ω, F, P). For any T > 0 we denote by Σ(0, T) the
set of all decompositions of [0, T]
σ = ¦0 = t
0
< t
1
< < t
n
= T¦.
Then for any σ = ¦0 = t
0
< t
1
< < t
n
= T¦ ∈ Σ(0, T) we set
[σ[ := min¦t
k
−t
k−1
: k = 1, ...n −1¦.
We introduce a partial ordering on Σ(0, T), setting
σ
1
≤ σ
2
if and only if [σ
1
[ ≤ [σ
2
[.
Let us now introduce the quadratic variation of Brownian motion B in
[0, T]. For any σ = ¦0 = t
0
< t
1
< < t
n
= T¦ ∈ Σ(0, T) we define
J
σ
:=
n

k=1
[B(t
k
) −B(t
k−1
)[
2
.
Then we prove
Theorem 3.19 We have
lim
|σ|→0
J
σ
= T in L
2
(Ω, F, P).
We say that T is the quadratic variation of B in [0, T].
Proof. Since B
t
k
−B
t
k−1
is a real Gaussian random variable with law N
t
k
−t
k−1
,
we have E(J
σ
) = T, and so,
E([J
σ
−T[
2
) = E(J
2
σ
) −2TE(J
σ
) + T
2
= E(J
2
σ
) −T
2
. (3.17)
Moreover
E[J
σ
[
2
= E
¸
¸
¸
¸
¸
n

k=1
[B(t
k
) −B(t
k−1
)[
2
¸
¸
¸
¸
¸
2
= E
n

k=1
[B(t
k
) −B(t
k−1
)[
4
+ 2
n

h<k=1
E[B(t
h
) −B(t
h−1
)[
2
[B(t
k
) −B(t
k−1
)[
2
.
40 Chapter 3
But we have
E
n

k=1
[B(t
k
) −B(t
k−1
)[
4
= 3
n

k=1
(t
k
−t
k−1
)
2
, (3.18)
and, since B(t
h
) −B(t
h−1
) and B(t
k
) −B(t
k−1
) are independent, we have
n

h<k=1
E[B(t
h
) −B(t
h−1
)[
2
[B(t
k
) −B(t
k−1
)[
2
=
n

h<k=1
(t
h
−t
h−1
)(t
k
−t
k−1
).
(3.19)
Therefore
E[J
σ
[
2
= 3
n

k=1
(t
k
−t
k−1
)
2
+ 2
n

h<k=1
(t
h
−t
h−1
)(t
k
−t
k−1
)
= 2
n

k=1
(t
k
−t
k−1
)
2
+
_
n

k=1
(t
k
−t
k−1
)
_
2
.
= 2
n

k=1
(t
k
−t
k−1
)
2
+ T
2
.
(3.20)
Now, substituting (3.20) on (3.17), we obtain
E
_
[J
σ
−T[
2
_
= 2
n

k=1
(t
k
−t
k−1
)
2
→ 0,
as [σ[ → 0.
An important consequence of Theorem 3.19 is that almost all trajectories
of the Brownian motion B have not bounded variation
(2)
. In other terms
the set
V
T
:= ¦ω ∈ Ω : B(, ω) ∈ BV (0, T)¦
has outer probability zero.
In fact the following result holds.
Proposition 3.20 We have P

(V
T
) = 0.
(2)
Let f : [0, T] → R. Then for any σ = ¦0 = t
0
< t
1
< < ..., t
n
= T¦ ∈ Σ(0, T) we
set V
σ
(f) =

n
k=1
[f(t
k
) − f(t
k−1
)[ and define V (f) := sup
σ∈Σ
V
σ
(f), V (f) is called the
variation of f. BV (0, T) is the set of all functions f : [0, T] →R of finite variation.
Brownian motion 41
Proof. Set
Λ := ¦ω ∈ Ω : B(, ω) is continuous ¦,
so that P(Λ) = 1 because B is continuous.
Since lim
|σ|→0
J
σ
= T in L
2
(Ω, F, P) there exists a sequence (σ
n
) ⊂
Σ(0, T) such that [σ
n
[ → 0 and a set Λ
1
⊂ F such that
(i) P(Λ
1
) = 1.
(ii) lim
n→∞
J
σ
n
(ω) = T for all ω ∈ Λ
1
.
We claim that
V
T
∩ Λ ⊂ Λ
c
1
. (3.21)
By the claim the conclusion will follow since P(Λ
c
1
) = 0.
Let us prove the claim. Let ω ∈ V
T
∩ Λ. Since B(, ω) is uniformly
continuous in [0, T], for any ε > 0 there exists δ
ε
> 0 such that
t, s ∈ [0, T], [t −s[ < δ
ε
=⇒ [B(t, ω) −B(s, ω)[ < ε.
Consequently, if n is so large that [σ
n
[ < δ
ε
we have J
σ
n
(ω) ≤ εV (B(, ω)).
Since ε is arbitrary ω cannot belong to Λ
1
. The claim is proved.
3.7 Multidimensional Brownian motions
Definition 3.21 Let n ∈ N and let X
1
, ..., X
n
be stochastic processes on a
probability space (Ω, F, P). Then X(t) := (X
1
(t), ..., X
n
(t)), t ≥ 0, is called
an n-dimensional stochastic process.
X
1
, ..., X
n
are said to be independent if for any t
1
, ..., t
n
∈ [0, +∞) the
random variables X
i
(t
i
) are independent.
A n-dimensional Brownian motion is a n-dimensional stochastic process
B(t) := (B
1
(t), ..., B
n
(t)), t ≥ 0, such that B
1
, ..., B
n
are independent Brow-
nian motions.
Example 3.22 Let us construct an n-dimensional Brownian motion. Let
(e
1
, ..., e
n
) be the canonical basis in R
n
and choose Ω = H = L
2
(0, +∞; R
n
),
F = B(H) and P = N
Q
, where Q is any operator in L
+
1
(H) such that Ker
Q = ¦0¦.
Then set
B
i
(t) = W
e
i
1l
[0,t]
, ∀ t ≥ 0, i = 1, ..., n.
Then one can check easily that B(t) = (B
1
(t), ..., B
n
(t)) is an n-dimensional
Brownian motion.
42 Chapter 3
Let B be a Brownian motion in R
n
. Then the following properties are
easily checked.
(i) If t > s, B(t) −B(s) is a Gaussian random variable with law N
(t−s)I
n
,
t ≥ 0, where I
n
represents the identity in R
n
,
(ii) E[B
i
(t)B
j
(t)] = 0 if i ,= j.
(iii) We have
E
_
[B(t) −B(s)[
2
¸
= n(t −s). (3.22)
Let us check (iii). We have
E
_
[B(t) −B(s)[
2
¸
=
n

k=1
E
_
[B
k
(t) −B
k
(s)[
2
¸
= n(t −s).
Exercise 3.23 Prove that for 0 ≤ s < t we have
E
_
[B(t) −B(s)[
4
¸
= (2n + n
2
)(t −s)
2
. (3.23)
Exercise 3.24 Let A, C ∈ L(R
d
) and set
Z(t) = e
tA
x +
_
t
0
e
(t−s)A
CdB(s), t ≥ 0.
Prove that the law of Z(t) in R
d
is given by
N
e
tA
x,Q
t
, (3.24)
where
Q
t
=
_
t
0
e
sA
CC

e
sA

ds, (3.25)
where A

and C

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

∈(0,t)
F
t−
_
is the σ-algebra generated by F
t−
for ∈ (0, t) and
F
t
+ : =

>0
F
t+
, t ≥ 0.
Proposition 4.1 For all t > 0 we have F
t
= F
t
−.
Due to Proposition 4.1 we say that the natural filtration (F
t
)
t≥0
is left con-
tinuous.
Proof. Let t > 0. It is clear that
F
t

_
∈(0,t)
F
t−
,
so that F
t
⊃ F
t
−. To prove the converse inclusion it is enough to show that
C
t
⊂ F
t
−.
Let in fact I = C
t
1
,··· ,t
n
;A
∈ C
t
so that t
n
≤ t. If t
n
< t then I belongs to F
t

whereas if t
n
= t we have
I = lim
k→∞
C
t
1
,··· ,t
t−
1
k
;A
∈ F
t
−,
so that I ∈ F
t
− as well.
Remark 4.2 The filtration (F
t
)
t≥0
is not right continuous, that is F
t
+ ,= F
t
for all t ≥ 0. Let for instance t = 0 and consider the sets
A
n
= ¦ω ∈ Ω : [ω(1/n)[ ≤ 1/n¦, n ∈ N.
Then A
n
∈ F
1/n
and A =

n∈N
A
n
∈ F
0
+. Notice that
A = ¦ω ∈ Ω : [ω

(0)[ = 0¦,
so that F
0
+ ,= F
0
.
4.1.1 F
t
-measurable random variables
We say that a real random variable X is F
t
-measurable if
I ∈ B(R) ⇒ X
−1
(I) ∈ F
t
.
In this case we say also that X depends from the story of the Brownian
motion only up to t.
The following lemma will be frequently used.
Markov property 45
Lemma 4.3 Let s
2
> s
1
≥ t > 0, and let ϕ be a real random variable
F
t
–measurable. Then W(s
2
) −W(s
1
) and ϕ are independent.
Proof. It is enough to show that for any A ∈ F
t
, W(s
2
) −W(s
1
) and 1l
A
are
independent; in other words that F
t
coincides with the set D defined below.
D = ¦A ∈ F
t
: 1l
A
is independent of W(s
2
) −W(s
1
)¦.
Since W is a process with independent increments, D contains the algebra
of all cylindrical set belonging to C
t
(which is a π-system). Moreover, D
is a λ-system. In fact if A ∈ D it is obvious that A
c
∈ D. Moreover, if
(A
n
) is a sequence in D consisting of disjoint sets, one can show easily that


n=1
A
n
∈ D. Now the claim follows from Dynkin’s theorem (Theorem A.1
in Appendix A).
Next result shows that F
0
+ contains only trivial sets.
Proposition 4.4 (one-zero law) Assume that A ∈ F
0
+. Then either P(A) =
1 or P(A) = 0.
Proof. Let A ∈ F
0
+. Denote by G the σ-algebra generated by all sets of
the form
D
t
1
,...,t
n
,h;I
= ¦ω ∈ Ω : (ω(t
1
+ h) −ω(h), ..., ω(t
n
+ h) −ω(h)) ∈ I¦,
where n ∈ N, 0 < t
1
< < t
n
, h > 0, I ∈ B(R
n
). It is clear that A is
independent of G, since it belongs to all F
t
, t > 0, and W has independent
increments. Then we have
P(A ∩ G) = P(A)P(G), ∀ G ∈ G. (4.1)
On the other hand, we claim that G = B(C
0
). To prove the claim it is
enough to show that any cylindrical set C
t
1
,...,t
n
,h;I
belongs to G; but this
follows from the identity
lim
j→∞
D
t
1

1
j
,...,t
n

1
j
,
1
j
;I
= lim
j→∞
¦ω ∈ Ω : (ω(t
1
) −ω(1/j), ..., ω(t
n
) −ω(1/j)) ∈ I¦ = C
t
1
,...,t
n
;I
.
Since G = B(C
0
) we can set in (4.1) G = A, so that P
2
(A) = P(A) which
yields P(A) equal to zero or one.
Remark 4.5 For any t ≥ 0 denote by F
t
the σ-algebra generated by F
t
and all null sets of Ω (called the completion of F
t
). By using Proposition 4.4
one can easily show that (F
t
)
t≥0
is both right and left continuous.
46 Chapter 4
4.2 Stopping times
A nonnegative extended (that is with values in [0, +∞]) random variable τ in
(C
0
, B(C
0
), Q) is called a stopping time with respect to the filtration (F
t
)
t≥0
if
¦τ ≤ t¦ ∈ F
t
for all t ≥ 0.
To any stopping time τ we associate the σ-algebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ ≤ t¦ ∈ F
t
for all t ≥ 0¦.
Let us describe the σ-algebra F
τ
, For 0 < t
1
< ... < t
n
and I∈B(R) we
define
C
(τ)
t
1
,...,t
n
;I
= ¦ω ∈ Ω : t
n
(ω) < τ, (ω(t
1
), ..., ω(t
n
)) ∈ I¦ = C
t
1
,...,t
n
;I
∩¦t
n
< τ¦.
We claim that C
(τ)
t
1
,...,t
n
;I
is F
τ
-measurable.
In fact
C
(τ)
t
1
,...,t
n
;I
∩ ¦τ ≤ t¦ = C
t
1
,...,t
n
;I
∩ ¦t
n
< τ ≤ t¦
So, the σ-algebra generated by all C
(τ)
t
1
,...,t
n
;I
in included in F
τ
and one can
show that it coincides with F
τ
.
If τ is stopping time, then ¦τ > t¦ and ¦τ = t¦ belong obviously to F
t
for all t ≥ 0.
Moreover, τ is F
τ
-measurable. In fact, if A = ¦τ ≤ s¦ we have
A ∩ ¦τ ≤ t¦ = ¦τ ≤ t ∧ s¦ ∈ F
t∧s
⊂ F
t
.
In other words we have
F
τ
⊃ σ(τ),
where σ(τ) is the σ-algebra generated by τ.
Remark 4.6 Let τ be an extended random variable such that
¦τ < t¦ ∈ F
t
, for all t ≥ 0.
Then τ is not in general a stopping time with respect to (F
t
)
t≥0
, but it is a
stopping time with respect to the filtration (F
t
+)
t≥0
. In fact
¦τ ≤ t¦ =

k=1
_
τ ≤ t +
1
k
_
∈ F
t
+.
Markov property 47
Exercise 4.7 Assume that the nonnegative random variable τ is discrete,
that is that τ(Ω) = (µ
k
)
k∈N
where µ
k
is an increasing sequence of positive
numbers. Show that τ is a stopping time if and only if ¦τ = µ
k
¦ ∈ F
µ
k
for
all k ∈ N. Show that in this case F
τ
is the σ–algebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ = µ
k
¦ ∈ F
µ
k
for all k ∈ N¦.
Proposition 4.8 Let τ be a stopping time. Then there exists a decreasing
sequence (τ
n
) of discrete stopping times convergent pointwise to τ such that
F
τ
n
⊃ F
τ
for all n ∈ N.
Proof. Define for any n ∈ N and ω ∈ Ω
τ
n
(ω) =
k
2
n
if
k −1
2
n
≤ τ(ω) <
k
2
n
, k ∈ N. (4.2)
It is clear that the sequence (τ
n
) is decreasing. Moreover, τ
n
is a stopping
time. In fact, if t =
k
2
n
with k ∈ N we have
¦τ
n
= t¦ =
_
k −1
2
n
≤ τ <
k
2
n
_
∈ F
t
. (4.3)
Finally, let A ∈ F
τ
, that is
A ∩ ¦τ ≤ t¦ ∈ F
t
, ∀ t ≥ 0.
Then we have
A ∩
_
τ
n
=
k
2
n
_
= A ∩
_
k −1
2
n
≤ τ <
k
2
n
_
∈ F k
2
n
, ∀ k ∈ N,
so that A ∈ F
τ
n
.
We want to extend several properties concerning time t to general stop-
ping times τ. We start by showing that W
τ
is F
τ
-measurable.
Proposition 4.9 Let τ be a stopping time and set
W
τ
(ω) = W(τ(ω), ω), ω ∈ Ω.
Then W
τ
is F
τ
-measurable.
Proof. Assume first τ discrete,
τ(Ω) = ¦t
k
¦, 0 < t
1
< < t
k
<
48 Chapter 4
and set A
k
= ¦τ = t
k
¦, k ∈ N. Then we have
W
τ
(ω) = W(t
k
)(ω), ∀ω ∈ A
k
, k ∈ N.
Let I ∈ B(R). Then
¦W
τ
∈ I¦ ∩ ¦τ ≤ t¦ =


k=1
[¦W
τ
∈ I¦ ∩ ¦τ ≤ t¦ ∩ A
k
]
=


k=1
[¦W
t
k
∈ I¦ ∩ ¦τ ≤ t¦ ∩ A
k
]
=


{k∈N: t
k
≤t}
[¦W
t
k
∈ I¦ ∩ ¦τ ≤ t¦ ∩ A
k
] ∈ F
t
.
So, the conclusion holds in this case.
Let now τ be arbitrary, let τ
n
be defined by (4.2) and set
W
τ
n
(ω) = W(τ
n
(ω), ω), ω ∈ Ω.
Since W is continuous we have
lim
n→∞
W
τ
n
(ω) = W
τ
(ω), ω ∈ Ω.
Fix t ≥ 0. By the previous argument we have
¦W
τ
n
∈ I¦ ∩ ¦τ
n
≤ t¦ ∈ F
t
for all I ∈ B(R). (4.4)
Now the conclusion follows letting n → ∞.
Example 4.10 Let a ∈ R and set
(1)
τ
a
= inf¦t ≥ 0 : W(t) = a¦.
Then
¦τ
a
> t¦ =

s∈[0,t]
¦W(s) < a¦ =

s∈[0,t]∩Q
¦W(s) < a¦ ∈ F
t
.
So, τ
a
is a stopping time with respect to the filtration (F
t
)
t≥0
.
Let now
τ = inf¦t ≥ 0 : W(t) > a¦.
Then we have
¦τ ≥ t¦ =

s∈[0,t]
¦W(s) ≤ a¦ =

s∈[0,t]∩Q
¦W(s) ≤ a¦ ∈ F
t
.
Consequently, by Remark 4.6, τ is a stopping time with respect to filtration
¦F
t

t≥0
.
(1)
We use the convention that the infimum of the empty set is +∞.
Markov property 49
4.3 The Brownian motion W(t + τ) −W(τ)
We recall that W(t +h) −W(t), t ≥ 0, is a Brownian motion for any h > 0.
We want now to show that the same holds when h is replaced by a stopping
time.
Proposition 4.11 Let τ be a stopping time. Then
C(t) := W(t + τ) −W(τ), t ≥ 0,
is a Brownian motion.
Proof. Let us first prove that the law of C(t) is N
t
. For this it is enough to
show that for any α ∈ R we have
E
_
e
iαC(t)
_
= E
_
e
iα(W(t+τ)−W(τ))
_
= e

1
2
α
2
t
, α ∈ R. (4.5)
Assume first that τ is discrete, τ(Ω) = (t
k
) and set
A
i
= ¦τ = t
i
¦ ∈ F
t
i
, ∀ i ∈ N.
Then we have
E
_
e
iα(W(t+τ)−W(τ))
_
=

i=1
_
A
i
e
iα(W(t+t
i
)−W(t
i
))
dP =

i=1
E
_
1l
A
i
e
iα(W(t+t
i
)−W(t
i
))
_
.
Since 1l
A
i
and W(t + t
i
) −W(t
i
) are independent, it follows that
E
_
e
iα(W(t+τ)−W(τ))
_
=

i=1
P(A
i
)E
_
e
iα(W(t+t
i
)−W(t
i
))
_
= e

1
2
α
2
t
and so (4.5) is proved.
Let now τ be general and let (τ
n
) be the sequence of finite stoppping
times defined by (4.2). We have just proved that
E
_
e
iα(W(t+τ
n
)−W(τ
n
))
_
= e

1
2
α
2
t
, α ∈ R.
Now (4.5) follows letting n tend to infinity. By (4.5) it follows that C(t) is a
Gaussian random variable N
t
. Proceeding similarly one can prove that the
law of C(t) − C(s) with t > s > 0 is N
t−s
and that C(t) has independent
increments. Continuity of C(t) is obvious.
50 Chapter 4
4.4 Transition semigroup
We shall denote by B
b
(R) the set of all real, bounded and Borel functions
and by C
b
(R) the subspace of B
b
(R) of those functions which are uniformly
continuous and bounded on R.
Given ϕ ∈ B
b
(R) we want to study the evolution in time of ϕ(W(t) +x).
To this purpose, we define the transition semigroup
P
t
ϕ(x) = E[ϕ(W(t) + x)], t ≥ 0, x ∈ R, ϕ ∈ B
b
(R), (4.6)
Since the law of W(t) + x is N
x,t
we have
P
t
ϕ(x) = E[ϕ(W(t) + x)]
=
1

2πt
_
+∞
−∞
e

1
2t
(x−y)
2
ϕ(y)dy
=
_
+∞
−∞
g
t
(x −y)ϕ(y)dy,
(4.7)
where
g
t
(ξ) =
1

2πt
e

ξ
2
2t
, t > 0, ξ ∈ R. (4.8)
We deduce, by an explicit computation, that P
t
, t ≥ 0, is a semigroup of
linear operators in B
b
(R), that is P
0
= I and
P
t+s
= P
t
P
s
, ∀ t, s ≥ 0.
Notice that P
t
coincides with the heat semigroup in R. In fact one checks
easily that if ϕ ∈ C
b
(R) then the function u : [0, +∞) R → R, u(t, x) =
P
t
ϕ(x) is continuous, infinitely differentiable and fulfills
_
¸
_
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), ∀ t > 0, x ∈ R,
u(0, x) = ϕ(x), ∀ x ∈ R.
Remark 4.12 One can show that u(t, x) = P
t
ϕ(x), t ≥ 0, x ∈ R, is the
unique solution of the Dirichlet problem above.
There is a simple deterministic proof based on maximum principle and a
stochastic proof, which we will present later, based on Itˆo’s formula.
Exercise 4.13 Prove that for t > s ≥ 0,
P
t−s
ϕ(x) = E[ϕ(W(t) −W(s) + x)], ϕ ∈ B
b
(H), x ∈ R. (4.9)
Markov property 51
4.5 Markov property
In this section we shall use several properties of conditional expectation, they
are recalled in Appendix A.
We are here concerned with the stochastic process
X(t) = X(t, x) = W(t) + x, t ≥ 0,
where x ∈ R.
Proposition 4.14 For any t > s > 0 and any ϕ ∈ B
b
(H) we have
E[ϕ(X(t))[F
s
] = (P
t−s
ϕ)(X(s)). (4.10)
Equivalently
_
A
ϕ(X(t))dP =
_
A
(P
t−s
ϕ)(X(s))dP, ∀ A ∈ F
s
. (4.11)
Moreover X() is a Markov process.
Proof. Set
X(t) = W(t) + x = (W(s) + x) + (W(t) −W(s)) =: U + V.
Notice that U is F
s
-measurable and V is independent of F
s
. By Proposition
B.6 it follows that
E[ϕ(X(t))[F
s
] = E[ϕ(U + V )[F
s
] = h(U),
where (recall Exercise 4.13)
h(u) = E[ϕ(u + V )] = E[ϕ(u + W(t) −W(s))] = P
t−s
ϕ(u).
So, (4.10) is proved.
To prove the last statement notice that by Proposition B.3 we have
E[ϕ(X(t))[X(s)] = E[E[ϕ(X(t))[F
s
][X(s)]
= E[P
t−s
ϕ(X(s))[X(s)]
= P
t−s
ϕ(X(s)) = E[ϕ(X(t))[F
s
].

Exercise 4.15 Let s > 0, η a F
s
-measurable random variable and ϕ ∈
B
b
(R). Show that
E[ϕ(W(t) + η[F
s
] = (P
t−s
ϕ(η)).
52 Chapter 4
4.5.1 Strong Markov property
We now consider conditional expectation with respect to F
τ
where τ is a
stopping time.
Proposition 4.16 Let τ be a stopping time and let t ≥ τ and ϕ ∈ B
b
(H).Then
we have
E[ϕ(X(t))[F
τ
] = (P
t−τ
ϕ)(X(τ)). (4.12)
Equivalently
_
A
ϕ(X(t))dP =
_
A
(P
t−τ
ϕ)(X(τ))dP, ∀ A ∈ F
τ
. (4.13)
Proof. We set x = 0 for simplicity, so that X(t) = W(t). Assume first that
τ is of the form
τ(Ω) = (t
k
)
k∈N
.
Let A ∈ F
τ
. Then we have
_
A
(P
t−τ
ϕ)(W(τ))dP =

i=1
_
A∩{τ=t
i
}
(P
t−τ
ϕ)(W(τ))dP
=

i=1
_
A∩{τ=t
i
}
(P
t−t
i
ϕ)(W(t
i
))dP.
Therefore, by (4.10) and taking into account that by the definition of F
τ
we
have
A ∩ ¦τ = t
i
¦ ∈ F
t
i
, i = 1, ..., n,
we can write,
_
A
(P
t−τ
ϕ)(W(τ))dP =

i=1
_
A∩{τ=t
i
}
(P
t−t
i
ϕ)(W(t
i
))dP
=

i=1
_
A∩{τ=t
i
}
E[ϕ(W(t))[F
t
i
]dP
=

i=1
_
A∩{τ=t
i
}
ϕ(W(t))dP =
_
A
ϕ(W(t))dP.
Therefore, (4.13) is proved.
Markov property 53
Let now τ be an arbitrary stopping time and let (τ
n
) be defined by (4.2).
Recall that (Proposition 4.8)
F
τ
⊂ F
τ
n
for all n ∈ N.
Let A ∈ F
τ
. Then by (4.13) it follows that
_
A
ϕ(W(t))dP =
_
A
(P
t−τ
n
ϕ)(W(τ
n
))dP for all A ∈ F
τ
.
Now the conclusion follows letting n → ∞.
Property (4.12) is called the strong Markov property of W.
4.6 Some consequences of the strong Markov
property
In this section we want to determine the laws of the following important
random variables.
• T
b
= inf¦t ≥ 0 : B(t) = b¦, b ∈ R.
• M(t) = max
s∈[0,t]
B(s), t ≥ 0.
• m(t) = min
s∈[0,t]
B(s), t ≥ 0.
Notice that
¦T
a
≤ t¦ = ¦M(t) ≥ a¦, t ≥ 0, a ≥ 0 (4.14)
and
¦T
a
≤ t¦ = ¦m(t) ≤ a¦, t ≥ 0, a ≤ 0. (4.15)
To find the laws of T
a
with a ≥ 0 and M(t) the following lemma is useful.
Lemma 4.17 Let a ≥ 0 and t ≥ 0. Then we have
P(B(t) ≤ a, M(t) ≥ a) = P(B(t) ≥ a). (4.16)
Proof. We have, taking into account that
¦T
a
≤ t¦ = ¦M(t) ≥ a¦
54 Chapter 4
P(W(t) ≤ a, M(t) ≥ a) = P(W(t) ≤ a, T
a
≤ t)
=
_
{T
a
≤t}
1l
(−∞,a]
(W(t))dP
=
_
{T
a
≤t}
E[1l
(−∞,a]
(W(t))[F
T
a
]dP,
since ¦T
a
≤ t¦ ∈ F
T
a
. By the strong Markov property it follows that
P(W(t) ≤ a, M(t) ≥ a) =
_
{T
a
≤t}
E[1l
(−∞,a]
(W(t))[F
T
a
]dP
=
_
{T
a
≤t}
E[P
t−T
a
1l
(−∞,a]
(W(T
a
))]dP
=
_
{T
a
≤t}
E[P
t−T
a
1l
(−∞,a]
(a)]dP.
On the other hand, we have, as easily checked,
P
s
1l
(−∞,a]
(a) = P
s
1l
[a,+∞)
(a), ∀ s > 0, a > 0.
Therefore
P(W(t) ≤ a, M(t) ≥ a) =
_
{T
a
≤t}
E[P
t−T
a
1l
(−∞,a]
(a)]dP
=
_
{T
a
≤t}
E[P
t−T
a
1l
[a,+∞)
(a)]dP
=
_
{T
a
≤t}
E[1l
[a,+∞)
(W(t))[F
T
a
]dP
= P(W(t) ≥ a, M(t) ≥ a)
= P(W(t) ≥ a).
Proposition 4.18 (Reflection principle) For all a ≥ 0 we have
P(M(t) ≥ a) = 2P(W(t) ≥ a), (4.17)
Proof. Write
P(M(t) ≥ a) = P(M(t) ≥ a, W(t) ≤ a) +P(M(t) ≥ a, W(t) ≥ a).
Markov property 55
Now, by Lemma 4.17 we have P(M(t) ≥ a, W(t) ≤ a) = P(W(t) ≥ a).
Moreover, it is clear that P(M(t) ≥ a, W(t) ≥ a) = P(W(t) ≥ a) so, the
conclusion follows.
By Proposition 4.18 we can easily deduce the expressions of the laws of
M(t) and T
a
for all a ∈ R.
Corollary 4.19 (Law of M(t)) For all t ≥ 0 we have
(M(t)
#
P)(dξ) =
2

2πt
e

ξ
2
2t
1l
[0,+∞)
(ξ)dξ. (4.18)
Proof. We have in fact by Proposition 4.18 for any a ≥ 0
P(M(t) ≥ a) = 2P(W(t)[ ≥ a) =
2

2πt
_
+∞
a
e

ξ
2
2t

= P([W(t)[ ≥ a).

Remark 4.20 From Corollary 4.19 it follows that at fixed time t the law
of M(t) coincides with that of [W(t)[, though random variables M(t) and
[W(t)[ are different; in particular M(t) is increasing whereas [W(t)[ is not.
Obviously the laws of M() and [W()[ on C
0
([0, +∞)) are different.
Corollary 4.21 (Law of T
a
) Let a ≥ 0 and t ≥ 0. Then we have
((T
a
)
#
P)(dt) =
a

2πt
3
e

a
2
2t
dt. (4.19)
Proof. By (4.14) and Proposition 4.18 we have
P(T
a
≤ t) = P(M(t) ≥ a) =
2

2πt
_
+∞
a
e

ξ
2
2t

=
2


_
+∞
at
−1/2
e

η
2
2
dξ.
Therefore
d
dt
P(T
a
≤ t) =
a

2πt
3
e

a
2
2t
dt,
which implies the conclusion.
The following results can be proved similarly.
56 Chapter 4
Lemma 4.22 Let a ≤ 0 and t ≥ 0. Then we have
P(W(t) ≥ a, m(t) ≤ a) = P(W(t) ≤ a). (4.20)
Proposition 4.23 (Reflection principle) For all a ≤ 0 we have
P(m(t) ≤ a) = 2P(W(t) ≤ a). (4.21)
Corollary 4.24 (Law of m(t)) For all t ≥ 0 we have
(m(t)
#
P)(dξ) = −
2

2πt
e

ξ
2
2t
1
(−∞,a]
(ξ)dξ. (4.22)
Corollary 4.25 (Law of T
a
) Let a ∈ R and t ≥ 0. Then we have
((T
a
)
#
P)(dt) =
[a[

2πt
3
e

a
2
2t
dt. (4.23)
4.7 Application to partial differential equa-
tions
For any x ≥ 0 we set in this section
τ
x
= inf¦t ≥ 0 : W(t) + x = 0¦ = T
−x
.
Moreover we consider the following processes which take values in [0, +∞).
(i) Y (t) = W(t) + x, ∀ t ∈ [0, τ
x
].
Y (t) is called the Brownian motion killed in 0.
(ii) U(t) = [W(t) + x[, x ≥ 0, t ≥ 0.
U(t) is called the Brownian motion reflected in 0
(iii) V (t) = W(t ∧ τ
x
) + x, t ≥ 0. V (t) is called the Brownian motion
absorbed in 0
Markov property 57
4.7.1 The Dirichlet problem in the half-line
We are here concerned with the process Y (t) = W(t) + x, ∀ t ∈ [0, τ
x
].
Define for any ϕ ∈ B
b
([0, +∞))
U
t
ϕ(x) := u(t, x) := E[ϕ(W(t) + x)1l
t≤τ
x
], t ≥ 0, x ∈ H. (4.24)
We are going to show that u(t, x) is the solution of the Dirichlet problem in
[0, +∞),
_
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), x > 0, t > 0
u(t, 0) = 0, t > 0,
u(0, x) = ϕ(x), x ≥ 0.
(4.25)
Proposition 4.26 We have
u(t, x) =
_
+∞
0
[g
t
(x −y) −g
t
(x + y)]ϕ(y)dy, x ≥ 0, t ≥ 0, (4.26)
where g is defined by (4.8).
Proof. We have
u(t, x) = E[ϕ(W(t) + x)1l
t≤τ
x
]
= P
t
ϕ(x) −E[ϕ(W(t) + x)1l
t>τ
x
],
where ϕ is extended to R by setting
ϕ(−x) = ϕ(x), x ≥ 0.
Write
E[ϕ(W(t) + x)1l
t>τ
x
] = E[E[1l
t>τ
x
ϕ(W(t) + x)[F
τ
x
]]
= E[1l
t>τ
x
E[ϕ(W(t) + x)[F
τ
x
]]
Now, using the strong Markov property we find that,
E[ϕ(W(t) + x)1l
t>τ
x
] = E[1l
t>τ
x
(P
t−τ
x
ϕ)(0)] =: E[ψ(τ
x
)],
where
ψ(λ) = 1l
t>λ
1
_
2π(t −λ)
_
R
e

ξ
2
2(t−λ)
ϕ(ξ)dξ, λ > 0.
58 Chapter 4
Next, recalling the law of τ
x
(see (4.23)) it follows that
E[ϕ(W(t) + x)1l
t>τ
x
] =
_
t
0
__
R
g
t−s
(y)ϕ(y)dy
_
x

2πs
3
e

x
2
2s
ds
=

∂x
_
t
0
__
R
g
t−s
(y)ϕ(y)dy
_
g
s
(x)ds
=
_
R
g
t
(x −y)ϕ(y)dy +

∂x
_
R
G
x,y
ϕ(y)dy,
where
(2)
G
x,y
=
_
t
0
g
t−s
(y)g
s
(x)ds =
1
2
Erfc
_
[x[ +[y[

2t
_
.
Since, for x > 0,

∂x
G
x,y
= −
1

2πt
e

(x+|y|)
2
2t
= −g
t
(x +[y[)
we get
u(t, x) =
_
R
g
t
(x −y)ϕ(y)dy −
_
R
g
t
(x +[y[)ϕ(y)dy,
and the conclusion follows.
It is easy to check, by a direct computation, that if ϕ ∈ C
b
([0, +∞)),
U
t
ϕ(x) = u(t, x) is the solution of the Dirichlet problem (4.25). Moreover
U
0
= I and U
t+s
= U(t)U(s) for all t, s ≥ 0.
4.7.2 The Neumann problem
We consider the process
U(t) = [W(t) + x[, x ≥ 0, t ≥ 0.
For any ϕ ∈ B
b
([0, +∞)) we set
Q
t
ϕ(x) = E[ϕ([W(t) + x[)] = (2πt)
−1/2
_
R
e

|x−y|
2
2t
ϕ([y[)dy.
Replacing in the last integral y with −y, we see that
Q
t
ϕ(x) =
_
+∞
0
[g
t
(x −y) + g
t
(x + y)]ϕ(y),
(2)
We recall that Erfc (a) =
2

π
_
+∞
a
e
−r
2
dr.
Markov property 59
where g
t
is defined by (4.8).
Now it is easy to check that if ϕ ∈ C
b
([0, +∞)) then u(t, x) = Q
t
ϕ(x) is
continuous in [0, ∞) [0, ∞), infinitely differentiable in (0, ∞) [0, ∞) and
solves the following Neumann problem
_
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), x ≥ 0, t > 0,
u
x
(t, 0) = 0, t > 0,
u(0, x) = ϕ(x), x ≥ 0.
Moreover Q
0
= I and Q
t+s
= Q(t)Q(s) for all t, s ≥ 0.
4.7.3 The Ventzell problem
Let us consider the stochastic process,
V (t) = W(t ∧ τ
x
) + x, t ≥ 0,
where x ≥ 0.
Set
Z
t
ϕ(x) = E[ϕ(W(t ∧ τ
x
) + x)], ϕ ∈ B
b
([0, +∞)), x ≥ 0.
So,
Z
t
ϕ(x) =
_

ϕ(B(t ∧ τ
x
) + x)dP
=
_
{t<τ
x
}
ϕ(W(t) + x)dP +
_
{t≥τ
x
}
ϕ(0)dP,
since W(τ
x
) + x = 0. Therefore
Z
t
ϕ(x) = U
t
ϕ(x) + ϕ(0) P(T
−x
≤ t),
where U
t
is defined by (4.24). So
Z
t
ϕ(x) =
_
+∞
0
[g
t
(x −y) −g
t
(x + y)]ϕ(y)dy +
ϕ(0)

2πt
_
x
−∞
e

y
2
2t
dy.
If ϕ ∈ C
b
([0, +∞)), setting u(t, x) = Z
t
ϕ(x) we see that u is the solution to
the Ventzell problem,
_
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
_
u
t
(t, x) =
1
2
u
xx
(t, x), x ≥ 0, t ≥ 0
u
xx
(t, 0) = 0, t ≥ 0,
u(0, x) = ϕ(x), x ≥ 0.
60 Chapter 4
Moreover Z
0
= I and Z
t+s
= Z(t)Z(s) for all t, s ≥ 0.
Chapter 5
The Itˆ o integral
In all this chapter B represents a Brownian motion in a probability space
(Ω, F, P).
Similarly as in Chapter 4, for any t > 0 we denote by C
t
the algebra of
all cylindrical sets
C
t
1
,··· ,t
n
;A
= ¦ω ∈ C
0
: (B(t
1
), ..., B(t
n
)) ∈ A¦
where 0 ≤ t
1
< ... < t
n
, t
n
≤ t and A ∈ B(R
n
).
Moreover, we denote by F
t
the σ-algebra generated by C
t
and all P-null
sets of Ω. We call F
t
, t ≥ 0 the natural filtration of B augmented with the
null sets of P.
The family of σ–algebras (F
t
)
t≥0
is increasing; it is called the natural
filtration of B.
We denote by (F
t
)
t≥0
the completion of the natural filtration of B with
all P-null sets of Ω.
We say that a stochastic process F(t), t ∈ [0, T], is adapted to the Brow-
nian motion B if F(t) is F
t
-measurable for any t ∈ [0, T].
5.1 Definition of Itˆo’s integral
5.1.1 Itˆ o’s integral for elementary processes
Definition 5.1 Let T > 0. An elementary process F(t), t ∈ [0, T], in
(Ω, F, P) is a stochastic process of the form
F =
n

i=1
F
i−1
1l
[t
i−1
,t
i
)
, (5.1)
61
62 The Itˆo integral
where n ∈ N, 0 = t
0
< t
1
< < t
n
= T and F
i
is F
t
i
-measurable for any
i = 0, 1, ..., n −1.
For any elementary process F(t), t ∈ [0, T], we define the Itˆo integral
setting
I(F): =
_
T
0
F(s)dB(s) =
n

i=1
F
i−1
(B(t
i
) −B(t
i−1
)). (5.2)
Obviously any elementary process is adapted. This property is needed to
prove some basic identities (similar to those obtained for the Wiener integral)
which allow to extend the integral to more general processes.
Proposition 5.2 Assume that F ∈ E
2
B
(0, T). Then I(F) ∈ L
2
(Ω, F, P) and
we have
E
__
T
0
F(s)dB(s)
_
= 0 (5.3)
E
_
__
T
0
F(s)dB(s)
_
2
_
=
_
T
0
E([F(s)[
2
)ds. (5.4)
Proof. Let us prove (5.3). We have
E[I(F)] =
n

j=1
E[F
j−1
(B(t
j
) −B(t
j−1
))].
Since F
j−1
is F
j−1
measurable, it is independent of B(t
j
)−B(t
j−1
), by Lemma
4.3. Therefore we have
E[I(F)] =
n

j=1
E[F
j−1
]E[B(t
j
) −B(t
j−1
)] = 0
and (5.3) is proved.
Let us prove (5.4). We have
E[[I(F)[
2
] = E
_
n

j=1
[F
j−1
[
2
[B(t
j
) −B(t
j−1
)]
2
_
+2E
_

j<k
F
j−1
F
k−1
[B(t
j
) −B(t
j−1
)] [B(t
k
) −B(t
k−1
)]
_
.
Notice now that for j < k the random variable
F
j−1
F
k−1
[B(t
j
) −B(t
j−1
)],
Chapter 5 63
is F
k−1
–measurable and consequently is independent of B(t
k
) − B(t
k−1
).
Therefore, taking the expectation, we have
E[F
j−1
F
k−1
[B(t
j
) −B(t
j−1
)][B(t
k
) −B(t
k−1
)]]
= E[F
j−1
F
j−1
[B(t
j
) −B(t
j−1
)]] E[B(t
k
) −B(t
k−1
)] = 0.
It follows that
E[[I(F)[
2
] =
n

j=1
E[[F
j−1
[
2
](t
j
−t
j−1
),
as required.
Exercise 5.3 Let F, G ∈ E
2
B
(0, T). Prove that
E
__
T
0
F(s)dB(s)
_
T
0
G(s)dB(s)
_
=
_
T
0
E[F(s)G(s)]ds.
Hint: Use the identity
ab =
1
2
(a + b)
2

1
2
a
2

1
2
b
2
, a, b ∈ R.
5.1.2 General definition of Itˆ o’s integral
Let us denote by
Z
T
:= L
2
([0, T] Ω, B(0, T) F, dt P)
the Hilbert space of all (equivalence classes of) functions
F : [0, T] Ω, (t, ω) → F(t, ω),
which are measurable with respect to the product σ-algebra, B(0, T) F
and such that
|F|
Z
T
:= E
_
T
0
[F(t, )[
2
dt < ∞.
The scalar product on Z is defined by
¸F, F
1
) = E
_
T
0
F(t, )F
1
(t, )dt.
Obviously any elementary process F belongs to Z.
64 The Itˆo integral
In view of (5.4), the mapping
E
2
B
(0, T) ⊂ Z
T
→ L
2
(Ω, F
T
, P)F →
_
T
0
F(s)dB(s),
is an isometry. Therefore it can be uniquely extended to the closure E
2
B
(0, T)
of E
2
B
(0, T) in Z
T
.
Processes belonging to E
2
B
(0, T) are called predictable.
So, the Itˆ o integral can be uniquely defined by extension for any pre-
dictable square integrable process F(t), t ≥ 0 and the following properties
are fulfilled.
E
__
T
0
F(s)dB(s)
_
= 0 (5.5)
E
_
__
T
0
F(s)dB(s)
_
2
_
=
_
T
0
E([F(s)[
2
)ds. (5.6)
Moreover, from Exercise 5.3 it follows that if F and G are predictable square
integrable processes we have
E
__
T
0
F(s)G(s)dB(s)
_
=
_
T
0
E[F(s)G(s)]ds. (5.7)
We can define in an obvious way the Itˆo integral
_
b
a
F(s)dB(s) in any
interval [a, b] ⊂ [0, T]. We have
E
__
b
a
F(s)dB(s)
_
= 0,
and
E
_
__
b
a
F(s)dB(s)
_
2
_
=
_
b
a
(E[F(s)[
2
)ds.
Moreover, for any a, b, c ∈ [0, T] we have
_
c
a
F(s)dB(s) =
_
b
a
F(s)dB(s) +
_
c
b
F(s)dB(s).
Let us now present a characterization of predictable processes (that is of
space E
2
B
(0, T)). Note first that an elementary process is a linear combination
of processes of the form
F1l
[a,b)
, with F F
a
-measurable.
Chapter 5 65
In turn each F can be approximated by linear combinations of characteristic
functions of F
a
-measurable sets. So, it is natural to approximate a general
predictable process by linear combinations of functions of the form
1l
A×[a,b)
, with A F
a
measurable.
We call A [a, b) a predictable rectangle. We denote by R the family of all
predictable rectangles and by P the σ-algebra generated by R. P is called
the σ-algebra of all predictable events.
Definition 5.4 A real predictable process in [0, T] is a real random variable
in the probability space
([0, T] Ω, P, dt P).
Proposition 5.5 The closure E
2
B
([0, T]) is precisely L
2
([0, T]Ω, P, dtP).
Proof. Denote by Λ
T
the closure of E
2
B
([0, T]) in L
2
([0, T] Ω, P, dt P).
Since any element of L
2
([0, T] Ω, P, dt P) can be approximated by a
monotonic sequence of simple functions, it is enough to show that 1l
A
∈ Λ
T
for any A ∈ P. For this we shall use the Dynkin Theorem, see Appendix A.
We first note that R is a π-system. Then we set
D = ¦A ∈ P : 1l
A
∈ Λ
T
¦.
We claim that D is a λ-system, i.e. that it fulfills (A.1). Properties (B.1)-
(i)-(ii) are clear, let us show (A.1)-(iii). Let (A
n
) ⊂ D be mutually disjoint
sets and set
φ
n
=
n

k=1
1l
A
k
.
Then, by the monotone convergence theorem, φ
n
→ φ = 1l
A
in L
2
([0, T]
Ω, P, dt P) where A =


k=1
A
k
. So, A ∈ D and (A.1)-(iii) is fulfilled. Now
the conclusion follows by Theorem A.1.
Exercise 5.6 Let F ∈ L
2
([0, T] Ω, P, dt P), [s, t] ⊂ [0, T] and let ϕ ∈
L

(Ω, F
s
, P). Prove that
ϕ
_
t
s
F(r)dB(r) =
_
t
s
ϕ F(r)dB(r). (5.8)
Exercise 5.7 Let F ∈ L
2
([0, T] Ω, P, dt P) such that
_
T
0
F(s)dB(s) = 0.
Show that F = 0.
66 The Itˆo integral
5.2 Itˆ o integral for mean square continuous
processes
We shall denote by C
B
([0, T]; L
2
(Ω)) the space of all stochastic processes
which are mean square continuous and adapted. We recall that if F ∈
C
B
([0, T]; L
2
(Ω)) then F(t) is F
t
-measurable for all t ∈ [0, T] and the map-
ping
[0, T] → L
2
(Ω, F, P), t → F(t),
is continuous.
For any decomposition σ = ¦t
0
, t
1
, , t
n
¦ ∈ Σ(0, T) consider the ele-
mentary process
F
σ
:=
n

j=1
F(t
j−1
)1l
[t
j−1
,t
j
)
and set
I
σ
(F) :=
_
T
0
F
σ
(s)dB(s) =
n

j=1
F(t
j−1
)(B(t
j
) −B(t
j−1
)).
Clearly F
σ
∈ E
2
B
(0, T) and, using the continuity of F one can check easily
that
lim
|σ|→0
F
σ
= F, in L
2
([0, T] Ω, P, dt P). (5.9)
Consequently we have
lim
|σ|→0
I
σ
(F) =
_
T
0
F(s)dB(s) in L
2
(Ω, F, P). (5.10)
Example 5.8 Let us prove that
_
T
0
B(t)dB(t) =
1
2
(B
2
(T) −T). (5.11)
Let σ = ¦t
0
, t
1
, ..., t
n
¦ ∈ Σ(0, T). Write
B(t
k−1
)(B(t
k
) −B(t
k−1
)) = B(t
k−1
)B(t
k
) −B
2
(t
k−1
))
= −
1
2
B
2
(t
k
) + B(t
k−1
)B(t
k
) −
1
2
B
2
(t
k−1
) +
1
2
B
2
(t
k
) −
1
2
B
2
(t
k−1
)
=
1
2
B
2
(t
k
) −
1
2
B
2
(t
k−1
) −
1
2
(B(t
k
) −B(t
k−1
))
2
.
Chapter 5 67
Then we have
I
σ
(B) =
1
2
B
2
(T) −
1
2
n

k=1
(B(t
k
) −B(t
k−1
))
2
.
Recalling that the quadratic variation of B is T (Theorem 3.19), we deduce
that
_
T
0
B(t)dB(t) = lim
|σ|→0
I
σ
(B) =
1
2
(B
2
(T) −T).
Exercise 5.9 Prove that
lim
|σ|→0
n

k=1
B(t
k
)(B(t
k
) −B(t
k−1
)) =
1
2
(B
2
(T) + T), in L
2
(Ω, F, P),
and
lim
|σ|→0
n

k=1
B
_
t
k
+ t
k−1
2
_
(B(t
k
) −B(t
k−1
)) =
1
2
B
2
(T), in L
2
(Ω, F, P).
Therefore the definition of the Itˆo integral depends on the particular form of
the integral sums.
5.3 The Itˆ o integral as a stochastic process
Let F ∈ L
2
([0, T] Ω, P, dt P and set
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
We first notice that X(t), t ≥ 0, is not a process with independent increments
in general (unless f is deterministic); take for instance
X(t) =
_
t
0
B(s)dB(s) =
1
2
(B
2
(t) −t), t ≥ 0.
However, X(t), t ≥ 0, has orthogonal increments (in the sense of L
2
(Ω, F, P))
as the following result shows.
Proposition 5.10 Let 0 ≤ t
1
≤ t
2
≤ t
3
≤ t
4
≤ T. Then we have
E[(X(t
2
) −X(t
1
))(X(t
4
) −X(t
3
))] = 0
68 The Itˆo integral
Proof. We have in fact, taking into account (5.7)
E[(X(t
2
) −X(t
1
))(X(t
4
) −X(t
3
))]
= E
__
t
2
t
1
F(s)dB(s)
_
t
4
t
3
F(s)dB(s)
_
= E
__
T
0
1l
[t
1
,t
2
]
F(s)dB(s)
_
T
0
1l
[t
3
,t
4
]
F(s)dB(s)
_
=
_
T
0
1l
[t
1
,t
2
]
1l
[t
3
,t
4
]
E(F
2
(s))ds = 0.

We are going to show that X(t), t ≥ 0, is mean square continuous, then
that it is a continuous process.
Proposition 5.11 Let F ∈ L
2
([0, T]Ω, P, dtP). Then X ∈ C
B
([0, T]; L
2
(Ω)).
Proof. We know that for any t ∈ [0, T], X(t) ∈ L
2
(Ω, F
t
, P). Moreover, for
any t, t
0
∈ [0, T] we have
E([X(t) −X(t
0
)[
2
) =
¸
¸
¸
¸
_
t
t
0
E([F(r)[
2
)dr
¸
¸
¸
¸
,
so that
lim
t→t
0
E([X(t) −X(t
0
)[
2
) = 0.
The conclusion follows.
We show now that X(t), t ≥ 0, is a continuous process. For this we first
prove that it is a martingale with respect to the filtration (F
t
) (see Appendix
C).
Proposition 5.12 X(t), t ∈ [0, T], is a F
t
–martingale
Proof. Let t > s. Since
X(t) −X(s) =
_
t
s
F(r)dB(r),
we have
E[X(t)[F
s
] = X(s) +E
__
t
s
F(r)dB(r)[F
s
_
.
Chapter 5 69
So, it remains to prove that
E
__
t
s
F(r)dB(r)[F
s
_
= 0. (5.12)
Notice that this is not obvious since
_
t
s
F(r)dB(r) is not independent of F
s
in general
(1)
. It is enough to prove (5.12) when F is an elementary process,
F =
n

i=1
F
i−1
1l
[t
i−1
,t
i
)
,
where s = t
1
, , t
n
= t and F
i−1
∈ L
2
(Ω, F, P). In this case, taking into
account that F
s
⊂ F
i−1
, we write
E
__
t
s
F(r)dB(r)[F
s
_
=
n

i=1
E[F
i−1
(B(t
i
) −B(t
i−1
))[F
s
]
=
n

i=1
E¦E[F
i−1
(B(t
i
) −B(t
i−1
))[F
i−1
][F
s
¦ = 0,
since F
i−1
is F
i−1
–measurable and B(t
i
) − B(t
i−1
) is independent of F
i−1
.
So, (5.12) is proved and the conclusion follows.
We are now ready to prove the continuity of X.
Theorem 5.13 Let F ∈ L
2
([0, T] Ω, P, dt P) and let
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
Then X has a continuous version and
E
_
sup
t∈[0,T]
[X(t)[
2
_
≤ 4
_
T
0
E[F(s)[
2
ds. (5.13)
Proof. Let (F
n
) ⊂ E
2
B
(0, T) such that
F
n
→ F in L
2
([0, T] Ω, P, dt P)
and set
X
n
(t) =
_
t
0
F
n
(s)dB(s), n ∈ N, t ∈ [0, T].
(1)
because F(r) contains in general the “story” of the Brownian motion from 0 to r.
70 The Itˆo integral
Since B(t) is continuous it is clear that X
n
(t) is continuous for all n ∈
N. Taking into account Proposition 5.12 we see that X(t), t ∈ [0, T], is
a continuous F
t
–martingale. Then by Corollary C.6 it follows that for any
n, m ∈ N
E
_
sup
t∈[0,T]
[X
n
(t) −X
m
(t)[
2
_
≤ 4E([X
n
(T) −X
m
(T)[
2
)
= 4E
__
T
0
[F
n
(s) −F
m
(s)[
2
ds
_
.
Consequently (X
n
)(ω) is Cauchy in C([0, T]) for almost all ω and its limit,
which coincides with X(ω) is continuous.
5.4 Itˆ o integral with stopping times
5.4.1 Stopping times
We proceed here as in Section 4.2.
A nonnegative extended random variable τ in (Ω, F, P) is called a stopping
time with respect to the filtration (F
t
)
t≥0
if
¦τ ≤ t¦ ∈ F
t
for all t ≥ 0.
To any stopping time τ we associate the σ-algebra
F
τ
: = ¦A ∈ F : A ∩ ¦τ ≤ t¦ ∈ F
t
for all t ≥ 0¦.
The proofs of the two following propositions are completely similar to that
of Proposition 4.8 and 4.8. So, they will be omitted.
Proposition 5.14 Let τ be a stopping time. Then there exists a decreasing
sequence (τ
n
) of discrete stopping times convergent pointwise to τ such that
F
τ
n
⊃ F
τ
for all n ∈ N.
Proposition 5.15 Let τ be a stopping time and set
W(τ)(ω) = W(τ(ω))(ω), ω ∈ Ω.
Then W(τ) is F
τ
-measurable and W(t + τ) − W(τ), t ≥ 0 is a Brownian
motion in (Ω, F, P).
Chapter 5 71
5.4.2 Itˆ o’s integral with stopping times
Let F ∈ L
2
([0, T] Ω, P, λ P) and set
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
Let moreover τ ≤ T be a stopping time. Define
_
τ
0
F(s)dB(s): = X(τ),
where
X(τ, ω) = X(τ(ω), ω), ω ∈ Ω.
Arguing as in Proposition 5.15 and using the fact that X(t), t ∈ [0, T], has
a continuous version, one can see that X(τ) is F
τ
–measurable.
The following result reduces a Itˆ o’s integral with a stopping time to a
usual one between 0 to T.
Proposition 5.16 Let F ∈ L
2
([0, T] Ω, P, dt P) and let τ ≤ T be a
stopping time. Then we have
_
τ
0
F(s)dB(s) =
_
T
0
1l
{s<τ}
F(s)dB(s). (5.14)
Proof. It is enough to prove the result when τ is of the form,
τ(Ω) = (t
1
, t
2
, ..., t
n
),
with 0 < t
1
< t
2
< < t
n
≤ T.
Set
A
i
:= ¦τ = t
i
¦, i = 1, ..., n.
T
¯
hen A
i
∈ F
t
i
, i = 1, ..., n.
Consider now the stochastic process
h(s) = 1l
{s≤τ}
, s ∈ [0, T].
We have
h(s) = 1, s ∈ [0, t
1
).
If s ∈ [t
1
, t
2
) we have
h(s)(ω) = 1 if ω ∈ A
2
∪ ∪ A
n
,
72 The Itˆo integral
so that
h(s) = 1l
A
2
∪···∪A
n
= 1l
A
c
1
.
Similarly, if s ∈ [t
k−1
, t
k
) with k ≤ n we have
h(s) = 1l
(A
k
∪...∪A
n
)
c.
Then h is predictable and
_
T
0
1l
{t<τ}
F(s)dB(s) =
_
t
1
0
F(s)dB(s) + 1l
(A
1
)
c
_
t
2
t
1
F(s)dB(s)
+ + 1l
(A
1
∪A
2
∪···∪A
n−1
)
c
_
t
n
t
n−1
F(s)dB(s)
= X(t
1
) + 1l
(A
1
)
c(X(t
2
) −X(t
1
))
+ + 1l
(A
1
∪A
2
∪···∪A
n−1
)
c(X(t
n
) −X(t
n−1
) = X(τ).

5.5 Multidimensional Itˆ o integrals
Let m ∈ N be fixed and consider a standard m-dimensional Brownian motion
B(t) = (B
1
(t), ..., B
m
(t)), t ≥ 0
in the probability space (Ω, F, P). Let (F
t
)
t∈[0,T]
be the natural filtration of
B (augmented with all P-null sets of Ω) .
We shall define the Itˆ o integral for predictable processes with values
in L(R
m
, R
d
) (that is such that any matrix element belongs to L
2
([0, T]
Ω, P, dtP)). We shall denote this space by L
2
([0, T]Ω, P, dtP; L(R
m
, R
d
))).
First we need a lemma whose simple proof is left to the reader.
Lemma 5.17 Let f, g ∈ L
2
([0, T] Ω, P, dt P). Then we have
E
__
T
0
f(s)dB
i
(s)
_
T
0
g(s)dB
j
(s)
_
= δ
i,j
_
T
0
E[f(s)g(s)]ds, i, j = 1, ..., m.
(5.15)
Let now F ∈ L
2
([0, T] Ω, P, dt P; L(R
m
, R
d
)). We define the Itˆo
integral of F as the d-dimensional process
__
T
0
F(t)dB(t)
_
i
=
m

j=1
_
T
0
F
i,j
(t)dB
j
(t), i = 1, ..., d.
Chapter 5 73
Proposition 5.18 Let F ∈ L
2
([0, T] Ω, P, dt P; L(R
m
, R
d
)). Then we
have
E
¸
¸
¸
¸
_
T
0
F(t)dB(t)
¸
¸
¸
¸
2
=
_
T
0
E[Tr (F(t)F

(t))]dt, (5.16)
where Tr denotes the trace.
Proof. Set I(F) =
_
T
0
F(t)dB(t). Then we have
(I(F))
i
=
m

j=1
_
T
0
F
i,j
(t)dB
j
(t), i = 1, ..., d.
It follows that
E[I(F)[
2
=
d

i=1
E
_
m

j=1
_
T
0
F
i,j
(t)dB
j
(t)
_
2
and, taking into account (5.15),
E[I(F)[
2
=
d

i=1
m

j=1
_
T
0
E[F
i,j
(t)
2
]dt,
which yields (5.16).
Remark 5.19 Assume that d = 1 so that L(R
d
; R
m
) is isomorphic to R
m
and F becomes a vector F = (F
1
, , F
m
).
In this case we shall write the Itˆo integral of F as
_
T
0
¸F(s), dB(s))
and formula (5.16) reduces to
E
¸
¸
¸
¸
_
T
0
¸F(t), dB(t))
¸
¸
¸
¸
2
=
_
T
0
E[F(t)[
2
dt. (5.17)
74 The Itˆo integral
Chapter 6
The Itˆ o formula
6.1 Introduction
Let (Ω, F, P) be a probability space, B a real Brownian motion, (F
t
)
t≥0
the
natural filtration of B augmented with the null sets of P and P the σ-algebra
of all predictable events (also augmented with the null sets of P).
We are given two stochastic processes b, σ ∈ L
2
([0, T] Ω, P, dt P) and
consider the stochastic process
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dB(s), t ≥ 0, (6.1)
where x ∈ R. X is adapted, continuous and continuous in mean square.
We set
dX(t) = b(t)dt + σ(t)dB(t)
and call dX(t) the Itˆo differential of X.
Given a regular real function ϕ, we are going to give a meaning to the
Itˆo’s differential ϕ

(X(t)).
We need some notations. For any k ∈ N we denote by C
k
b
(R) the linear
space of all real mappings which are uniformly continuous and bounded to-
gether with their derivatives of order less or equal to k. If ϕ ∈ C
k
b
(R) we
set
|ϕ|
0
= sup
x∈R
[ϕ(x)[,
and
|ϕ|
k
= |ϕ|
0
+
k

j=1
sup
x∈R
[D
j
ϕ(x)[.
75
76 Chapter 6
We shall prove the following Itˆo’s formula,
ϕ(X(t)) = ϕ(x) +
_
t
0
ϕ

(X(s))σ(s)dB(s)
+
_
t
0
_
1
2
σ
2
(s)ϕ

(X(s)) + b(s)ϕ

(X(s))
_
ds, t ≥ 0.
(6.2)
We shall write (6.2) in the differential form, setting
ϕ

(X(t)) = ϕ

(X(t))σ(t)dB(t),
+
_
1
2
σ
2
(t)ϕ

(X(t)) + b(t)ϕ

(X(t))
_
dt, t ≥ 0,
(6.3)
or, also as
ϕ

(X(t)) = ϕ

(X(t))dX(t) +
1
2
σ
2
(t)ϕ

(X(t))dt, t ≥ 0. (6.4)
Remark 6.1 One can deduce formally Itˆo’s formula by proceeding as fol-
lows. Write dX = b(t)dt + σ(t)dB and
dϕ(X) = ϕ(X + dX) −ϕ(X) = ϕ

(X)dX +
1
2
ϕ

(X)(dX)
2
= ϕ

(X)dX +
1
2
ϕ

(X)b
2
(t)(dt)
2
+ 2b(t)σ(t)dt dB + σ
2
(t)(dB)
2
.
Put (dB)
2
= dt and neglet the terms of order greater than dt, that is terms
with (dt)
2
and dt dB(t).
Writing (dB)
2
= dt is justified by Lemma 6.2 below.
Tthe following result on quadratic sums of a process is a generalization of
Theorem 3.19.
Lemma 6.2 Let F ∈ C
B
([0, T]; L
2
(Ω, F, P)) and let η = ¦0 = t
0
< t
1
<
< t
n
= T¦ ∈ Σ(0, T). Then we have
lim
|η|→0
n

k=1
F(t
k−1
)(B(t
k
) −B(t
k−1
))
2
=
_
T
0
F(s)ds in L
2
(Ω, F, P) (6.5)
Proof. Set
J
η
:=
n

k=1
F(t
k−1
)(B(t
k
) −B(t
k−1
))
2
.
The Itˆo formula 77
It is enough to prove that
lim
|η|→0
E
_
_
_
J
η

n

k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
= 0, (6.6)
since, obviously
lim
|η|→0
n

k=1
F(t
k−1
)(t
k
−t
k−1
) =
_
T
0
F(s)ds in L
2
(Ω, F, P).
To prove (6.6) write
E
_
_
_
J
η

n

k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
= E
_
_
_
n

k=1
F(t
k−1
)
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
_
_
2
_
_
=
n

k=1
E
_
[F(t
k−1
)[
2
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
¸
2
_
+2
n

j<k=1
E
_
F(t
j−1
)[[B(t
j
) −B(t
j−1
)[
2
−(t
j
−t
j−1
)]
F(t
k−1
)[[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)]
_
Since the Brownian motion has independent increments, the last sum van-
ishes, so that
E
_
_
_
J
η

n

k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
=
n

k=1
E
_
[F(t
k−1
)[
2
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
¸
2
_
=
n

k=1
E[F(t
k−1
)[
2
E
_
_
[B(t
k
) −B(t
k−1
)[
2
−(t
k
−t
k−1
)
¸
2
_
,
(6.7)
78 Chapter 6
since F(t
k−1
) and B(t
k
) −B(t
k−1
) are independent.
Now, taking into account that
E[[B(t
k
) −B(t
k−1
)[
2
] = (t
k
−t
k−1
),
E[[B(t
k
) −B(t
k−1
)[
4
] = 3(t
k
−t
k−1
)
2
,
we have
E
_
_
_
J
η

n

k=1
F(t
k−1
)(t
k
−t
k−1
)
_
2
_
_
= 2
n

k=1
E[[F(t
k−1
)[
2
](t
k
−t
k−1
)
2
≤ 2[η[
n

k=1
E[[F(t
k−1
)[
2
(t
k
−t
k−1
)] → 0,
as [η[ → 0. The conclusion follows.
Now we are in position to prove Itˆ o’s formula. First we assume that b
and σ are elementary processes,
b =
p

i=1
b
i−1
1l

i−1

i
)
, σ =
p

i=1
σ
i−1
1l

i−1

i
)
, (6.8)
where p ∈ N, 0 = λ
0
< λ
1
< < λ
p
and b
i
, σ
i
are F
t
i
-measurable for any
i = 0, 1, ..., p −1.
Lemma 6.3 Let ϕ ∈ C
2
b
(R), x ∈ R, b and σ given by (6.8) and X by (6.1).
Then identity (6.2) holds.
Proof. Since C
3
b
(R) is dense in C
2
b
(R) it is enough to show (6.2) when
ϕ ∈ C
3
b
(R). We start by proving (6.2) in [0, t] with t ≤ λ
1
. In this case we
have
b(t) = b
0
, σ(t) = σ
0
, t ∈ [0, λ
1
]
and
X(t) = b
0
t + σ
0
B(t), t ∈ [0, λ
1
].
Let η = ¦t
0
= 0 < t
1
< < t
N
= t¦. Then we obviously have
ϕ(X(t)) −ϕ(x) =
N

k=1
[ϕ(X(t
k
)) −ϕ(X(t
k−1
))].
The Itˆo formula 79
On the other hand, using Taylor’s formula we can write
ϕ(X(t)) −ϕ(x) =
N

k=1
ϕ

(X(t
k−1
))(X(t
k
) −X(t
k−1
))
+
1
2
N

k=1
ϕ

(X(t
k−1
))(X(t
k
) −X(t
k−1
))
2
+ R
η
=: I
1
+ I
2
+ I
3
. (6.9)
Concerning I
1
we have
I
1
=
N

k=1
ϕ

(X(t
k−1
))(b
0
(t
k
−t
k−1
) + σ
0
(B(t
k
) −B(t
k−1
)).
So,
lim
|η|→0
I
1
=
_
t
0
ϕ

(X(s))b(s)ds +
_
t
0
ϕ

(X(s))σ(s)dB(s) in L
2
(Ω, F, P).
(6.10)
Concerning I
2
we write
2I
2
=
N

k=1
ϕ

(X(t
k−1
))b
2
0
(t
k
−t
k−1
)
2
+ 2
N

k=1
ϕ

(X(t
k−1
))b
0
σ
0
(t
k

k−1
)(B(t
k
) −B(t
k−1
))
+
N

k=1
ϕ

(X(t
k−1
))σ
2
0
(B(t
k
) −B(t
k−1
))
2
=: I
2,1
+ I
2,2
+ I
2,3
. (6.11)
It is easy to check that
lim
|η|→0
I
2,1
= lim
|η|→0
I
2,2
= 0 in L
1
(Ω, F, P) (6.12)
In fact
[I
2,1
[ ≤
1
2
|ϕ|
2
[b
0
[
2
N

k=1
(t
k
−t
k−1
)
2
→ 0 as [η[ → 0
80 Chapter 6
and
(1)
E[I
2,2
[ ≤ |ϕ|
2
[b
0
[ [σ
0
[
N

k=1
(t
k
−t
k−1
)E[B(t
k
) −B(t
k−1
)[
≤ |ϕ|
2
[b
0
[ [σ
0
[
N

k=1
(t
k
−t
k−1
)
3/2
→ 0 as [η[ → 0.
Moreover, by Lemma 6.2 it follows that
lim
|η|→0
2I
2,3
=
_
t
0
ϕ

(X(s))σ
2
(s)ds in L
2
(Ω, F, P). (6.13)
So, the conclusion will follow provided
lim
|η|→0
E[R
η
[ = 0, (6.14)
Let us prove (6.14). We have
R
η
=
N

k=1
_
1
0
(1 −ξ)[ϕ


k
) −ϕ

(X(t
k−1
))](X(t
k
) −X(t
k−1
))
2
dξ,
where
ξ
k
= (1 −ξ)X(t
k−1
) + ξX(t
k
).
Since ϕ ∈ C
3
b
(R) we have by the mean value theorem,


k
) −ϕ

(X(t
k−1
))[ ≤ |ϕ|
0
(1 −ξ)[X(t
k
) −X(t
k−1
)[,
so that, we deduce setting 1 −ξ ≤ 1,
[R
η
[ ≤ |ϕ|
3
N

k=1
[X(t
k
) −X(t
k−1
)[
3
.
Consequently
[R
η
[ ≤ 3|ϕ|
3
[b
0
[
3
N

k=1
[t
k
−t
k−1
[
3
+ 3|ϕ|
3

0
[
3
N

k=1
[B(t
k
) −B(t
k−1
)[
3
(1)
since E[B(t)[ ≤ [E[B
2
(t)[]
1/2
= t
1/2
.
The Itˆo formula 81
and so
(2)
,
E([R
η
[) ≤ 3|ϕ|
3
[b
0
[
3
N

k=1
[t
k
−t
k−1
[
3
+ 3|ϕ|
3

0
[
3

15
N

k=1
[t
k
−t
k−1
[
3/2
→ 0,
as [η[ → 0. The proof is complete when t ≤ λ
1
. The general case can be
treated in the same way taking into account that b
k−1
and σ
k−1
are indepen-
dent of B(t
k
) −B(t
k−1
).
We finally prove
Theorem 6.4 Let x ∈ R, b, σ ∈ L
2
([0, T] Ω, P, dt P) and ϕ ∈ C
2
b
(R).
Then identity (6.2) holds for all t ∈ [0, T].
Proof. Let (b
j
) and (σ
j
) be sequences of elementary processes such that
lim
j→∞
b
j
= b, lim
j→∞
σ
j
= σ in L
2
([0, T] Ω, P, dt P).
Set, for any j ∈ N,
X
j
(t) = x +
_
t
0
b
j
(s)ds +
_
t
0
σ
j
(s)dB(s), s ∈ [0, T]. (6.15)
Then we have (see (5.10))
lim
j→∞
X
j
= X in C
B
([0, T]; L
2
(Ω)).
Moreover by (6.2) we have
ϕ(X
j
(t)) = ϕ(x) +
_
t
0
ϕ

(X
j
(s))σ
j
(s)dB(s),
+
_
t
0
_
1
2
σ
j
(s)ϕ

(X
j
(s)) + b
j
(s)ϕ

(X
j
(s))
_
ds.
(6.16)
Now the conclusion follows by the dominated convergence theorem letting
j → ∞.
Taking expectation in the Itˆo formula we find a useful identity which
allows to estimate the expectation of ϕ(X(t)).
(2)
Since E[B(t)[
3
) ≤ [E(B(t)
6
)]
1/2
=

15.
82 Chapter 6
Proposition 6.5 Assume that x ∈ R, b, σ ∈ L
2
([0, T] Ω, P, dt P) and
ϕ ∈ C
2
b
(R). Let
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dB(s), t ∈ [0, T].
Then
E[ϕ(X(t))] = ϕ(x) +
1
2
E
_
t
0

(X(s))σ
2
(s) + 2ϕ

(X(s))b(s)]ds. (6.17)
6.1.1 The Itˆ o formula for unbounded functions
We want now to show that formula (6.17) also holds without the assumption
that ϕ is bounded, provided the integrand in the right hand side is summable.
Proposition 6.6 Assume that x ∈ R, b, σ ∈ L
2
([0, T] Ω, P, dt P) and
ϕ ∈ C
2
(R). Set
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dB(s), t ∈ [0, T]. (6.18)
and assume in addition that
E
_
t
0

(X(s))σ
2
(s) + 2ϕ

(X(s))b(s)[ds < +∞. (6.19)
Then E[ϕ(X(t))] < +∞ and (6.17) holds.
Example 6.7 Take ϕ(x) = x
2
. Then condition (6.19) becomes
E
_
t
0

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

2
(s) + 2X(s)b(s))ds.
Proof of Proposition 6.6. For any R > 0 consider a function ϕ
R

C
2
b
(R) such that
ϕ
R
(x) =
_
ϕ(x) if [x[ ≤ R,
0 if [x[ ≥ R + 1.
The Itˆo formula 83
Then, applying Itˆo’s formula (6.2) to ϕ
R
(X(t)), yields for any R > 0
ϕ
R
(X(t)) −ϕ(x) =
1
2
_
t
0

R
(X(s))σ
2
(s) + 2ϕ

R
(X(s)b(s)]ds
+
_
t
0
ϕ

R
(X(s)))σ(s)dB(s).
(6.20)
Let now τ
R
be the stopping time
τ
R
=
_
¸
¸
_
¸
¸
_
inf¦t ∈ [0, T] : [X(t)[ ≥ R¦ if sup
t∈[0,T]
[X(t)[ ≥ R,
T if sup
t∈[0,T]
[X(t)[ < R.
It is clear that τ
R
is increasing and bounded by T. We know that X(, ω) is
continuous for almost all ω ∈ Ω. For such a ω, X(, ω) attains the maximum,
say M(ω). Then we have τ
R
(ω) = T for all R > M(ω). So,
lim
R→∞
τ
R
= T P–a.s.. (6.21)
Now, in view of Proposition 5.16 we can write
ϕ(X(t ∧ τ
R
)) −ϕ(x) =
1
2
_
t
0
1l
s<(t∧τ
R
)

(X(s))σ
2
(s) + 2ϕ

(X(s)b(s)]ds
+
_
t
0
1l
s<(t∧τ
R
)
ϕ

(X(s)))σ(s)dB(s).
(6.22)
Taking expectation we obtain
E[ϕ(X(t ∧ τ
R
))] −ϕ(x)
=
1
2
E
_
t
0
1l
s<(t∧τ
R
)

(X(s))σ
2
(s) + 2ϕ

(X(s)b(s)]ds.
(6.23)
Now, by the assumption (6.19), (6.21) and the dominated convergence theo-
rem, we can let R → ∞ obtaining the conclusion.
As an application of Proposition 6.6 let us estimate E
_
_
T
0
F(s)dB(s)
_
2m
where F is predictable and m ∈ N, m > 1.
84 Chapter 6
Proposition 6.8 Assume that F ∈ L
2m
([0, T] Ω; P, dt P), m ∈ N, and
set
X(t) =
_
t
0
F(s)dB(s), t ∈ [0, T].
Then X ∈ L
2m
([0, T] Ω; P, dt P) and we have
E[[X(T)[
2m
] ≤ [m(2m−1)]
m
T
m−1
_
T
0
E
_
[F(t)[
2m
¸
dt. (6.24)
Proof. It is enough to prove (6.24) when F is bounded (because L

([0, T]
Ω; P, dt P) is dense in L
2m
([0, T] Ω; P, dt P)).
We start from the case m = 2, setting ϕ(x) = x
4
. Then (6.19) holds so
that, by Proposition 6.6 we have
E[[X(t)[
4
] = 6E
__
t
0
[X(s)[
2
[F(s)[
2
ds
_
.
By H¨older’s inequality it follows that
E[[X(t)[
4
] ≤ 6
_
E
_
t
0
[X(s)[
4
ds
_
1/2
_
E
_
t
0
[F(s)[
4
ds
_
1/2
. (6.25)
Integrating between 0 and T, yields
_
T
0
E[X(t)[
4
dt ≤ 6T
_
E
_
T
0
[X(t)[
4
dt
_
1/2
_
E
_
T
0
[F(t)[
4
dt
_
1/2
. (6.26)
From which
_
T
0
E[X(t)[
4
dt ≤ 36T
2
_
T
0
E[F(t)[
4
dt.
Substituting this in (6.25) yields
E[[X(t)[
4
] ≤ 36TE
_
T
0
[F(t)[
4
dt.
So, (6.24) is proved for m = 2. We can now easily iterate the previous
argument taking successively m = 3, 4 and so on.
6.2 Itˆ o’ formula for a vector valued process
Let d, m ∈ N. Assume that x ∈ R
d
, b ∈ L
2
([0, T] Ω; P, dt P; R
d
) and
σ ∈ L
2
([0, T] Ω; P, dt P; L(R
m
; R
d
)). Set
X(t) = x +
_
t
0
b(s)ds +
_
t
0
σ(s)dW(s), t ∈ [0, T]
The Itˆo formula 85
We are going to prove the following Itˆo’s formula,
ϕ(X(t)) = ϕ(x) +
_
t
0
¸Dϕ(X(s)), σ(s)dB(s)),
+
_
t
0
_
1
2
Tr[(σσ

)(s)D
2
ϕ(X(s))] +¸b(s), Dϕ(X(s)))
_
ds,
(6.27)
for all t ∈ [0, T]. We shall write (6.27) in the differential form
ϕ

(X(t)) = ¸Dϕ(X(t)), σ(t)dB(t))
+
_
1
2
Tr[(σσ

)(t)D
2
ϕ(X(t))] +¸b(t), Dϕ(X(t)))
_
dt, t ≥ 0,
(6.28)
The proof is similar to that of the one-dimensional case seen before. So, we
shall only sketch some points of the proof. Let us start with a preliminary
lemma.
Lemma 6.9 Let f ∈ C
B
([0, T]; L
2
(Ω)) and let i, j ∈ ¦1, 2..., m¦. Then we
have
lim
|σ|→0
n

k=1
f(t
k−1
)(B
i
(t
k
) −B
i
(t
k−1
))(B
j
(t
k
) −B
j
(t
k−1
))
= δ
i,j
_
T
0
f(s)ds, in L
2
(Ω, F, P).
(6.29)
Proof. Let η = ¦0 = t
0
< t
1
< < t
n
= T¦ be a decomposition of [0, T].
If i = j, (6.29) follows from Lemma 6.2. Let i ,= j and set
I
η
i,j
:=
n

k=1
f(t
k−1
)(B
i
(t
k
) −B
i
(t
k−1
))(B
j
(t
k
) −B
j
(t
k−1
)).
Then we have
E[(I
σ
i,j
)
2
] = E
n

h,k=1
f(t
h−1
)f(t
k−1
)(B
i
(t
h
) −B
i
(t
h−1
))(B
j
(t
h
) −B
j
(t
h−1
))
(B
i
(t
k
) −B
i
(t
k−1
))(B
j
(t
k
) −B
j
(t
k−1
))
= E
n

h=1
f
2
(t
h−1
)(B
i
(t
h
) −B
i
(t
h−1
))
2
(B
j
(t
h
) −B
j
(t
h−1
))
2
=
n

h=1
E(f
2
(t
h−1
))(t
h
−t
h−1
)
2
→ 0,
86 Chapter 6
as [σ[ → 0.
Now we prove Itˆo’s formula when b and σ are elementary processes as,
b =
p

i=1
b
i−1
1l

i−1

i
)
, σ =
p

i=1
σ
i−1
1l

i−1

i
)
, (6.30)
where p ∈ N, 0 = λ
0
< λ
1
< < λ
p
b
i
∈ L
2
(Ω, F
t
i
, P; R
d
) and σ
i

L
2
(Ω, F
t
i
, P; L(R
m
; R
d
)) i = 0, 1, ..., p −1.
Lemma 6.10 Let ϕ ∈ C
2
b
(R
d
), x ∈ R
d
and let b and σ given by (6.30).
Then identity (6.27) holds.
Proof. We proceed as in the proof of Lemma 6.3, taking ϕ ∈ C
3
b
(R
d
) and
proving (6.6) in [0, t] with t ≤ λ
1
. We have
b(t) = b
0
, σ(t) = σ
0
, t ∈ [0, λ
1
]
and
X(t) = b
0
t + σ
0
B(t), t ∈ [0, λ
1
].
Let η = ¦t
0
= 0 < t
1
< < t
N
= t¦. Then we obviously have
ϕ(X(t)) −ϕ(x) =
N

k=1
[ϕ(X(t
k
)) −ϕ(X(t
k−1
))].
On the other hand, by Taylor’s formula we can write
(3)
ϕ(X(t)) −ϕ(x) =
N

k=1
¸Dϕ(X(t
k−1
)), X(t
k
) −X(t
k−1
))
+
1
2
N

k=1
¸D
2
ϕ(X(t
k−1
))(X(t
k
) −X(t
k−1
)), X(t
k
) −X(t
k−1
)) + R
η
=: I
1
+ I
2
+ I
3
. (6.31)
Concerning I
1
we have
I
1
=
N

k=1
¸Dϕ(X(t
k−1
)), b
0
(t
k
−t
k−1
) + σ
0
(B(t
k
) −B(t
k−1
)).
(3)
We use the notations Dϕ(x)h = ¸Dϕ(x), h) and D
2
ϕ(x)(h, k) = ¸D
2
ϕ(x)h, k) for all
x, h, k ∈ R
d
.
The Itˆo formula 87
So,
lim
|η|→0
I
1
=
_
t
0
¸Dϕ(X(s)), b(s))ds+
_
t
0
¸Dϕ(X(s)), σ(s)dB(s)) in L
2
(Ω, F, P).
(6.32)
Concerning I
2
we write
2I
2
=
N

k=1
¸D
2
ϕ(X(t
k−1
))b
0
, b
0
)(t
k
−t
k−1
)
2
+ 2
N

k=1
¸D
2
ϕ(X(t
k−1
))b
0
, σ
0
(B(t
k
) −B(t
k−1
)))(t
k
−t
k−1
)
+
N

k=1
¸D
2
ϕ(X(t
k−1
))σ
0
(B(t
k
)−B(t
k−1
)), σ
0
(B(t
k
)−B(t
k−1
))) =: I
2,1
+I
2,2
+I
2,3
.
(6.33)
It is easy to check that
lim
|η|→0
I
2,1
= lim
|η|→0
I
2,2
= 0 in L
1
(Ω, F, P) (6.34)
Moreover, we have
2I
2,3
=
N

k=1
¸D
2
ϕ(X(t
k−1
))(σ(B(t
k
) −B(t
k−1
))), σ(B(t
k
) −B(t
k−1
)))
=
N

k=1
d

i,j=1
m

α,β=1
D
2
i,j
ϕσ
i,α
(B
α
(t
k
) −B
α
(t
k−1
)) σ
i,β
(B
β
(t
k
) −B
β
(t
k−1
)).
Therefore, taking into account Lemma 6.9 we have
lim
|η|→0
2I
2,3
=
_
t
0
d

i,j=1
m

α=1
D
2
i,j
ϕ(X(s)) σ
i,α
(s)σ
i,β
(s)ds
=
_
t
0
Tr [D
2
ϕ(X(s))(σσ

(s))]ds.
Now, proceeding as before, we see that
lim
|η|→0
E[R
η
[ = 0, (6.35)
88 Chapter 6
The proof is complete when t ≤ λ
1
. The general case can be treated in
the same way taking into account that b
k−1
and σ
k−1
are independent of
B(t
k
) −B(t
k−1
).
Finally, proceeding as we did for the proof of Theorem 6.4 we obtain the
result
Theorem 6.11 Let b ∈ L
2
([0, T] Ω, P, dt P : R
d
), σ ∈ L
2
([0, T]
Ω, P, dt P : L(R
m
; R
d
)), x ∈ R
d
and ϕ ∈ C
2
b
(R
d
). Then identity (6.27)
holds for any t ∈ [0, T].
Exercise 6.12 Let d = 1, m ∈ N, b, σ
k
∈ L
2
([0, T] Ω, P, dt P), k =
1, ..., m.
Set
X(t) =
_
t
0
b(s)ds +
m

k=1
_
t
0
σ
k
(s)dB
k
(s).
Let ϕ ∈ C
2
b
(R). Prove that
dϕ(X(t)) = ϕ

(X(t))dX(t) +
1
2
ϕ

(X(t))[σ(t)[
2
dt, (6.36)
where σ(t) = (σ
1
(t), ..., σ
m
(t)).
Exercise 6.13 Let d ∈ N, m = 1 b
i
, σ
i
∈ L
2
([0, T] Ω, P, dt P), i = 1, 2 =
..., d. Set
X(t) = b(t)dt + σdB(t), i = 1, 2,
where σ = (σ
1
, ..., σ
d
). Let moreover ϕ ∈ C
2
b
(R
d
). Prove that
dϕ(X(t)) = ¸Dϕ(X(t)), dX(t)) +
1
2
¸D
2
ϕ(X(t))σ(t), σ(t))dt. (6.37)
Chapter 7
Stochastic evolution equations
We are given two positive integers r, d and an r-dimensional standard Brow-
nian motion B(t), t ≥ 0, in a probability space (Ω, F, P). We denote by
(F
t
)
t≥0
the natural filtration of B(t) (augmented with all P-null sets of Ω).
Let us consider the following integral equation
X(t) = η +
_
t
s
b(u, X(u))du +
_
t
s
σ(u, X(u))dB(u), t ∈ [s, T], (7.1)
where s ∈ [0, T), η ∈ L
2
(Ω, F
s
, P; R
d
), b: [0, T] R
d
→ R
d
and σ: [0, T]
R
d
→ L(R
r
, R
d
). b is called the drift and σ the diffusion coefficient of the
equation.
We shall write (7.1) in differential form as
_
_
_
dX(t) = b(t, X(t))dt + σ(t, X(t))dB(t),
X(s) = η.
(7.2)
By a solution of equation (7.1) on the interval [s, T] we mean a function
X ∈ C
B
([s, T]; L
2
(Ω; R
d
)) that fulfills equation (7.1).
In order to solve (7.1) we shall use a fixed point argument, based on the
identity
E
¸
¸
¸
¸
_
b
a
G(t)dB(t)
¸
¸
¸
¸
2
=
_
b
a
E[Tr (G(t)G

(t))] dt.
for all G ∈ C
B
([0, T]; L
2
(Ω, L(R
r
, R
d
))) and 0 ≤ a < b ≤ T. This suggests to
endow L(R
r
, R
d
) with the Hilbert–Schmidt norm, setting
|S|
HS
: = [Tr(SS

)]
1/2
, S ∈ L(R
r
, R
d
)
and to write
E
¸
¸
¸
¸
_
b
a
G(t)dB(t)
¸
¸
¸
¸
2
=
_
b
a
E
_
|G(t)|
2
HS
_
dt. (7.3)
89
90 Chapter 7
7.1 Existence and uniqueness
The standard assumptions for the well-posedness of problem (7.1) are the
following.
Hypothesis 7.1
(i) b and σ are continuous on [0, T] R
d
.
(ii) There exists M > 0 such that for all t ∈ [0, T], x, y ∈ R
d
, we have
[b(t, x) −b(t, y)[
2
+|σ(t, x) −σ(t, y)|
2
HS
≤ M
2
[x −y[
2
(7.4)
and
[b(t, x)[
2
+|σ(t, x)|
2
HS
≤ M
2
(1 +[x[
2
). (7.5)
Notice that, after possibly changing the constant M, (7.5) is a consequence
of (7.4).
Theorem 7.1 Assume that Hypothesis 7.1 holds and let s ∈ [0, T), η ∈
L
2
(Ω, F
s
, P; R
d
). Then problem (7.1) has a unique solution
X ∈ C
B
([s, T]; L
2
(Ω; R
d
)).
Proof. We are going to solve (7.1) by a fixed point argument in the space
C
B
:= C
B
([s, T]; L
2
(Ω; R
d
)).
Define
γ
1
(X)(t) :=
_
t
s
b(u, X(u))du, X ∈ C
B
, t ∈ [s, T],
γ
2
(X)(t) :=
_
t
s
σ(u, X(u))dB(u), X ∈ C
B
, t ∈ [s, T]
and set
γ(X) := η + γ
1
(X) + γ
2
(X), X ∈ C
B
.
Then equation (7.1) is equivalent to the following,
X = η + γ
1
(X) + γ
2
(X) = γ(X). (7.6)
Step 1. γ
1
and γ
2
map C
B
into itself.
Stochastic evolution equations 91
Concerning γ
1
we have, using the H¨ older inequality and taking into ac-
count (7.5),

1
(X)(t)[
2
≤ (t −s)
_
t
s
[b(u, X(u))[
2
du ≤ M
2
(t −s)
_
t
s
(1 +[X(u)[
2
)du
≤ M
2
(t −s)
2
(1 +|X|
2
C
B
).
Since γ
1
(X)(t) is F
t
–measurable for all t ∈ [s, T], γ
1
maps C
B
into itself and

1
(X)|
C
B
≤ M(t −s)(1 +|X|
C
B
).
Concerning γ
2
we have taking into account (7.3) and (7.5),
E[γ
2
(X)(t)[
2
=
_
t
s
E(|σ(u, X(u))|
2
HS
)du
≤ M
2
_
t
s
(1 +[X(u)[
2
)du ≤ M
2
(t −s)(1 +|X|
2
C
B
)
So, we see that γ
2
maps C
B
into itself.
Step 2. γ is Lipschitz continuous.
Let X, Y ∈ C
B
. We have, using again the H¨older inequality and taking
into account (7.4),

1
(X)(t) −γ
1
(Y )(t)[
2
≤ (t −s)
_
t
s
[b(u, X(u)) −b(u, Y (u))[
2
du
≤ (t −s)M
2
_
t
s
[X(u) −Y (u)[
2
du ≤ (t −s)
2
M
2
|X −Y |
2
C
B
du.
Consequently

1
(X) −γ
1
(Y )|
C
B
≤ M (T −s) |X −Y |
C
B
, X, Y ∈ C
B
(7.7)
Furthermore
E[γ
2
(X)(t) −γ
2
(Y )(t)[
2
=
_
t
s
E(|σ(u, X(u)) −σ(u, Y (u))|
2
HS
)du
≤ M
2
(t −s)|X −Y |
2
C
B
,
92 Chapter 7
and so,

2
(X) −γ
2
(Y )|
C
B
≤ M

T −s |X −Y |
C
B
, X, Y ∈ C
B
. (7.8)
By (7.7) and (7.8) it follows that γ maps C
B
into itself and
|γ(X) −γ(Y )|
C
B
≤ M(T −s +

T −s )|X −Y [|
C
B
,
for all X, Y ∈ C
B
. Now if T −s is such that
M
_
T −s +

T −s
_
≤ 1/2, (7.9)
γ is a 1/2–contraction on C
B
, and so, it possesses a unique fixed point. If
(7.9) does not hold we choose T
1
∈ (s, T] such that
M
_
T
1
−s +
_
T
1
−s
_
≤ 1/2.
Then by the previous argument there is a unique solution to (7.1) on [s, T
1
].
Now we repeat the proof with T
1
replacing s and in a finite number of steps
we arrive to the conclusion.
Remark 7.2 By Theorem 5.13 it follows that there exists a version of the
solution X(, s, η) which belongs to L
2
(Ω, C([s, T])) and so it is a continuous
process.
In the following we shall denote by X(, s, η) the solution of problem (7.1).
Whe shall use greek letters for stochastic initial data and latin letters for
deterministic ones.
Let us prove the co-cycle law.
Proposition 7.3 Assume that Hypothesis 7.1 holds and let η ∈ L
2
(Ω, F
s
, P; R
d
).
Then
X(t, s, η) = X(t, r, X(r, s, η)), 0 ≤ s ≤ r ≤ t ≤ T. (7.10)
Proof. Define Z(t) = X(t, s, η), t ∈ [s, T]. Then Z solves the problem
_
_
_
dZ(t) = b(t, Z(t))dt + σ(t, Z(t))dB(t),
Z(r) = X(r, s, η).
By the uniqueness part of Theorem 7.1 it follows that
Z(t) = X(t, s, η) = X(t, r, X(r, s, η)),
as required.
Stochastic evolution equations 93
Remark 7.4 By the contraction principle it follows that the solution X(t, s, η)
of problem (7.1) can be obtained as a limit of successive approximations.
More precisely, define X
0
(t, s, η) = η and for any N ∈ N,
X
N+1
(t, s, η) = η +
_
t
s
b(u, X
N
(u, s, η))du +
_
t
s
σ(u, X
N
(u, s, η))dB(u).
(7.11)
Then we have
lim
N→∞
X
N
(, s, η) = X(, s, η) in C
B
([s, T]; L
2
(Ω; R
d
)). (7.12)
Next result, which as we shall see plays an important rˆole in proving that
X(, s, x) is a Markov process, gives some information about the relationship
between X(t, s, η), η ∈ L
2
(Ω, F
s
, P; R
d
) and X(t, s, x), x ∈ R
d
.
Proposition 7.5 Assume that Hypothesis 7.1 holds and that
η =
n

k=1
x
k
1l
A
k
, (7.13)
where x
1
, ..., x
n
∈ R
d
, and A
1
, ..., A
n
are mutually disjoints sets in F
s
such
that
Ω =
n
_
k=1
A
k
.
Then we have
X(t, s, η) =
n

k=1
X(t, s, x
k
)1l
A
k
. (7.14)
Proof. Let X
N
be defined by (7.11). We claim that
X
N
(t, s, η) =
n

k=1
X
N
(t, s, x
k
)1l
A
k
, ∀ N ∈ N. (7.15)
Once (7.15) is proved, the conclusion follows letting N tend to infinity. Let
us proceed by recurrence. Equality (7.15) is clear for N = 0. Assume that it
holds for a given N ∈ N, so that
X
N
(t, s, η) = X
N
(t, s, x
k
) in A
k
, k = 1, ..., n.
Then we have
b(u, X
N
(u, s, η)) = b(u, X
N
(u, s, x
k
)) in A
k
, k = 1, ..., n,
σ(u, X
N
(u, s, η)) = σ(u, X
N
(u, s, x
k
)) in A
k
, k = 1, ..., n,
94 Chapter 7
so that
b(u, X
N
(u, s, η)) =
n

k=1
1l
A
k
b(u, X
N
(u, s, x
k
)),
σ(u, X
N
(u, s, η)) =
n

k=1
1l
A
k
σ(u, X
N
(u, s, x
k
)).
Consequently
X
N+1
(t, s, η) =
n

k=1
1l
A
k
_
X
0
(t, s, x
k
) +
_
t
s
b(u, X
N
(u, s, x
k
)du
+
_
t
s
σ(u, X
N
(u, s, x
k
))dB(u)
_
=
n

k=1
1l
A
k
X
N+1
(t, s, x
k
)
and (7.15) holds for N + 1. So, the conclusion follows.
7.1.1 Solution of the stochastic differential equation in
the space C
B
([s, T]; L
2m
(Ω; R
d
)).
Theorem 7.6 Assume that Hypothesis 7.1 holds and let m ∈ N, s ∈ [0, T),
η ∈ L
2m
(Ω, F
s
, P; R
d
). Then problem (7.1) has a unique solution
X(, s, η) ∈ C
B
([s, T]; L
2m
(Ω; R
d
)).
In particular
X(, s, x) ∈ C
B
([s, T]; L
2m
(Ω; R
d
)), ∀ x ∈ R
d
.
Proof. We proceed as in the proof of Theorem 7.1 by a fixed point argument
in the space
C
m
B
:= C
B
([s, T]; L
2m
(Ω; R
d
)),
using inequality (6.24) proved in Proposition 6.8.
7.1.2 Examples
Example 7.7 Consider the stochastic differential equation
dX = AXdt + CdB(t), X(0) = x, (7.16)
where A ∈ L(R
d
), C ∈ L(R
r
; R
d
) and x ∈ R
d
.
Stochastic evolution equations 95
Clearly Theorem 7.1 applies so that (7.16) has a unique solution X(t)
which fulfills the integral equation
X(t) = x + A
_
t
0
X(s)ds + CB(t). (7.17)
Setting
Y (t) =
_
t
0
X(s)ds, t ∈ [0, T],
Y fulfills the equation
Y

(t) = AY (t) + x + CB(t), Y (0) = 0, t ∈ [0, T],
which can be easily solved by the method of variation of constants. We
obtain
Y (t) =
_
t
0
e
(t−s)A
(x + CB(s))ds, t ∈ [0, T].
By substituting Y (t) in (7.17) yields
X(t) = A
_
t
0
e
(t−s)A
(x + CB(s))ds + x + CB(t).
Taking into account that, thanks to Proposition 3.12,
_
t
0
e
(t−s)A
CdB(s) = CB(t) + A
_
t
0
e
(t−s)A
CB(s)ds,
we find
X(t) = e
tA
x +
_
t
0
e
(t−s)A
CdB(s). (7.18)
Example 7.8 Let r = d = 1 and consider the stochastic differential equation
dX = aXdt + cXdB(t), X(0) = x, (7.19)
where a, c, x ∈ R. Again Theorem 7.1 applies. We want to show that the
solution of (7.19) is given by
X(t) = e
t
(
a−
1
2
c
2
)
e
cB(t)
x, t ≥ 0. (7.20)
For this we check that X(t) given by (7.20) solves (7.19).
Write X(t) = e
F(t)
where F(t) = t
_
a −
1
2
c
2
_
+ cB(t). Then we have
dF(t) =
_
a −
1
2
c
2
_
dt + cdB(t)
96 Chapter 7
and, by Itˆo’s formula,
dX(t) = e
F(t)
dF(t) +
1
2
c
2
e
F(t)
dt
= e
F(t)
_
a −
1
2
c
2
_
dt + cdB(t) +
1
2
c
2
e
F(t)
dt
= aX(t)dt + cX(t)dB(t).
Exercise 7.9 Let r = 1 and consider the differential stochastic equation
dX = AXdt + CXdB(t), X(0) = x, (7.21)
where A, C ∈ L(R
d
), x ∈ R
d
and AC = CA. Show that the solution of (7.21)
is given by
X(t) = e
t(A−C
2
/2)
e
CB(t)
x. (7.22)
7.1.3 Differential stochastic equations with random co-
efficients
In some situations (see Subsections 7.3 and 7.4) one deals with stochastic
differential equations having random coefficients,
X(t, ω) = η(ω) +
_
t
s
b(u, X(u, ω), ω)du +
_
t
s
σ(u, X(u, ω), ω)dB(u). (7.23)
Here η ∈ L
2
(Ω, F
s
, R
d
), b: [0, T] R
d
Ω →R
d
and σ: [0, T] L(R
r
, R
d
)
Ω →R
d
are such that:
Hypothesis 7.2
(i) There exists M > 0 such that for all t ∈ [0, T], x, y ∈ R
d
, ω ∈ Ω
[b(t, x, ω)−b(t, y, ω)[
2
+|σ(t, x, ω)−σ(t, y, ω)|
2
HS
≤ M
2
[x−y[
2
(7.24)
and
[b(t, x, ω)[
2
+|σ(t, x, ω)|
2
HS
≤ M
2
(1 +[x[
2
). (7.25)
(ii) For any Y ∈ C
B
([0, T]; L
2
(Ω, R
d
)) we have U ∈ C
B
([0, T]; L
2
(Ω, R
d
))
and V ∈ C
B
([0, T]; L
2
(Ω, L(R
r
, R
d
))) where, for all t ∈ [0, T], ω ∈ Ω,
U(t, ω) = b(t, Y (t, ω), ω)), V (t, ω) = σ(t, Y (t, ω), ω)).
The following result can be proved as Theorem 7.1.
Stochastic evolution equations 97
Theorem 7.10 Assume that Hypothesis 7.2 holds. Let s ∈ [0, T) and η ∈
L
2
(Ω, F
s
, R
d
). Then problem (7.23) has a unique solution
X ∈ C
B
([s, T]; L
2
(Ω; R
d
)).
Example 7.11 Let d = 1 and consider the stochastic differential equation
_
_
_
dX(t) = X(t)¸F(t), dB(t)), t ∈ [0, T],
X(0) = x,
(7.26)
where F ∈ C
B
(0, T; L

(Ω; R
d
)). Now it is easy to check that Theorem 7.10
applies and so there exists a solution X of (7.26). Let us show that
X(t) = e

1
2
R
t
0
|F(s)|
2
ds+
R
t
0
F(s),dB(s)
x, t ≥ 0. (7.27)
For this we check that X(t) given by (7.27) solves (7.26).
Write X(t) = e
H(t)
where
H(t) = −
1
2
_
t
0
[F(s)[
2
ds +
_
t
0
¸F(s), dB(s)).
Then we have
dH(t) = −
1
2
[F(t)[
2
dt +¸F(t), dB(t)), t ≥ 0.
Now by Itˆo’s formula we find
dX(t) = e
H(t)
dH(t) +
1
2
e
H(t)
[F(t)[
2
dt
= e
H(t)
¸F(t), dB(t)) = X(t)¸F(t), dB(t)), t ≥ 0.
So, (7.27) is proved.
7.2 Continuous dependence on data
7.2.1 Continuous dependence on mean square
We assume here that Hypothesis 7.1 holds. We are going to prove that
the solution X(t, s, η) to (7.1) is H¨ older continuous on t, s and Lipschitz
continuous on η in mean square. First we show that E[X(t, s, η)[
2
is bounded.
98 Chapter 7
Lemma 7.12 Assume that Hypothesis 7.1 holds. Then for all s ∈ [0, T] and
η ∈ L
2
(Ω, F
s
, P; R
d
) we have
E
_
[X(t, s, η)[
2
_
≤ 3[E([η[
2
) + M
2
((T −s)
2
+ (T −s)]e
3M
2
(T−s+1)
. (7.28)
Proof. Writing for short X(t, s, η) = X(t), we have
E([X(t)[
2
) ≤ 3E([η[
2
) + 3E
_
¸
¸
¸
¸
_
t
s
b(u, X(u))du
¸
¸
¸
¸
2
_
+3
_
t
s
E(|σ(u, X(u))|
2
HS
)du.
By Hypothesis 7.1(ii) and the H¨ older inequality we deduce that
E([X(t)[
2
) ≤ 3E([η[
2
) + 3M
2
(t −s)
_
t
s
(1 +E
_
[X(u)[
2
_
)du
+3M
2
_
t
s
(1 +E
_
[X(u)[
2
_
)du.
Consequently
E([X(t)[
2
) ≤ 3E([η[
2
) + 3M
2
((T −s)
2
+ (T −s))
+3M
2
((T −s) + 1)
_
t
s
E
_
[X(u)[
2
_
du.
The conclusion follows from the Gronwall lemma.
We now study the regularity of X(t, s, η) with respect to t, s, η. We note
that, by Lemma 7.12, there exists a constant C(T, E([η[
2
)) such that
E
_
[X(t, s, η)[
2
_
≤ C(T, E([η[
2
)), 0 ≤ s < t ≤ T. (7.29)
We start with the regularity of X(t, s, η) with respect to t.
Proposition 7.13 Assume that Hypothesis 7.1 holds. Let 0 ≤ s ≤ t
1
< t ≤
T and η ∈ L
2
(Ω, F
s
, R
d
). Then there exists a constant C
1
(T, E([η[
2
)) such
that we have
E
_
[X(t, s, η) −X(t
1
, s, η)[
2
_
≤ C
1
(T, E([η[
2
))(t −t
1
). (7.30)
Stochastic evolution equations 99
Proof. We have
E
_
[X(t, s, η) −X(t
1
, s, η)[
2
_
≤ 2M
2
(t −t
1
)
_
t
t
1
(1 +E
_
[X(u, s, η)[
2
_
du
+ 2M
2
_
t
t
1
(1 +E
_
[X(u, s, η)[
2
_
)du.
Consequently,
E
_
[X(t, s, η) −X(t
1
, s, η)[
2
_
≤ 2M
2
((t −t
1
)
2
+ t −t
1
)(1 + C
2
(T, E([η[
2
)))
and the conclusion follows.
Let us study the regularity of X(t, s, η) with respect to η.
Proposition 7.14 Assume that Hypothesis 7.1 holds, let 0 ≤ s < t ≤ T and
η, ζ ∈ L
2
(Ω, F
s
, R
d
). Then
E
_
[X(t, s, η) −X(t, s, ζ)[
2
_
≤ 3e
3M
2
(T−s+1)(t−s)
E([η −ζ[
2
). (7.31)
Proof. We have
[X(t, s, η) −X(t, s, ζ)[
2
≤ 3[η −ζ[
2
+ 3
¸
¸
¸
¸
_
t
s
(b(u, X(u, s, η) −b(u, X(u, s, ζ))du
¸
¸
¸
¸
2
+ 3
¸
¸
¸
¸
_
t
s
(σ(u, X(u, s, η) −σ(u, X(u, s, ζ))dB(u)
¸
¸
¸
¸
2
.
Taking expectation and using (7.4) we obtain
E([X(t, s, η) −X(t, s, ζ)[
2
) ≤ 3E([η −ζ[
2
) + 3M
2
(T −s + 1)

_
t
s
E
_
[X(u, s, η) −X(u, s, ζ)[
2
_
du
and the conclusion follows from the Gronwall lemma.
We finally study the regularity of X(t, s, η) with respect to s.
Proposition 7.15 Assume that Hypothesis 7.1 holds, let 0 < s < s
1
< t ≤
T, and η ∈ L
2
(Ω, F
s
, P; R
d
). Then there exists a constant C

T,η
> 0 such that
E
_
[X(t, s, η) −X(t, s
1
, η)[
2
_
≤ C

T,η
[s −s
1
[. (7.32)
100 Chapter 7
Proof. Taking into account the co-cycle law (7.10), we can write
X(t, s, η) −X(t, s
1
, η) = X(t, s
1
, X(s
1
, s, η)) −X(t, s
1
, η).
By (7.31) there exists C
T
> 0 such that
E([X(t, s, η) −X(t, s
1
, η)[
2
) ≤ C
2
T
E([X(s
1
, s, η) −η[
2
)
= C
2
T
E([X(s
1
, s, η) −X(s, s, η)[
2
) .
The conclusion follows now from (7.30).
7.3 Almost sure continuity and h¨olderianity
of trajectories
In this section we show that X(, s, x) belongs to a suitable Sobolev space,
whose definition is recalled in Appendix E below. Then the Sobolev embed-
ding theorem (also stated in Appendix E) will imply that X(, s, x) is H¨ older
continuous almost surely.
First we need a lemma, which can be proved as Proposition 7.13 using
(6.24).
Lemma 7.16 Assume that Hypothesis 7.1 holds. Let 0 ≤ s ≤ t
1
< t ≤
T, x ∈ R
d
and m ∈ N. Then there exists a constant C
1
(T, [x[) such that
E
_
[X(t, s, x) −X(t
1
, s, x)[
2m
_
≤ C
1
(T, [x[
2
))(t −t
1
)
m
. (7.33)
Now from Proposition E.3 and the Sobolev embedding theorem E.1 it
follows that
Proposition 7.17 Assume that Hypothesis 7.1 holds. Let x ∈ R
d
, 0 ≤ s ≤
t ≤ T, m ∈ N and ∈ (0, 1/2). Then we have
E
_
[X(, s, x)[
2m
,2m
¸
< +∞. (7.34)
Moreover, X(, s, x) belongs to C
−1/(2m)
([s, T]) almost surely.
Finally, we consider almost sure regularity of X(t, s, ). First, arguing as
in the proof of Proposition 7.14 we have
Lemma 7.18 Assume that Hypothesis 7.1 holds, let 0 ≤ s < t ≤ T and
x, y ∈ R
d
. Then there is a constant C(T) > 0 such that
E
_
[X(t, s, x) −X(t, s, y)[
2m
_
≤ C(T)[x −y[
2m
. (7.35)
Stochastic evolution equations 101
Now from Proposition E.3 it follows that
Proposition 7.19 Assume that Hypothesis 7.1 holds, let 0 ≤ s < t ≤ T and
x, y ∈ [0, 1]
d
. Then for any m > 1 and ∈ (0, 1) we have
E
_
[X(t, s, )[
2m
,2m
¸
< +∞. (7.36)
Moreover, X(t, s, ) belongs to C
−d/(2m)
([0, 1]
d
) almost surely.
7.4 Differentiability of X(t, s, x) with respect
to x
In this section we assume, besides Hypothesis 7.1, that
Hypothesis 7.3
(i) D
x
b, D
2
x
b, D
x
σ and D
2
x
σ are continuous on [0, T] R
d
.
(ii) We have
(1)
sup
t∈[0,T]
([b(t, )]
2
+ [σ(t, )]
2
) < ∞. (7.37)
We set
C
B
= C
B
([s, T]) =: C
B
([s, T]; L
2
(Ω; R
d
)).
7.4.1 Existence of X
x
(t, s, x)
Theorem 7.20 Assume that Hypotheses 7.1 and 7.3 hold. Then for any
s ∈ [0, T] the mapping
R
d
→ C
B
, x → X(, s, x),
is continuously Gateaux differentiable and its Gateaux derivative is given by
X
x
(t, s, x) h = η
h
(t, s, x), x, h ∈ R
d
, (7.38)
where η
h
(t, s, x) is the solution to the stochastic differential equation with
random coefficients,
_
¸
¸
¸
¸
_
¸
¸
¸
¸
_

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

x
(t, X(t, s, x))(η
h
(t, s, x), dB(t))
η
h
(s, s, x) = h.
(7.39)
(1)
Recall the notations given at the beginning of Chapter 6.
102 Chapter 7
Proof. Note that the coefficients of equation (7.39) fulfill Hypothesis 7.3, so
it possesses a unique solution by Theorem 7.10.
To prove the theorem we use Theorem D.6 from Appendix D (with Λ = R
d
and E = C
B
). We set C
B
= C
B
([s, T
1
]) and define a mapping
F : R
d
C
B
→ C
B
,
setting
[F(x, X)](t): = x +
_
t
s
b(r, X(r))dr +
_
t
s
σ(r, X(r))dB(r), t ∈ [s, T
1
],
(7.40)
where T
1
> s is chosen such that
|F(x, X
1
) −F(x, X
2
)|
C
B

1
2
|X
1
−X
2
|
C
B
for all X
1
, X
2
∈ C
B
, x ∈ R
d
.
(7.41)
Then F fulfills Hypothesis D.1 so that it possesses a unique fixed point
X(x) ∈ C
B
, that is
F(x, X(x)) = X(x), x ∈ R
d
,
which depends continuously on x. X(x) coincides with the solution X(, s, x)
of (7.2).
It is not difficult to check that F is Gateaux continuously differentiable,
(the straightforward proof is left to the reader) and that for each x ∈ R
d
,
X, Y ∈ C
B
we have
F
x
(x, X) = I,
[F
X
(x, X)Y ](t) =
_
t
s
b
x
(r, X(r))Y (r)dr+
_
t
s
σ
x
(r, X(r))Y (r)dB(r), t ∈ [s, T
1
],
So, the conclusion follows from Theorem D.6.
7.4.2 Existence of X
xx
(t, s, x)
We now prove the existence of the second derivative of X(t, s, x) with respect
to x.
Theorem 7.21 Assume that Hypotheses 7.1 and 7.3 hold. Then the mapping
R
d
→ C
B
, x → X(, s, x),
is twice differentiable with respect to x in any couple of directions (h, k) in
R
d
. Moreover, setting
X
xx
(t, s, x)(h, k) = ζ
h,k
(t, s, x), x, h ∈ R
d
, (7.42)
Stochastic evolution equations 103
ζ
h,k
(t, s, x) is the solution to the stochastic differential equation (with random
coefficients)
_
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
_
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
¸
_
d ζ
h,k
(t, s, x) = b
x
(t, X(t, s, x)) ζ
h,k
(t, s, x)dt
+b
xx
(t, X(t, s, x))(η
h
(t, s, x), η
k
(t, s, x))dt

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

xx
(t, X(t, s, x)) (η
h
(t, s, x), η
k
(t, s, x), dB(t))
ζ
h,k
(s, s, x) = 0.
(7.43)
We shall prove the theorem when n = r = 1 for simplicity. We first prove a
lemma.
Lemma 7.22 Let η(, s, x) ∈ C
B
([s, T]; L
2
(Ω)) be the solution of the equa-
tion
η(t, s, x) = 1 +
_
t
s
b
x
(r, X(r, s, x))η(r, s, x)dr
+
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r).
(7.44)
Then η(, s, x) ∈ C
B
([s, T]; L
4
(Ω)) and there exists C > 0 such that
E[η(, s, x)[
4
≤ C, ∀ s ∈ [0, T), x ∈ R
d
. (7.45)
Proof. We have,
[η(t, s, x)[
4
≤ 27 + 27
¸
¸
¸
¸
_
t
s
b
x
(r, X(r, s, x))η(r, s, x)dr
¸
¸
¸
¸
4
+27
¸
¸
¸
¸
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r)
¸
¸
¸
¸
4
.
By using (7.37) and the H¨older inequality we see that there exists a constant
C
1
such that
[η(t, s, x)[
4
≤ 27 + C
1
_
t
s
[η(r, s, x)[
4
dr
+C
1
¸
¸
¸
¸
_
t
s
σ
x
(r, X(r, s, x))η(r, s, x)dB(r)
¸
¸
¸
¸
4
.
104 Chapter 7
Now, taking expectation on both sides of this inequality and using Corollary
6.8, we find that
E[η(t, s, x)[
4
≤ C
2
(1 +
_
t
s
E[η(r, s, x)[
4
dr), 0 ≤ s ≤ t ≤ T, x ∈ R,
where C
2
is another constant. The conclusion follows from the Gronwall
lemma.
Proof of Theorem 7.21. We choose T
1
as in (7.41) and C
B
= C
B
([s, T
1
])
as before. By Theorem 7.20 we know that X(t, s, x) is differentiable with
respect to x and that its derivative η(, s, x) = X
x
(, s, x) belongs to C
B
and
fulfills equation (7.44). For any x ∈ R we define a linear bounded operator
T(x) from C
B
into C
B
setting for all t ∈ [s, T
1
],
(T(x)Z)(t) = −
_
t
s
b
x
(r, X(r, s, x))Z(r)dr −
_
t
s
σ
x
(r, X(r, s, x))Z(r)dB(r).
(7.46)
Notice that, since η(, s, x) ∈ C
B
([s, T]; L
4
(Ω)), T(x)Z is differentiable with
respect to x for any Z ∈ C
B
([s, T]; L
4
(Ω)) and it results
(T

(x)Z)(t) = −
_
t
s
b
xx
(r, X(r, s, x))Z(r)η(, r, x)dr

_
t
s
σ
xx
(r, X(r, s, x))Z(r)η(, r, x)dB(r).
(7.47)
Now we write equation (7.44) as
η(, s, x) = 1 + T(x)η(, s, x) (7.48)
By (7.41) it follows that
|T(x)|
L(C
B
)
≤ 1/2, ∀ x ∈ R.
Thus the solution of (7.48) is given by
η(, s, x) = (1 −T(x))
−1
(1). (7.49)
From this identity it is easy to show the existence of η
x
(, s, x) := ζ(, s, x).
We have in fact, by a straightforward computation
η
x
(, s, x) = (1 −T(x))
−1
(T

(x)η(, s, x)), (7.50)
Stochastic evolution equations 105
where
T

(x)η(, s, x)(t) =
_
t
s
b
xx
(r, X(r, s, x))η
2
(, s, x)dr
+
_
t
s
σ
xx
(r, X(r, s, x))η
2
(, s, x)dB(r).
(7.51)
Now by (7.50) it follows that
η
x
(t, s, x) −T(x)η
x
(, s, x)(t) =
_
t
s
b
xx
(r, X(r, s, x))η
2
(, s, x)dr
+
_
t
s
σ
xx
(r, X(r, s, x))η
2
(, s, x)dB(r),
and the conclusion follows.
7.5 Itˆ o Differentiability of X(t, s, x) with re-
spect to s.
It is useful to recall first some results in the deterministic case.
7.5.1 The deterministic case
Let us consider the problem
_
_
_
X

(t) = b(t, X(t)), t ∈ [s, T],
X(s) = x,
(7.52)
under Hypotheses 7.1 and 7.3 with σ = 0. Denote by X(t, s, x) the solution
of (7.52). Let us compute X
s
(t, s, x) (it is well known that X(t, s, x) is C
1
in all variables).
Write
X(t, s, x) = X(t, r, X(r, s, x)), t ≥ r ≥ s. (7.53)
Differentiating (7.53) with respect to r yields
0 = X
s
(t, r, X(r, s, x)) + X
x
(t, r, X(r, s, x)) X
t
(r, s, x).
Setting r = s we find
X
s
(t, s, x) = −X
x
(t, s, x)b(s, x),
106 Chapter 7
which is equivalent to
X(t, s, x) = x +
_
t
s
X
x
(t, r, x)b(r, x)dr, 0 ≤ s ≤ t ≤ T. (7.54)
In the next subsection we are going to generalize this formula for the solution
X(t, s, x) of (7.2).
7.5.2 The stochastic case
Here we want to study the differentiability of X(t, s, x) with respect to s in
a sense to be precised. A difficulty arises since the process s → X(t, s, x) is
not adapted, because X(t, s, x) is not F
s
-measurable. It happens, however,
that for any s ∈ [0, T], X(t, s, x) is measurable with respect to the σ–algebra
F
+
s
generated by all sets of the form
¦ω ∈ Ω : (B(s
1
(ω)) −B(s(ω)), ..., B(s
n
(ω)) −B(s(ω))) ∈ A¦ ,
where n ∈ N, 0 ≤ s ≤ s
1
< ... < s
n
≤ T and A ∈ B(R
n
). The family
(F
+
s
)
s∈[0,T]
is called the future filtration of B.
Proposition 7.23 Assume that Hypotheses 7.1 holds. Let x ∈ R
d
, s ∈ [0, T].
Then X(t, s, x) is F
+
s
-measurable.
Proof. Let X
N
(t, s, x) be defined by (7.11), N ∈ N. Then X
1
(t, s, x) is
F
+
s
–measurable. We have in fact
X
1
(t, s, x) = x +
_
t
s
b(u, x)du +
_
t
s
σ(u, x)dB(u).
Since
_
t
s
σ(u, x)dB(u) = lim
|η|→0
n

k=1
σ(t
k−1
, x)(B(t
k
) −B(t
k−1
)),
where η = ¦s = t
0
< t
1
< < t
n
= t¦, then X
1
(t, s, x) is F
+
s
-measurable.
We end the proof by recurrence.
Now we introduce the backward Itˆo integral for a process wich is adapted
to the future filtration. For this we need the following result which can be
proved as Lemma 4.3.
Lemma 7.24 Let t
1
< t
2
≤ s, and let ϕ ∈ L
2
(Ω, F
+
s
, P). Then B(t
2
)−B(t
1
)
and ϕ are independent.
Stochastic evolution equations 107
We define C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))) by a straightforward generaliza-
tion of the space C
B
([0, T]; L
2
(Ω; L(R
r
; R
d
))) defined in Chapter 5.
The elements of C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
)) are called stochastic pro-
cesses adapted to the future filtration (F
+
t
) and continuous in quadratic
mean.
Let F ∈ C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))). For any η ∈ Σ with η = ¦0 =
s
0
< s
1
< < s
n
= T¦ we set
I
σ
(F) =
n

k=1
F(t
k
)(B(t
k
) −B(t
k−1
))
The proof of next theorem is completely similar to that of equation (5.10).
Theorem 7.25 For any F ∈ C
B
+([0, T]; L
2
(Ω; L(R
r
; R
d
))) there exists the
limit
lim
|σ|→0
I
σ
(F) =:
_
T
0
F(s)dB(s), (7.55)
in L
2
(Ω). Moreover we have
E
_
T
0
F(s)dB(s) = 0, (7.56)
and
E
¸
¸
¸
¸
_
T
0
F(s)dB(s)
¸
¸
¸
¸
2
=
_
T
0
E
_
|F(s)|
2
HS
¸
ds. (7.57)
_
T
0
F(s)dB(s) is called the backward Itˆo integral of the function F in [0, T].
Exercise 7.26 Let t > s. Prove that
_
t
s
B(r)dB(r) =
1
2
(B(t)
2
−B(s)
2
+ (t −s)).
7.5.3 Backward Itˆo’s formula
Theorem 7.27 Assume that Hypotheses 7.1 and 7.3 hold. Then we have
X(t, s, x) −x =
_
t
s
X
x
(t, r, x) b(r, x)dr
+
1
2
_
t
s
TR [X
xx
(t, r, x)(σ(r, x), σ(r, x))]dr
+
_
t
s
X
x
(t, r, x)(σ(r, x), dB(r))),
(7.58)
108 Chapter 7
where
TR [X
xx
(t, r, x)(σ(r, x), σ(r, x))] =
d

k=1
X
xx
(t, r, x)(σ(r, x)e
k
, σ(r, x)e
k
)
and (e
k
) is any orthonormal basis in R
d
.
Proof. We take d = r = 1 for simplicity. For any η ∈ Σ(s, t) we set
[η[ = max
k=1,...,n
(t
k
−t
k−1
).
If η ∈ Σ(s, t) we have
X(t, s, x) −x = −
n

k=1
[X(t, s
k
, x) −X(t, s
k−1
, x)]
= −
n

k=1
[X(t, s
k
, x) −X(t, s
k
, X(s
k
, s
k−1
, x))]
= −
n

k=1
X
x
(t, s
k
, x)(x −X(s
k
, s
k−1
, x))

1
2
n

k=1
X
xx
(t, s
k
, x)(x −X(s
k
, s
k−1
, x))
2
+ o([η[).
(7.59)
Arguing as in the proof of Itˆ o’s formula one can show, after some tedious but
straighforward computations, that
lim
|η|→0
o([η[) = 0, P-a.s..
On the other hand we have
X(s
k
, s
k−1
, x) −x =
_
s
k
s
k−1
b(r, X(r, s
k−1
, x))dr
+
_
s
k
s
k−1
σ(r, X(r, s
k−1
, x))dB(r)
= b(s
k
, x)(s
k
−s
k−1
) + σ(s
k
, x)(B(s
k
) −B(s
k−1
)) + o(s
k
−s
k−1
).
(7.60)
Stochastic evolution equations 109
(Notice that, since b is deterministic, one can replace in (7.60) b(s
k
, x) with
b(ξ
k
, x) where ξ
k
is any point in [s
k−1
, s
k
].) Substituting (7.60) in (7.59) we
find that
X(t, s, x) −x =
n

k=1
X
x
(t, s
k
, x)b(s
k
, x)(s
k
−s
k−1
)
+
n

k=1
X
x
(t, s
k
, x)σ(s
k
, x)(B(s
k
) −B(s
k−1
))
+
1
2
n

k=1
X
xx
(t, s
k
, x)σ
2
(s
k
, x)(B(s
k
) −B(s
k−1
))
2
+I
1
(η) + I
2
(η) + I
3
(η) + o
1
([η[).
(7.61)
Obviously
lim
|η|→0
I
1
(η) =
_
t
s
X
x
(r, x)b(r, x)dr.
Concerning I
2
(η), we note that it is an integral sum corresponding to the
backward Itˆ o integral since X
x
(t, s
k
, x) is F
+
s
k
measurable by Proposition
7.23. Therefore we have
lim
|η|→0
I
2
(η) =
_
t
s
X
x
(r, x)σ(r, x)dB(r).
The other terms I
3
(η) and o
1
([η[) can be handled as in the proof of Itˆo’s
formula.
In a similar way one can prove the following backward Itˆo formula.
Theorem 7.28 Let ϕ ∈ C
2
b
(R
d
). Then for any 0 ≤ s < t ≤ T, we have
ϕ(X(t, s, x)) −ϕ(x) =
_
t
s
¸D
x
[ϕ(X(t, r, x))], b(r, x))dr
+
1
2
_
t
s
Tr [D
2
x
[ϕ(X(t, r, x))]σ(r, x)σ

(r, x)]dr
+
_
t
s
¸D
x
[ϕ(X(t, r, x))], σ(r, x)dB(r).
(7.62)
110 Chapter 7
Chapter 8
Kolmogorov equations
8.1 The deterministic case
We consider here the problem
_
_
_
X

(t) = b(t, X(t)), t ∈ [s, T],
X(s) = x ∈ R
n
,
(8.1)
where s ∈ [0, T) and b : [0, T] R
n
→R
n
fulfills the following hypothesis.
Hypothesis 8.1
(i) b is continuous on [0, T] R
n
.
(ii) There exists M > 0 such that
[b(t, x) −b(t, y)[ ≤ M[x −y[, x, y ∈ R
n
, t ∈ [0, T].
(iii) b is differentiable with respect to x and b
x
is continuous on [0, T] R
n
.
As well known, under Hypothesis 8.1 problem (8.1) has a unique solution
X() = X(, s, x) ∈ C
1
([s, T]; R
n
), and it holds
X(t, s, x) = X(t, u, X(u, s, x)), 0 ≤ s ≤ u ≤ t ≤ T, x ∈ R
n
. (8.2)
Morever, differentiating (8.2) with respect to u and setting u = s we find
X
s
(t, s, x) + X
x
(t, s, x) b(s, x) = 0, 0 ≤ s ≤ t ≤ T, x ∈ R
n
. (8.3)
Of great interest for the applications is the transition evolution operator
P
s,t
, s, t ∈ [0, T], defined on the space C
b
(R
n
) by
P
s,t
ϕ(x) = ϕ(X(t, s, x)), x ∈ R
n
, s, t ∈ [0, T]. (8.4)
111
112 Kolmogorov equations
As easily checked, P
s,t
is a linear bounded operator on C
b
(R
n
). Moreover for
any ϕ ∈ C
b
(R
n
) the mapping
[0, T] [0, T] R
n
→R
n
, (s, t, x) → P
s,t
ϕ(x),
is continuous. From (8.2) it follows immediately the cocycle property
P
s,t
= P
s,u
P
u,t
, s, t, u ∈ [0, T]. (8.5)
Proposition 8.1 For any ϕ ∈ C
1
b
(R
n
) we have
d
dt
P
s,t
ϕ = P
s,t
L(t)ϕ, t ≥ s (8.6)
and
d
ds
P
s,t
ϕ = −L(s)P
s,t
ϕ, t ≥ s, (8.7)
where
L(t)ϕ(x) = ¸b(t, x), ϕ
x
(x)), ϕ ∈ C
1
b
(R
n
), x ∈ R
n
. (8.8)
Proof. We have
d
dt
P
s,t
ϕ(x) =
d
dt
ϕ(X(t, s, x)) = ¸b(t, X(t, s, x)), ϕ
x
(X(t, s, x)))
and
P
s,t
L(t)ϕ(x) = ¸b(t, X(t, s, x)), ϕ
x
(X(t, s, x))),
so that (8.6) follows.
Let us prove (8.7). We have, taking into acccount (8.3),
d
ds
P
s,t
ϕ(x) =
d
ds
ϕ(X(t, s, x)) = −¸ϕ
x
(X(t, s, x)), X
x
(t, s, x) b(s, x))
= −L(s)P
s,t
ϕ(x).

Let us now consider the following partial differential equation called trans-
port equation
_
_
_
z
s
(s, x) +¸b(s, x), z
x
(s, x)) = 0, s ∈ [0, T]
z(T, x) = ϕ(x),
(8.9)
where ϕ ∈ C
1
b
(R
n
) and T > 0 is fixed.
Chapter 8 113
Theorem 8.2 Assume that b : [0, T] R
n
→ R
n
fulfills Hypothesis 8.1 and
let ϕ ∈ C
1
b
(R
n
). Then problem (8.9) has a unique solution z. z is given by
z(s, x) = P
s,T
ϕ(x) = ϕ(X(T, s, x)), s ∈ [0, T], x ∈ R
n
. (8.10)
Proof Existence. It is enough to notice that z, given by (8.10), is a
solution of (8.9) by (8.6).
Uniqueness. If z is a solution of problem (8.9) we have
d
ds
z(s, X(s, u, x))
= z
t
(s, X(s, u, x)) +¸z
x
(s, X(s, u, x)), X
t
(s, u, x))
= z
t
(s, X(s, u, x)) +¸z
x
(s, X(s, u, x)), b(s, X(s, u, x))) = 0.
Therefore z(s, X(s, u, x)) is constant in s. Setting s = T and s = u we find
that z(T, X(T, u, x)) = z(u, X(u, u, x)) which implies z(u, x) = ϕ(X(T, s, x))
as required.
8.1.1 The autonomous case
We assume here that b(t, x) = b(x) and consider the problem
_
_
_
X

(t) = b(X(t)), t ≥ 0,
X(0) = x ∈ R
n
,
(8.11)
whose solution we denote by X(, x). In this case it is easy to check that for
any t > s ≥ 0, we have P
s,t
= P
0,t−s
.
Define
P
t
ϕ(x) = ϕ(X(t, x)), ϕ ∈ C
b
(R
n
), t ≥ 0, x ∈ R
n
, (8.12)
so that by (8.5) it follows the semigroup law
P
t+s
= P
t
P
s
, t, s ≥ 0. (8.13)
P
t
is called the transition semigroup associated with (8.11). By Proposition
8.1 we deduce
Proposition 8.3 For any ϕ ∈ C
1
b
(R
n
) we have
D
t
P
t
ϕ = P
t
Lϕ = LP
t
ϕ, t ≥ 0 (8.14)
where
Lϕ(x) = ¸b(x), ϕ
x
(x)), ϕ ∈ C
1
b
(R
n
), x ∈ R
n
. (8.15)
114 Kolmogorov equations
Finally, by Theorem 8.2 we have
Theorem 8.4 Assume that b ∈ C
1
b
(R
n
) and let ϕ ∈ C
1
b
(R). Then problem
_
_
_
u
t
(t, x) = ¸b(x), u
x
(t, x)), t ≥ 0, x ∈ R
n
u(0, x) = ϕ(x), x ∈ R
n
.
(8.16)
has a unique solution given by
u(t, x) = P
t
ϕ(x) = ϕ(X(t, x)), t ≥ 0, x ∈ R
n
. (8.17)
8.2 Stochastic case
We consider the stochastic evolution equation
_
_
_
dX(t) = b(t, X(t))dt + σ(t, X(t))dB(t)
X(s) = x ∈ R
d
(8.18)
and assume that the following hypothesis holds.
Hypothesis 8.2 (i) b : [0, T] R
n
→R
n
and σ : [0, T] R
n
→ L(R
r
, R
n
)
are continuous.
(ii) There exists M > 0 such that
[b(t, x)−b(t, y)[+|σ(t, x)−σ(t, y)|
HS
≤ M[x−y[, x, y ∈ R
n
, t ∈ [0, T].
(iii) b and σ have first and second partial derivatives with respect to x con-
tinuous and bounded in [0, T] R
n
.
We denote as before by X(, s, x) the solution of (8.18) corresponding to
η = x ∈ R
n
. For all t, s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ C
b
(R
n
)
we set
P
s,t
ϕ(x) = E[ϕ(X(t, s, x))], x ∈ R
n
, 0 ≤ s ≤ t ≤ T. (8.19)
As easily checked, P
s,t
is a linear bounded operator on C
b
(R
n
).
P
s,t
, 0 < s ≤ t ≤ T, is called the transition evolution operator associated with
(8.18). By Chapter 6 we know that the mapping
(s, t, x) → P
s,t
ϕ(x),
is continuous for all ϕ ∈ C
b
(R
n
).
Chapter 8 115
8.3 Basic properties of transition operators
Let us introduce the Kolmogorov operator
(L(s)ϕ)(x) =
1
2
Tr [ϕ
xx
(x)σ(s, x)σ

(s, x)] +¸b(s, x), ϕ
x
(x)), ϕ ∈ C
2
b
(R
n
).
(8.20)
The first basic identity is the following.
Proposition 8.5 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
).
Then P
s,t
ϕ is differentiable in t and we have
d
dt
P
s,t
ϕ = P
s,t
L(t)ϕ, t ≥ 0. (8.21)
Proof. By the Itˆ o formula we have that
d
t
ϕ(X(t, s, x)) = (L(t)ϕ)(X(t, s, x)) +¸ϕ
x
(X(t, s, x)), σ(t, X(t, s, x))dB(t)).
Integrating with respect to t and taking expectation, yields
E[ϕ(X(t, s, x))] = ϕ(x) +
_
t
s
E[(L(r)ϕ)(X(r, s, x))]dr,
that is
P
s,t
ϕ(x) = ϕ(x) +
_
t
s
P
r,t
(L(r)ϕ)(x)dr,
which coincides with (8.21).
The second basic identity is the following,
Proposition 8.6 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
).
Then P
s,t
ϕ is differentiable in s and we have
d
ds
P
s,t
ϕ = −L(s)P
s,t
ϕ, t ≥ 0. (8.22)
Proof. Taking expectation in the backward Itˆ o formula (7.62) we find
P
s,t
ϕ(x) −ϕ(x) =
_
t
s
L(r)P
s,r
ϕ(x)dr,
which yields (8.22).
116 Kolmogorov equations
8.4 Parabolic equations
We consider here the parabolic equation
_
_
_
z
s
(s, x) + (L(s)(z(s, )))(x) = 0, 0 ≤ s < T,
z(T, x) = ϕ(x), x ∈ R
n
,
(8.23)
We say that a function z : [0, T] R
n
→ R is a solution to (8.23) if z is
continuous and bounded together with its partial derivatives z
t
, z
x
, z
xx
, and
fulfills (8.23).
Theorem 8.7 Assume that Hypothesis 8.2 holds and let ϕ ∈ C
2
b
(R
n
). Then
there exists a unique solution z of problem (8.23). z is given by
z(s, x) = E[ϕ(X(T, s, x))], 0 < s ≤ T, ϕ ∈ C
2
b
(R
n
). (8.24)
Proof. Existence. By (8.22) it follows that
z(s, x) = P
s,T
ϕ(x), s ∈ [0, T], x ∈ R
n
,
fulfills (8.23).
Uniqueness. Let z be a solution to (8.23), and let 0 ≤ u ≤ s ≤ T. Let us
compute the Itˆ o differential of z(s, X(s, u, x)). We have
d
s
z(s, X(s, u, x)) = z
s
(s, X(s, u, x))ds + (L(s)z(s, X(s, u, )))(x)
+¸z
x
(s, X(s, u, x)), σ(s, X(s, u, x))dB(s))
= ¸z
x
(s, X(s, u, x)), σ(s, X(s, u, x))dB(s)).
since z fulfills (8.23). Integrating in s between u and T yields
z(T, X(T, u, x)) −z(u, X(u, u, x)) = ϕ(X(t, u, x)) −z(u, x)
=
_
t
u
z
x
(s, X(s, u, x))σ(s, X(s, u, x))dB(s).
Now, taking expectation we find
z(u, x) = E[ϕ(X(t, u, x))].

Exercise 8.8 Prove the cocycle law
P
s,r
P
r,t
= P
s,t
(8.25)
for 0 ≤ s ≤ t ≤ t ≤ T.
Chapter 8 117
8.4.1 Autonomous case
Assume that b and σ are independent of t :
b(t, x) = b(x), σ(t, x) = σ(x), x ∈ R
n
.
Then we have L(s) = L where
Lϕ(x) =
1
2
Tr [ϕ
xx
(x)σ(x)σ

(x)] +¸b(x), ϕ
x
(x)), ϕ ∈ C
2
b
(R
n
).
Proposition 8.9 Let X(t, s, x) be the solution of the stochastic evolution
equation
_
_
_
dX(t) = b(X(t))dt + σ(X(t))dB(t)
X(s) = x ∈ R
n
.
(8.26)
Then for any and a > 0 the laws of X(t, s, x) and X(t +a, s +a, x) coincide.
Proof. Set Y (t) = X(t + a, s + a, x). The we have
X(t+a, s+a, x) = x+
_
t+a
s+a
b(X(r, s+a, x))dr+
_
t+a
s+a
σ(X(r, s+a, x))dB(r).
Setting r −a = ρ yields
Y (t) = x +
_
t
s
b(Y (ρ))dρ +
_
t
s
σ(Y (ρ))d[B(ρ + a) −B(a)].
Setting B
1
(t) = B(t + a) − B(a) we see that Y (t) fulfills equation (8.26)
but with the Brownian motion B(t) replaced by B
1
(t). Now the conclusion
follows.
By the proposition and the cocycle law (8.25)it follows that, setting
P
t
= P
0,t
, t ≥ 0,
we have
P
t+s
= P
t
P
s
, t, s ≥ 0, P
0
= 1.
Thus P
t
, t ≥ 0 is a semgroup of linear operators in C
b
(R
d
).
Setting
v(s, x) = u(t, t −s, x), t ≥ 0, s ∈ [0, t], x ∈ R
n
,
problem (8.23) becomes
_
_
_
v
s
(s, x) = Lv(s, x), s ∈ [0, t], x ∈ R
n
,
v(0, x) = ϕ(x), x ∈ R
(8.27)
Then by Theorem 8.7 we find the result
118 Kolmogorov equations
Theorem 8.10 Assume that b, σ : R → R are Lipschitz continuous and of
class C
2
. Then, for any ϕ ∈ C
2
b
(R), problem (8.27) has a unique solution
given by
v(s, x) = P
t−s,t
ϕ(x) = P
t
ϕ(x), t ≥ 0, s ∈ [0, t], x ∈ R. (8.28)
8.5 Examples
Example 8.11 Consider the parabolic equation in R
n
_
_
_
u
t
(t, x) =
1
2
Tr [Qu
xx
(t, x)] +¸Ax + u
x
(t, x))
u(0, x) = ϕ(x),
(8.29)
where A, Q ∈ L(R
n
), Q is symmetric and ¸Qx, x) ≥ 0 for all x ∈ R
n
.
The corresponding stochastic differential equation is
_
_
_
dX(t) = AX(t)dt +

Q dB(t),
X(0) = x,
(8.30)
where B is a standard Brownian motion in a probability space (Ω, G, P)
taking values in R
n
. The solution of (8.30) is given by the variation of
constants formula
X(t, x) = e
tA
x +
_
t
0
e
(t−s)A
_
QdB(s). (8.31)
Therefore the law of X(t, x) is given by
X(t, x)
#
P = N
e
tA
x,Q
t
, (8.32)
where
Q
t
=
_
t
0
e
sA
Qe
sA

ds, t ≥ 0, (8.33)
where A

is the adjoint of A.
Consequently, the transition semigroup P
t
looks like
P
t
ϕ(x) =
_
R
n
ϕ(y)N
e
tA
x,Q
t
(dy). (8.34)
So, the solution of (8.29) is given by
u(t, x) = P
t
ϕ(x).
Chapter 8 119
If, in particular, det Q
t
> 0 we have
u(t, x) = (2π)
−n/2
[det Q
t
]
−1/2
_
R
n
e

1
2
Q
−1
t
(y−e
tA
x),(y−e
tA
x)
ϕ(y)dy. (8.35)
Example 8.12 Consider the parabolic equation in R
_
_
_
u
t
(t, x) =
1
2
qx
2
u
xx
(t, x) + axu
x
(t, x)
u(0, x) = ϕ(x),
(8.36)
where q > 0 and a ∈ R.
The corresponding stochastic differential equation is
_
_
_
dX(t) = aX(t)dt +

q X(t)dB(t),
X(0) = x,
(8.37)
where B is a real Brownian motion in is a real Brownian motion in some
probability space (Ω, F, P).
The solution of (8.37) is given by
X(t, x) = e
(a−q/2)t+

q B(t)
x. (8.38)
Therefore
P
t
ϕ(x) =
1

2πt
_
+∞
−∞
e

y
2
2t
ϕ(e
(a−q/2)t+

q y
x)dy. (8.39)
120 Kolmogorov equations
Appendix A
λ-systems and π-systems
Let Ω be a non empty set. A non empty family R of parts of Ω is called a
π-system if
A, B ∈ R =⇒ A ∩ B ∈ R,
a λ-system if
_
¸
¸
¸
¸
_
¸
¸
¸
¸
_
(i) Ω, ∅ ∈ D.
(ii) A ∈ D =⇒ A
c
∈ D.
(iii) (A
i
) ⊂ D mutually disjoint =⇒


i=1
A
i
∈ D.
(A.1)
Obviously any algebra is a π-system. Moreover, if D is a λ-system such that
A, B ∈ D =⇒ A ∩ B ∈ D then it is σ–algebra. In fact if (A
i
) is a sequence
in D of not necessarily disjoint sets we have

_
i=1
A
i
= A
1
∪ (A
2
¸ A
1
) ∪ (A
3
¸ A
2
¸ A
1
) ∪ ∈ D
and so


i=1
A
i
∈ D by (ii) and (iii).
Let us prove the following Dynkin theorem.
Theorem A.1 Let R be a π-system and let D be a λ-system including R.
Then we have σ(R) ⊂ D, where σ(R) is the σ algebra generated by R. If in
particular, D ⊂ σ(R) we have σ(R) = D.
Proof. Let D
0
be the minimal λ-system including R. We are going to show
that D
0
is a σ–algebra, which will imply the theorem. For this it is enough
to show, as remarked before, that the following inclusion holds
A, B ∈ D
0
=⇒ A ∩ B ∈ D
0
. (A.2)
121
122 λ-systems and π-systems
For any B ∈ D
0
we set
H (B) = ¦F ∈ D
0
: B ∩ F ∈ D
0
¦.
We claim that H (B) is a λ-system. In fact properties (i) and (iii) are clear.
It remains to show that if F ∩ B ∈ D
0
then F
c
∩ B ∈ D
0
or, equivalently,
that F ∪B
c
∈ D
0
. In fact, since F ∪B
c
= (F ¸ B
c
) ∪B
c
= (F ∩B) ∪B
c
and
F ∩ B and B
c
are disjoint, we have that F ∪ B
c
∈ D
0
as required.
If we show that
H (B) ⊃ R, ∀B ∈ D
0
(A.3)
then we conclude that H (B) = D
0
by the minimality of D
0
and (A.2) is
proved.
On the other hand it is clear that if R ∈ R we have R ⊂ H (R) since R is
a π-system. Therefore H (R) = D
0
by the minimality of D
0
. Consequently,
the following implication holds
R ∈ R, B ∈ D
0
⇒ R ∩ B ∈ D
0
,
which yields R ⊂ H (B) and (A.3) is fulfilled.
Example A.2 Let A be an algebra of subsets of Ω and let F be the σ-
algebra generated by A. Let P
1
and P
2
be probability measures on (Ω, F)
such that
P
1
(I) = P
2
(I), ∀ I ∈ A.
Using the Dynkin theorem we can show that P
1
= P
2
. It is clear in fact that
A is a π-system. Define
D = ¦B ∈ F : P
1
(B) = P
2
(B)¦.
It is easy to see that D is a λ-system which contains D. So, by Corollary
A.1 it follows that P
1
= P
2
.
Appendix B
Conditional expectation
B.1 Definition
We are given a probability space (Ω, F, P) and a σ-algebra G included in F.
Let X : Ω →R be a real random variable on (Ω, F, P)
(1)
.
We say that X is G-measurable if
I ∈ B(R) ⇒ X
−1
(I) ∈ F.
It is clear that X is not G-measurable in general.
Let us consider the signed measure
µ(G) =
_
G
XdP, G ∈ G.
It is clear that µ is absolutely continuous with respect to the restriction of
P to G. Therefore, by the Radon-Nikodym Theorem there exists a unique
Y ∈ L
1
(Ω, G, P) such that
µ(G) =
_
G
XdP =
_
G
Y dP, ∀ G ∈ G. (B.1)
The G-measurable random variable Y is called the conditional expectation of
X given G; it is denoted by E(X[G).
In view of (B.1) E(X[G) is characterized by
_
G
XdP =
_
G
E(X[G)dP, ∀ G ∈ G. (B.2)
Exercise B.1 Assume that X ∈ L
2
(Ω, F, P). Show that E(X[G) coincides
with the orthogonal projection of X into the closed subspace L
2
(Ω, G, P) of
L
2
(Ω, F, P).
(1)
In all this appendix by random variable we mean an equivalence class of random
variables with respect to the usual equivalence relation.
123
124 Conditional expectation
B.2 Basic properties
Let X, Y ∈ L
1
(Ω, F, P) and let G be σ-algebra included in F. It is obvious
that if X is G-measurable, we have E(X[G) = X. Setting G = Ω in (B.2)
yields
E[E(X[G)] = E(X). (B.3)
Moreover, one can check easily the linearity of conditional expectation,
E(αX + βY [G) = αE(X[G) + βE(Y [G), (B.4)
for all α, β ∈ R and all X, Y ∈ L
1
(Ω, F, P). Also if X ≥ 0, P-a.s., one has
E(X[G) ≥ 0, P-a.s. From this one deduces the inequality
[E(X[G)[ ≤ E([X[ [G). (B.5)
Proposition B.2 Assume that X is independent of G. Then we have
E(X[G) = E(X). (B.6)
Proof. Let A ∈ G. Then 1l
A
and X are independent so that
_
A
XdP =
_

1l
A
XdP = P(A)E(X) =
_
A
E(X[G)dP.
Proposition B.3 Let H be a σ-algebra included in G. Then we have
E(X[H ) = E
_
E(X[G)
¸
¸
H
¸
. (B.7)
Proof. Let A ∈ H . Then we have
_
A
XdP =
_
A
E(X[H )dP (B.8)
and
_
A
XdP =
_
A
E(X[G)dP =
_
A
E
_
E(X[G)
¸
¸
H
¸
dP. (B.9)
So, comparing (B.8) and (B.9) we see that
_
A
E(X[H )dP =
_
A
XdP =
_
A
E
_
E(X[G)
¸
¸
H
¸
dP.

Proposition B.4 Let X, Y, XY ∈ L
1
(Ω, F, P). Assume that X is G-measurable.
Then we have
E(XY [G) = XE(Y [G). (B.10)
Appendix B 125
Proof. It is enough to show (B.10) for X = 1l
A
where A ∈ G. Let now
G ∈ G, then since G∩ A ∈ G we have
_
G
E(1l
A
Y [G)dP =
_
G
1l
A
Y dP =
_
G∩A
Y dP
=
_
G∩A
E(Y [G)dP =
_
G
1l
A
E(Y [G)dP,
for any G ∈ G.
Recalling Proposition B.2 we find.
Corollary B.5 Let X, Y, XY ∈ L
1
(Ω, F, P). Assume that X is G-measurable
and that Y is independent of G. Then we have
E(XY [G) = XE(Y ). (B.11)
Let us prove now a useful generalization of this Corollary.
Proposition B.6 Let X, Y ∈ L
1
(Ω, F, P) and let φ : R
2
→ R be bounded
and Borel. Assume that X is G-measurable and Y is independent of G. Then
we have
E(φ(X, Y )[G) = h(X), (B.12)
where
h(x) = E[φ(x, Y )], x ∈ R. (B.13)
Proof. We have to show that
_
G
φ(X, Y )dP =
_
G
h(X)dP, ∀ G ∈ G.
This is clearly equivalent to
E(Zφ(X, Y )) = E(Zh(X)), ∀Z ∈ L
1
(Ω, G, P). (B.14)
Denote by µ the law of the random variable (X, Y, Z) with values in R
3
µ = (X, Y, Z)
#
P.
So,
E(Zφ(X, Y )) =
_
R
3
zφ(x, y)µ(dx, dy, dz). (B.15)
126 Conditional expectation
Since X and Z are G-measurable and Y is independent of G, the random
variables (X, Z) and Y are independent so that
µ(dx, dy, dz) = ν(dx, dz)λ(dy),
where
ν(dx, dz) = (X, Z)
#
P(dx, dz), λ(dy) = Y
#
P(dy).
Therefore we can write (B.15) as
E(Zφ(X, Y )) =
_
R
3
zφ(x, y)ν(dx, dz)λ(dy).
Using the Fubini Theorem we get finally
E(Zφ(X, Y )) =
_
R
2
z
__
R
φ(x, y)λ(dy)
_
ν(dx, dz)
=
_
R
2
zh(x)ν(dx, dz) = E(Zh(X)),
as required.
Exercise B.7 Let F, H, FH ∈ L
1
(Ω, G, P) and Z = E(H[G). Prove that
E(FH) = E(FZ). (B.16)
Exercise B.8 Let g : R → R be convex and let F, g(F) ∈ L
1
(Ω, F, P).
Prove the Jensen inequality
E(g(F)[G) ≥ g(E(F[G)). (B.17)
Appendix C
Martingales
C.1 Definitions
Let (Ω, F, P) be a probability space, (F
t
)
t≥0
an increasing family of σ-
algebras included in F and (M(t))
t∈[0,T]
with M(t) ∈ L
1
(Ω, F
t
, P), t ∈ [0, T],
a stochastic process.
(M(t))
t∈[0,T]
is said to be a martingale (with respect to the filtration
(F
t
)
t≥0
) if
E[M(t)[F
s
] = M(s), ∀ 0 ≤ s < t ≤ T,
a submartingale if
E[M(t)[F
s
] ≥ M(s), ∀ 0 ≤ s < t ≤ T,
a supermartingale if
E[M(t)[F
s
] ≤ M(s), ∀ 0 ≤ s < t ≤ T.
Thus (M(t))
t∈[0,T]
is a martingale if and only if
_
A
M(s)dP =
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
,
a submartingale if and only if
_
A
M(s)dP ≥
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
,
and a supermartingale if and only if
_
A
M(s)dP ≤
_
A
M(t)dP, ∀ 0 ≤ s < t ≤ T, A ∈ F
s
.
127
128 Martingales
Proposition C.1 If M is a martingale then [M[ is a submartingale.
Proof. Let 0 ≤ s < t ≤ T, A ∈ F
s
. Set
A
+
= ¦ω ∈ Ω : M(s)(ω) > 0¦, A

= ¦ω ∈ Ω : M(s)(ω) ≤ 0¦.
Clearly A
+
and A

belong to F
s
. Consequently we have
_
A
[M(s)[dP =
_
A
+
M(s)dP −
_
A

M(s)dP
=
_
A
+
M(t)dP −
_
A

M(t)dP ≤
_
A
[M(t)[dP.
This shows that [M[ is a submartingale.
Example C.2 The Brownian motion B is a martingale. In fact, let t > s
and A ∈ F
s
. Since B(t) −B(s) and 1l
A
are independent we have
_
A
(B(t) −B(s))dP = E(1l
A
(B(t) −B(s))) = 0,
so that
_
A
B(t)dP =
_
A
B(s)dP.
Exercise C.3 Using Jensen’s inequality prove that any convex function of
a martingale is a submartingale. (See Exercise B.8).
C.2 The basic inequality for martingales
Let M(t) be a martingale, let 0 < t
1
< t
2
< ... < t
n
≤ T and set
S = sup
1≤i≤n
[M(t
i
)[.
We are going to prove an important estimate (due to Kolmogorov) of S in
terms of M(t
n
).
Proposition C.4 For all λ > 0 we have
P(S ≥ λ) ≤
1
λ
_
{S≥λ}
[M(t
n
)[dP. (C.1)
Appendix C 129
Proof. Set
A
1
= ¦[M(t
1
)[ ≥ λ¦,
A
2
= ¦[M(t
1
)[ < λ, [M(t
2
)[ ≥ λ¦,

A
n
= ¦[M(t
1
)[ < λ, ..., [M(t
n
)[ ≥ λ¦.
Clearly, sets A
1
, ..., A
n
are mutually disjoint. Moreover A
i
∈ F
t
i
, i = 1, ..., n,
and we have
¦S ≥ λ¦ =
n
_
i=1
A
i
.
Let us estimate
_
{S≥λ}
[M(t
n
)[dP. We have obviously
_
A
n
[M(t
n
)[dP ≥ λP(A
n
).
Now we estimate
_
A
n−1
[X(t
n
)[dP. We have, recalling that [M(t)[ is a sub–
martingale,
λP(A
n−1
) ≤
_
A
n−1
[M(t
n−1
)[dP ≤
_
A
n−1
[M(t
n
)[dP.
Therefore
_
A
n−1
[M(t
n
)[dP ≥ λP(A
n−1
).
Proceeding in a similar way we obtain
_
A
k
[M(t
n
)[dP ≥ λP(A
k
), k = 1, . . . , n. (C.2)
Summing up on k from 1 to n the conclusion follows.
C.3 Square integrable martingales
In this section we are given a martingale M(t) such that M(t) ∈ L
2
(Ω, F, P)
for all t ∈ [0, T].
Let 0 < t
1
< t
2
< ... < t
n
≤ T and set as before
S = sup
1≤i≤n
[M(t
i
)[.
We are going to estimate of E[S
2
] in terms of E[M
2
(t
n
)].
130 Martingales
Proposition C.5 We have
E
_
sup
1≤i≤n
[M(t
i
)[
2
_
≤ 4E([M(t
n
)[
2
). (C.3)
Proof. Set
F(t) = P(S > t), t ≥ 0.
By (C.1) we have
F(t) ≤
1
t
_
{S≥t}
[M(t
n
)[dP. (C.4)
Consequently
E(S
2
) =
_

0
P(S
2
> t)dt =
_

0
P(S >

t)dt.
So, by (C.1) and the Fubini Theorem we have
E(S
2
) ≤
_

0
_
1

t
_
{S≥

t}
[M(t
n
)[dP
_
dt
=
_
[0,+∞)×Ω
1

t
[M(t
n
)[1l
{S≥

t}
P(dω)dt
=
_

[M(t
n
)[P(dω)
_

0
1

t
1l
{S≥

t}
dt
=
_

[M(t
n
)[P(dω)
_
S
2
0
1

t
dt
= 2
_

[M(t
n
)SP(dω) ≤ 2
__

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

S
2
dP
_
1/2
.
Now the conclusion follows easily.
Corollary C.6 Let M be a square integrable continuous martingale. Then
for any T > 0 we have
E
_
sup
t∈[0,T]
[M(t)[
2
_
≤ 4E[M
2
(T)]. (C.5)
Appendix C 131
Proof. Let 0 < s
1
< s
2
< < s
m
= T. By Proposition C.5 it follows that
E
_
sup
1≤i≤m
[M(s
i
)[
2
_
≤ 4E
_
[M(T)[
2
¸
.
Since M is continuous it follows, by the arbitrariness of the sequence s
1
, s
2
, . . . , s
m
,
that
E
_
sup
s∈[0,T]
[M(s)[
2
_
≤ 4E
_
[M(T)[
2
¸
,
as required.
132 Martingales
Appendix D
Fixed points depending on
parameters
D.1 Introduction
Let Λ, E be Banach spaces (norms [ [). We are given a continuous mapping
F : Λ E → E, (λ, x) → F(λ, x)
and assume that
Hypothesis D.1 There exists κ ∈ [0, 1) such that
[F(λ, x) −F(λ, y)[ ≤ κ[x −y[, ∀ λ ∈ Λ, x, y ∈ E.
The following result (contraction principle) is classical.
Theorem D.1 (i). There exists a unique continuous mapping
x : Λ → E, λ → x(λ),
such that
x(λ) = F(λ, x(λ)), ∀ λ ∈ Λ. (D.1)
(ii). If in addition F is of class C
1
, then x is of class C
1
and
x

(λ) = F
λ
(λ, x(λ)) + F
x
(λ, x(λ))x

(λ). (D.2)
We want to generalize the second part of this result to mappings F(λ, x)
which are only continuously Gˆateaux differentiable.
133
134 Fixed points
D.2 Gˆateaux differentiable mappings
Let A and B be Banach spaces and let Φ : A → B be a continuous mapping
from A into B.
Definition D.2 We say that Φ is Gˆ ateaux differentiable if there exists a
mapping
DΦ : A → L(A, B), a → DΦ(a),
such that
lim
ξ→0
1
ξ
(Φ(a + ξc) −Φ(a)) = DΦ(a)c, ∀ a, c ∈ A.
If in addition for all c ∈ A the mapping A → B, a → DΦ(a)c is continuous
we say that Φ is continuously Gˆ ateaux differentiable.
Remark D.3 It is well known that if the mapping A → L(A, B), a →
DΦ(a) is continuous then Φ is differentiable.
(1)
Example D.4 Let A, B = L
2
(0, 1) and Φ(x) = sin x. Then one can check
easily that Φ is continuously Gˆ ateaux differentiable and
DΦ(x)y = y cos x, ∀ x, y ∈ L
2
(0, 1).
However, (as one can see) Φ is not differentiable in any point.
We shall need the following result.
Proposition D.5 Let Φ : A → B be continuously Gˆateaux differentiable.
Then the following identity holds
Φ(c) −Φ(a) =
_
1
0
DΦ((1 −ξ)a + ξc)(c −a)dξ. (D.3)
Proof. Set
F(ξ) = Φ((1 −ξ)a + ξc), ξ ∈ [0, 1].
Then we have
F

(ξ) = DΦ((1 −ξ)a + ξc)(c −a)dξ,
and the conclusion follows just integrating this identity between 0 and 1.
(1)
One also says that Φ is Fr´echet differentiable.
Appendix D 135
D.3 The main result
We can back to the notations of the introduction and consider two Banach
spaces Λ and E and a continuous mapping
F : Λ E → E, (λ, x) → F(λ, x).
We assume that Hypothesis D.1 is fulfilled and denote by x the mapping
x : Λ → E, λ → x(λ),
such that
x(λ) = F(λ, x(λ)), ∀ λ ∈ Λ. (D.4)
Theorem D.6 Assume that Hypotheses D.1 is fulfilled and that F is con-
tinuously Gˆateaux differentiable. Then x() is continuously Gˆateaux differen-
tiable as well and we have
x

(λ) µ = (1 −F
x
(λ, x(λ)))
−1
F
λ
(λ, x(λ)) µ, (D.5)
equivalently
x

(λ) µ = F
λ
(λ, x(λ)) µ + F
x
(λ, x(λ))(x

(λ) µ). (D.6)
Proof. Let λ, µ ∈ Λ and h ∈ R. From (D.4) and (D.3) it follows that
x(λ + hµ) −x(λ) = F(λ + hµ, x(λ + hµ)) −F(λ, x(λ))
= h
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ
+
_
1
0
F
x
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) (x(λ + hµ) −x(λ))dξ.
(D.7)
Set now
G(λ, x, µ, h)z = Gz :=
_
1
0
F
x
(λ+ξhµ, x(λ)+ξ(x(λ+hµ)−x(λ)))zdξ, z ∈ E.
Then G ∈ L(E) and by Hypothesis D.1
[Gz[ ≤ κ[z[, ∀ z ∈ E.
136 Fixed points
Then from equation (D.7) we have
(1 −G(λ, x, µ, h))(x(λ + hµ) −x(λ))
= h
_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ,
which implies
1
h
x(λ + hµ) −x(λ)) = (1 −G(λ, x, µ, h))
−1

_
1
0
F
λ
(λ + ξhµ, x(λ) + ξ(x(λ + hµ) −x(λ))) µdξ.
Letting h → 0 we find
x

(λ) µ = (1 −F
x
(λ, x(λ)))
−1
F
λ
(λ, x(λ)).
Therefore
x

(λ) µ −F
x
(λ, x(λ))(x

(λ) µ) = F
λ
(λ, x(λ)).

Appendix E
Fractional Sobolev spaces and
regularity of processes
E.1 Fractional Sobolev spaces on [0, 1]
Let ∈ (0, 1), m ∈ N. Define
|f|
2m
,2m
:=
_
[0,T]
2
[f(t) −f(s)[
2m
[t −s[
1+2m
dt ds
W
,2m
(0, T) is by definition the space of all f : [0, T] →R such that |f|
,2m
<
+∞.
Theorem E.1 (Sobolev embedding) Assume that > 1/(2m). Then the
following inclusion holds with continuous embedding.
W
,2m
(0, T) ⊂ C
−1/(2m)
([0, T]). (E.1)
Example E.2 (The Brownian motion) Let > 0 and let p ≥ 1. We ask
the question whether B() belongs to W
,p
(0, T) or not.
Let us compute
E(|B|
p
W
,p) = E
_
[0,T]
2
[B(t) −B(s)[
p
[t −s[
1+p
dt ds
Take for simplicity p = 2m, then
E
_
|B|
2m
W
,2m
_
= E
_
[0,T]
2
[B(t) −B(s)[
2m
[t −s[
1+2m
dt ds
= c
m
_
[0,T]
2
[t −s[
m
[t −s[
1+2m
dt ds = c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds
137
138 Fractional Sobolev spaces
The integral is finite if and only if <
1
2
.
For instance taking m = 1 we conclude that B() ∈ W
,2
(0, T) for <
1
2
.
This does not imply that B() is continuous.
But if we take m = 2 we have B() ∈ W
,4
(0, T) again for <
1
2
. Therefore
if
1
4
< <
1
2
we conclude by the Sobolev embedding that B() ∈ C

1
4
(0, T).
Arguing similarly taking larger m we conclude that B() ∈ C
α
(0, T) for
any α ∈ (0, 1/2).
E.2 Processes belonging to W
,2m
(0, T)
Let (Ω, F, P) be probability space and let X(t), t ∈ [0, T], be a real stochastic
process on (Ω, F, P). One situation often encountered is when the following
estimate holds for some m > 1, ∈ (0, 1/2), and c
m
> 0
E[[X(t) −X(s)[
2m
] ≤ c
m
[t −s[
m
, ∀ t, s ∈ [0, T]. (E.2)
This estimate (provided m > 1) allows us to conclude that trajectories of X
are H¨older continuous almost surely, as the next proposition shows.
Proposition E.3 Assume that there is m > 1, ∈ (0, 1/2), and c
m
> 0
such that (E.2) is fulfilled. Then we have
E
_
[X[
2m
,2m
¸
< +∞. (E.3)
Moreover, X(, ω) belongs to C
−1/(2m)
([0, T]) for almost ω ∈ Ω.
Proof. We have in fact
E
_
|X|
2m
,2m
_
≤ c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds < ∞,
since ∈ (0, 1/2) and m− 1 − 2m > −1. The last statement follows from
the Sobolev embedding theorem.
Remark E.4 Kolomogorov test It is a generalization Proposition E.3. As-
sume that there is a > 0, b > 0 such that
E[[X(t) −X(s)[
1+a
] ≤ c
m
[t −s[
1+b
∀ t, s ∈ [0, T]. (E.4)
Then X has α-H¨ older continuous trajectories with α <
1+b
a
.
Appendix F 139
E.3 Multi dimensional Sobolev spaces and reg-
ularity of random fields
Let ∈ (0, 1), m ∈ N, d ∈ N. Define
|f|
2m
,2m
:=
_
[0,T]
2d
[f(x) −f(y)[
2m
[x −y[
d+2m
dx dy.
W
,2m
([0, T]
d
) is by definition the space of all f : [0, T]
d
→ R such that
|f|
,2m
< +∞.
Theorem E.5 (Sobolev embedding) Assume that > d/(2m). Then the
following inclusion holds with continuous embedding.
W
,2m
([0, T]
d
) ⊂ C
−d/(2m)
([0, T]
d
). (E.5)
Let (Ω, F, P) be probability space and let X(x), x ∈ [0, T]
d
, be a random
field on (Ω, F, P).
Assume that there is m > 1, ∈ (0, 1), and c
m
> 0
E[[X(x) −X(y)[
2m
] ≤ c
m
[t −s[
2m
, ∀ t, s ∈ [0, T]. (E.6)
This estimate implies that almost all trajectories of X are H¨ older continuous
almost surely.
Proposition E.6 Assume that there is m > 1, ∈ (0, 1), and c
m
> 0 such
that (E.2) is fulfilled. Then we have
E
_
[X[
2m
,2m
¸
< +∞. (E.7)
Moreover, X(, ω) belongs to C
−d/(2m)
([0, T]) for almost ω ∈ Ω.
Proof. We have in fact
E(|X|
2m
,2m
) ≤ c
m
_
[0,T]
2
[t −s[
m−1−2m
dt ds < ∞,
since ∈ (0, 1/2) and m− 1 − 2m > −1. The last statement follows from
the Sobolev embedding theorem.

Contents
1 Gaussian measures in Hilbert spaces 1.1 Some concepts of Probability . . . . . . . . . . . 1.1.1 Random variables . . . . . . . . . . . . . . 1.1.2 Product measures . . . . . . . . . . . . . . 1.2 Probability measures in Hilbert spaces . . . . . . 1.2.1 Mean and covariance . . . . . . . . . . . . 1.2.2 Finite dimensional projections of measures 1.3 Gaussian probability measures . . . . . . . . . . . 1.3.1 Gaussian probability measures in R . . . . 1.3.2 Gaussian probability measures in Rn . . . 1.3.3 Gaussian probability measures in H . . . . 1.3.4 Computation of some Gaussian integrals . 1.3.5 The Cameron–Martin space . . . . . . . . 3 3 3 5 5 5 7 9 9 10 11 11 13 17 17 18 18 21 21 22 23 23 25 27 27 28 29 29 31

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2 Gaussian random variables 2.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Independence . . . . . . . . . . . . . . . . . . . . . . 2.2.1 Independent real variables . . . . . . . . . . . 2.2.2 Independent Gaussian random variables . . . 2.3 Gaussian random variables defined in a Hilbert space 2.3.1 Affine changes of variables . . . . . . . . . . . 2.4 The white noise function . . . . . . . . . . . . . . . . 2.4.1 Equivalence classes of random variables . . . . 2.4.2 Definition of the white noise function . . . . . 3 Brownian Motion 3.1 Stochastic Processes . . . . . . . . . . . . . . 3.2 Brownian motion . . . . . . . . . . . . . . . . 3.2.1 Construction of a Brownian motion . . 3.2.2 Some properties of a Brownian motion 3.3 Wiener integral . . . . . . . . . . . . . . . . . i

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ii 3.4 3.5 Continuity of Brownian motion . . . . . . . . . . . . . The standard Brownian motion . . . . . . . . . . . . . 3.5.1 Some properties of C0 . . . . . . . . . . . . . . 3.5.2 The Wiener measure and the standard Brownian Quadratic variation of the Brownian motion . . . . . . Multidimensional Brownian motions . . . . . . . . . . . . . . . . . . . . . . . motion . . . . . . . . 35 36 37 37 39 41 43 43 44 46 49 50 51 52 53 56 57 58 59 61 61 61 63 66 67 70 70 71 72

3.6 3.7

4 Markov property of the Brownian motion 4.1 Filtration . . . . . . . . . . . . . . . . . . . . . . 4.1.1 Ft -measurable random variables . . . . . . 4.2 Stopping times . . . . . . . . . . . . . . . . . . . 4.3 The Brownian motion W (t + τ ) − W (τ ) . . . . . 4.4 Transition semigroup . . . . . . . . . . . . . . . . 4.5 Markov property . . . . . . . . . . . . . . . . . . 4.5.1 Strong Markov property . . . . . . . . . . 4.6 Some consequences of the strong Markov property 4.7 Application to partial differential equations . . . . 4.7.1 The Dirichlet problem in the half-line . . . 4.7.2 The Neumann problem . . . . . . . . . . . 4.7.3 The Ventzell problem . . . . . . . . . . . . 5 The Itˆ integral o 5.1 Definition of Itˆ’s integral . . . . . . . . . . . . . o 5.1.1 Itˆ’s integral for elementary processes . . . o 5.1.2 General definition of Itˆ’s integral . . . . . o 5.2 Itˆ integral for mean square continuous processes o 5.3 The Itˆ integral as a stochastic process . . . . . . o 5.4 Itˆ integral with stopping times . . . . . . . . . . o 5.4.1 Stopping times . . . . . . . . . . . . . . . 5.4.2 Itˆ’s integral with stopping times . . . . . o 5.5 Multidimensional Itˆ integrals . . . . . . . . . . . o

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6 The Itˆ formula o 75 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 6.1.1 The Itˆ formula for unbounded functions . . . . . . . . 82 o 6.2 Itˆ’ formula for a vector valued process . . . . . . . . . . . . . 84 o 7 Stochastic evolution equations 89 7.1 Existence and uniqueness . . . . . . . . . . . . . . . . . . . . . 90 7.1.1 Solution of the stochastic differential equation in the space CB ([s, T ]; L2m (Ω; Rd )). . . . . . . . . . . . . . . 94

100 o Differentiability of X(t.5 8 Kolmogorov equations 8. . . . . . . . . 133 . . . . . . . .3 Differential stochastic equations with random coefficients 96 Continuous dependence on data . . .1 Continuous dependence on mean square . . . . . . 133 . . 8. . . . . . . . 8. . . .1 Existence of Xx (t. . 124 C Martingales 127 C. . .3 7. . . . . T ) . . . .1 The deterministic case . . .3 Backward Itˆ’s formula . . x) with respect to x . . . . .2 Stochastic case . . . . . .2. . . . x) . . . . 135 E Fractional Sobolev spaces and regularity of processes 137 E. . . . . . . . .2 Existence of Xxx (t. . . . 116 . . . . . . .2 The basic inequality for martingales . . . . . . . . . . . . . . . . 105 o 7. . . 8. . . . . x) with respect to s. . . . . . . . . . . . . . . . . s. . . . . 94 7. . . . . . . . . .2 7. .1 Autonomous case . . . . A λ-systems and π-systems . . 101 7. . . 117 . . . . . .2 Processes belonging to W . . . . . . . . . .2 The stochastic case .4.2m (0. . .4 7. . . 97 7. 102 Itˆ Differentiability of X(t. . . . . .5. . . . . . . . . . . 111 . .1 Introduction . . . . . . . . . . . . . . . . 114 . . . . . . . . . . . . . B Conditional expectation 123 B. . . 128 C. 137 E. . . . . . . . . . 1] .1 Definitions . 113 . . . . . x) . .1. . . . . . . . . . . . . . 127 C. . . . .4. . . . . . . . . . . . . . . . . . . a D. . . . . . . . . . . . . . . . . . 106 7. 107 o 111 . . . . . s. . . . . . . . . . . 129 D Fixed points depending on parameters D. . . . . . . . . . . . . . . . . . . . . s. 134 . . . . . . . . . . . . . . . .1. . . . .2 Gˆteaux differentiable mappings . . . . 105 7. . . . . . . . . . . .1 The deterministic case . 123 B. . . . . . . .5 Examples . . . . . 101 7. . . . . . . . . . . . . . .1 Definition .3 Basic properties of transition operators 8. . . . . . . 8. 8. . . . . . . . . . . . . . . .1. . .1 7. . . . . . . . . .3 Square integrable martingales .4 Parabolic equations . . . . . . . . . . . . .1 Fractional Sobolev spaces on [0. .3 The main result . . 118 121 7. . . . . . . . .5. . . . . . . . . . .2 Basic properties . .4. . . . . . .1 The autonomous case . . D. . . . . . s. . . . . . . . . . . .2 Examples . . . . . . . . . . . 138 . . . . . . . 97 Almost sure continuity and h¨lderianity of trajectories . . . . . . . . . . . . . . . . . 115 . . . . . . . . . . . . . . . . . .5. . . . .

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

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

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

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

ek |2 µ(dx) = H H |x − m|2 µ(dx) < +∞. positive and of trace class. k) = H h. Therefore. ek = H | x − m. Schwartz. x − m µ(dx). ∀ h. N. Part II. It is also possible to define trace-class operators which are not symmetric. Dunford and J. Linear Operators. k = H h. In order to state the next result we need the concept of trace class operator. Let us consider the bilinear form G : H × H → R defined as G(h.T. ∀ h. A symmetric and positive operator Q ∈ L(H) is said to be of trace class if ∞ Tr Q : = k=1 Qek . we find that ∞ Tr Q = k=1 (2) | x − m. Interscience. ek < +∞ for one (and consequently for any) complete orthonormal system (ek ). x − m µ(dx). Therefore there is a unique linear bounded operator Q ∈ L(H) such that Qh. 1964.6 Chapter 1 (so that the first one is finite as well). Q is called the covariance of µ. k)| ≤ H |x − m|2 µ(dx) |h| |k|. Then we have Qek . Proof. x − m k. x − m k.2 The covariance operator Q of µ is symmetric. k ∈ N. ek |2 µ(dx). . ∀ h. k ∈ H. To prove that Q is of trace class choose a complete orthonormal system (ek ) in H. k ∈ H. Symmetry and positivity of Q are clear. but we shall not need in what follows. G is continuous since |G(h. see e. One can show that any trace class operator Q is compact and that Tr Q is the sum of its eigenvalues repeated according to their multiplicity. g. k ∈ H. by the monotone convergence theorem and the Parseval identity. (2) Proposition 1.

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

.4 Let µ. Proposition 1.5 Let µ. by the dominate convergence theorem it follows that lim ϕn dµ = lim H n→∞ n→∞ ϕn dν = µ(C) = ν(C). Then. 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). A sequence (ϕn ) ⊂ Cb (H) fulfilling (i) and (ii) is provided by.8 (ii) ϕn 0 Chapter 1 ≤ 1 for all ∈ N.3 we have µ = ν. Therefore. we conclude that ϕ(x)µ(dx) = H H ϕ(x)ν(dx) for all ϕ ∈ Cb (H).   1 if x ∈ C. Now. We can now prove the announced result. in view of Proposition 1. 1 1 − n d(x. Then µ = ν. using the dominated convergence theorem and the change of variables formula. ν ∈ P(H). C) if d(x. ν ∈ P(H) be such that µ(h) = ν(h) for all h ∈ H. If (Pn )# µ = (Pn )# ν for any n ∈ N we have µ = ν. H Since closed sets generate the Borel σ–algebra of H this implies that µ = ν. C) ≥ n . C) ≤ n ϕn (x) =  1 0 if d(x. Let ϕ ∈ Cb (H). As an application of Proposition 1. Pn (H) Since (Pn )# µ = (Pn )# ν by assumption. Proposition 1.4 we prove that the Fourier transform of µ determines µ. Proof.

We assume as granted the result when H is finite-dimensional the general case we have by (1.Gaussian measures Proof. B(R)). q) with m ∈ R and q ≥ 0 we define a probability measure Nm.0 = δm .q on (R. x2 See e.g. then we go to the general case. The conclusion follows from Proposition 1. 1. 1. Nm. M´tivier. In ei x.q (R) = √ (3) 1 2πq +∞ e− −∞ (x−m)2 2q 1 dx = √ 2π +∞ −∞ e− 2 dx = 1. 1968. where δm is the Dirac measure at m.1 Gaussian probability measures in R For any pair of real numbers (m.Pn h µ(dx) = Pn (H) ei Pn ξ. µ(Pn h) = H (3) 9 .Pn h (Pn )# µ(dξ) = (Pn )# µ(Pn h) and ν(Pn h) = H ei x.Pn h ν(dx) = Pn (H) ei Pn ξ.q is a probability measure since Nm.1) for any h ∈ H and n ∈ N. for all B ∈ B(R). If q = 0 we set Nm. e . defined for all B ∈ B(R) by   1 if m ∈ B. δm (B) =  0 if m ∈ B.q (B) = √ 2πq e− B (x−m)2 2q dx. Therefore measures (Pn )# µ and (Pn )# ν have the same Fourier tranforms and so they coincide.3. Dunod e e e Universit´.4.3 Gaussian probability measures We first recall the definition of Gaussian measure on (R. M. B(R)) as follows. / If q > 0 we set 1 Nm. Notions fondamentales de la th´orie des probabilit´es.Pn h (Pn )# ν(dξ) = (Pn )# ν(Pn h).

Q is given by Na. When m = 0 we shall write NQ instead of Nm... . B(R) and Nm.Q (dx) = 1 (2π)d det Q e− 2 1 Q−1 (x−a)..λk .h − 2 1 Qh.10 Chapter 1 If q > 0. Moreover. The proof of the following proposition is easy. . its Fourier transform is given by Nm.Q for short. Then we define a probability measure Na.Q for any m = (m1 .Q . Let Q ∈ L+ (Rn ) and let (e1 .Q (h) := Rn ei h. Proposition 1. Moreover the Fourier tranform of Na. 2πq When m = 0 we shall write for short Nq instead N0. z . for some λk ≥ 0. Finally.. h ∈ Rn .q is absolutely continuous with respect to the Lebesgue measure 1 (dx) = dx in (R. mn ) ∈ Rn and any Q ∈ L+ (Rn ). .q (dx) = √ (x−m)2 1 e− 2q dx. It is easy to see that m is the mean and q the covariance of Nm.3. x − a µ(dx) = Qy. k = 1. it is left to the reader.x−a dx.h . Nm..5) 1. Therefore m is the mean and Q the covariance operator of Na.. z ∈ Rn . Q ∈ L+ (Rn ) and µ = Nm. .q (dx) = eimh− 2 qh .. x − a z.q .Q .q (h) := R eihx Nm. Na. h ∈ R. n. B(Rn )) by setting Nm. if the determinant of Q is positive.Q is absolutely continuous with respect to the Lebesgue measure in Rn and we have Na.Q = ×N k=1 n mk . 1 2 (1.2 Gaussian probability measures in Rn We are going to define a Gaussian measure Nm.x µ(dx) = ei a. Then we have xµ(dx) = m. en ) be an orthonormal basis on Rn such that Qek = λk ek ..Q on (Rn .q . Rn y.6 Let m ∈ Rn .. Rn y.

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

1 To formulate the next result notice that for any ε < λ1 . ek ek .8 Prove that ∞ n→∞ (1 − ελk ) := k=1 (1 − ελk ).7) Proof. x ∈ H. k=1 (1 − ελk ) > 0.m . ε 2 Since |Pn x|2 ↑ |x|2 as n → ∞ and. Then we have  ε −1  [det(1 − εQ)]−1/2 e 2 (1−εQ) m.λk (dxk ) = √ R ε 2 1 −ε e 2 1 − ελk m2 k 1−ελk . For any n ∈ N we have. by an elementary computation. k=1 Hint.9 Let ε ∈ R. ∞ 1 −1 x. Write log ∞ ∞ (1 − ελk ) k=1 = k=1 log(1 − ελk ) ∞ k=1 and show that the series is convergent since λk < +∞. otherwise. Proposition 1.7 n e H ε |P x|2 2 n µ(dx) = Pn (H) e ε |P ξ|2 2 n µn (dξ) = k=1 R e 2 ξk Nmk . ε 2 e 2 |x| µ(dx) =  H +∞. . λ1 (1. e 2 xk Nmk . taking into account Exercise 1. if ε < 1 .λk (dξk ). the linear operator 1 − εQ is invertible and (1 − εQ)−1 is bounded. as easily checked. the conclusion follows from the monotone convergence theorem. We have in fact. (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 1.12 Chapter 1 We shall assume (which is always true after a rearrangement) that λ1 ≥ λ2 ≥ · · · λn ≥ · · · .

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

13

|x|2m µ(dx) < ∞

and compute Jm . Hint. Notice that Jm = 2m F (m) (0), where F (ε) =
H

e 2 |x| µ(dx),

ε

2

ε > 0.

Proposition 1.11 We have e h,x µ(dx) = e a,h e 2
H
1

Qh,h

, h ∈ H.

(1.8)

Proof. For any ε > 0 we have e h,x ≤ e|x| |h| ≤ eε|x| e ε |h| . Choosing ε <
1 , λ1
2 1 2

we have, by the dominated convergence theorem, that
n→∞

e h,x µ(dx) =
H

lim

e h,Pn x µ(dx) = lim
H
1

n→∞

e h,Pn ξ µn (dx)
Pn (H)
1

=

n→∞

lim e Pn m,h e 2

Pn Qh,h

= e m,h e 2

Qh,h

.

1.3.5

The Cameron–Martin space

We are given a Gaussian measure µ = NQ , where Q ∈ L+ (H). We say that 1 µ is non degenerate if Ker Q := {x ∈ H : Qx = 0} = {0}. Thus, if H is finite-dimensional µ is non degenerate if and only if det Q > 0. Assume now that H is infinite-dimensional and that µ is non degenerate. We denote by (ek ) a complete orthonormal system in H such that Qek = λk ek , k ∈ N, where (λk ) are the eigenvalues of Q and we set xk = x, ek , k ∈ N. We notice that the inverse Q−1 of Q (which is well defined since Ker Q = {0}) is not continuous because, Q−1 ek = 1 ek , λk k∈N

and λk → 0 as k → ∞. Consequently, recalling the closed graph theorem, we see that the range Q(H) does not coincide with H. However, it is dense in H as the following lemma shows.

14 Lemma 1.12 Q(H) is a dense subspace of H.

Chapter 1

Proof. In fact if x0 is an element of H orthogonal to Q(H), we have Qx, x0 = x, Qx0 = 0, ∀ x ∈ H, which yields Qx0 = 0, and so x0 = 0 because Ker(Q) = {0}. It is useful to introduce the operator Q1/2 defined as

Q1/2 x =
k=1

λk x, ek ek ,

x ∈ H.

Its range Q1/2 (H) is called the Cameron–Martin space of the measure µ. Arguing as before we see that Q1/2 (H) is a subspace of H different of H and dense in H. Moreover it is clear that x ∈ Q1/2 (H) if and only if,

λ−1 x2 < +∞. k k
k=1

It is important to notice that the measure of the Cameron–Martin space is zero. Proposition 1.13 We have µ(Q1/2 (H)) = 0. Proof. For any n, k ∈ N set

Un = and

y∈H:
h=1

2 λ−1 yh < n2 h

= {y ∈ Q1/2 (H) : |Q−1/2 y| < n},

2k

Un,k =
1/2

y∈H:
h=1

2 λ−1 yh < n2 h

.

Clearly Un ↑ Q (H) as n → ∞, and for any n ∈ N, Un,k ↓ Un as k → ∞. So, it is enough to show that µ(Un ) = lim µ(Un,k ) = 0.
k→∞

(1.9)

We have in fact µ(Un,k ) =

{y∈H:

P2k

−1 2 2 h=1 h=1 λh yh <n }

×N

2k

λk (dyk ),

Gaussian measures which, setting zh = λh
−1/2

15 yh is equivalent to NI2k (dz),

µ(Un,k ) =

{z∈R2k :|z|<n}

where I2k is the identity in R2k . Let us compute µ(Un,k ). We have µ(Un,k ) µ(Un,k ) = = µ(H) Therefore 1 µ(Un,k ) = (k − 1)! and (1.9) follows.
n2 /2 n − r2 2k−1 e 2r dr 0 2 +∞ − r 2k−1 e 2r dr 0

=

n2 /2 −ρ k−1 e ρ dρ 0 . +∞ −ρ k−1 e ρ dρ 0

e ρ
0

−ρ k−1

1 dρ ≤ (k − 1)!

n2 /2

ρ
0

k−1

1 dρ = k!

n2 2

k

,

16 Chapter 1 .

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

...18 Chapter 2 Example 2. . . ek = Ω (Xj (ω) − mj (Xj ))(Xk (ω) − mk (Xk ))P(dω).2 Independence In this section we introduce the basic concept of independence. Example 2.. if conversely X1 ..3 Assume that X = (X1 ... ... Xn (ω)). ....ek .. Notice that.. . .. Xn ) is a n-dimensional Gaussian random variable. 2.m(X) e− 2 a2 Q(X)ek . Xn are real Gaussian random variables. m(X) is a vector of Rn denoted by (m(X)1 .. n. n we have Q(X)j.. n and a ∈ R we have eiaXk (ω) P(dω) = Ω Ω 1 ei aek . k = 1.2.. . P). let (e1 .. F . i. .. Xn ) is not necessarily Gaussian.. 2.j ... . P). ω ∈ Ω. So. Xn are real Gaussian random variables.. Then X1 .. .. ek = Ω Xk (ω)P(dω) = m(Xk ) and for any j. More precisely... en ) be the canonical basis in Rn .k = Q(Xk )... j = 1... .. In particular. ... k = 1. In fact if k = 1. Then for any k = 1. n... F ... Xn be real random variables on (Ω... n we have m(X)k = m(X). if j = k we find Q(X)k.. Xn be real random variables in (Ω.k = Q(X)ej .2 Let n ∈ N. Consider the Rn -valued random variable X(ω) = (X1 (ω).1 Independent real variables Definition 2.. Then X = (X1 . Xn ) is a Rn -valued random variable. m(X)n ) and Q(X) is a n × n matrix denoted Q(X)i.4 Let n ∈ N and let X1 . . .X(ω) P(dω) = eiam(Xk ) e− 2 a 1 2 Q(X ) k = ei aek . .. X1 . then X = (X1 . ..

random variables We say that X1 . F . . n. if (2. Conversely..1) ϕi = 1 Ii . .. Xn . taking into account the independence of X1 . . They are called independent if Xi1 .. . Xn are independent if X# P = 19 ×(X ) j=1 n j # P. Then by the change of variable formula we have... .1) = Ω ϕ1 (X1 (ω))P(dω) · · · Ω ϕn (Xn (ω))P(dω)...1) holds for any choice of functions ϕ1 .. Xn it is enough to show that (X# P)(I1 × · · · × In ) = ((X1 )# P)(I1 ) · · · ((Xn )# P)(In ).. ϕ1 (X1 (ω)) · · · ϕn (Xn (ω))P(dω) = Ω Ω ψ(X(ω))P(dω) = Rn ψ(ξ)(X# P)(dξ) = R ϕ1 (ξ1 )((X1 )# P)(dξ1 ) · · · R ϕk (ξn )((Xn )# P)(dξn ) = Ω ϕ1 (X1 (ω))P(dω) · · · Ω ϕn (Xn (ω))P(dω).. But this follows immediately setting in (2. ... Set X = (X1 .. . (ξ1 . . Then we have ϕ1 (X1 (ω)) · · · ϕn (Xn (ω))P(dω) Ω (2.. . then X1 .... Xin are independent for any choice of n and of positive integers i1 < i2 < · · · < in . To prove independence of X1 ... Proposition 2. P).. ... ξn ) = ϕ1 (ξ1 ) · · · ϕk (ξn ). ϕn .. . .. l i = 1.. Let (Xi ) be a sequence of real random variables. Assume conversely that (2.5 Let X1 ... Xn ) and let ψ : Rn → R be defined as ψ(ξ1 .. Xn are independent..1) holds for any choice of positive Borel functions ϕ1 . Proof. A necessary and sufficient condition for the independence is provided by the following proposition. . . ... Xn ... ξn ) ∈ Rn . . . In ∈ B(R)... be real independent random variables in (Ω. ϕn positive Borel. Let moreover ϕ1 .. . n ∈ N.... ∀ I1 . ϕn be Borel positive functions.

. The following useful result is left to the reader as an exercise. Xn are independent if and only if n X# P(h) = k=1 (Xk )# P(hk )..10 Let X1 . .... F . ... 1 An are so. n and k different positive integer j1 . P) be a probability space and A1 . j = 1.. Xn be real random variables in (Ω. .. Definition 2.. An are independent if and only if P(Aj1 ∩ · · · ∩ Ajk ) = P(Aj1 ) × · · · × P(Ajk ).. for all k = 1. . . n Q(X)i.. F ... .6 Let X1 . Then X1 . Show that X1 · · · Xn dP = Ω Ω X1 dP × · · · × Ω Xn dP and V (X1 + · · · + Xn ) = V (X1 ) + · · · + V (Xn ).. . An ∈ F . P) and let X = (X1 .... P) and let X = (X1 . . We say that the sets A1 . Xn )..... We have in fact (by Exercise 2... F ... hn ) ∈ Rn . Proposition 2.. .... jk less or equal to n. . .9 Show that sets A1 ... ..8 Let (Ω.j = Ω (Xi (ω) − mi (X))(Xj (ω) − mj (X))P(dω) (Xj (ω) − mj (X))P(dω) = 0.. Xn be real independent random variables in (Ω..6) for i. .. P)...20 Chapter 2 Exercise 2.. F . ∀ h = (h1 .. Xn ).. Proof..7 Let X1 .10 does not hold in general. Ω = Ω (Xi (ω) − mi (X))P(dω) The converse of Proposition 2. l l Exercise 2. Proposition 2.. An are independent if the random variables 1 A1 . . Then the covariance matrix Q(X) is diagonal. Xn be real independent random variables in (Ω.

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

22

Chapter 2

2.3.1

Affine changes of variables

Let b ∈ K and A ∈ L(H, K) where K is another separable Hilbert space. Let us consider the affine transformation T (x) = Ax + b, x ∈ H.

Proposition 2.13 T is a Gaussian random variable and its law T# µ is given by NAa+b,AQA∗ , where A∗ is the transpose of A. Proof. We have in fact ei k,y T# µ(dy) =
K H

ei k,T (x) µ(dx) =
H
1

ei k,Ax+b µ(dx)
AQA∗ k,k

= ei k,b
H

ei A

∗ k,x

µ(dx) = ei k,Aa+b e− 2

, k ∈ K.

Example 2.14 Let µ = Nm,Q and n ∈ N, f1 , ..., fn ∈ H. Let F : H → Rn be defined as F (x) := ( x, f1 , ..., x, fn ), x ∈ H. Then by Proposition 2.13 F is a Gaussian random variable with mean m(F ) and covariance Q(F ) given by, m(F ) = F (m) = ( m, f1 , ..., m, fn ) and Q(F ) = F QF ∗ . On the other hand, the linear operator F ∗ : Rn → H is given by
n

F (ξ) =
k=1

fk ξk ,

∀ ξ = (ξ1 , ..., ξn ) ∈ Rn .

Therefore QF (ξ) =

n

Qfk ξk ,
k=1

∀ ξ = (ξ1 , ..., ξn ) ∈ Rn
n

and F QF ∗ (ξ) =

n

Qfk ξk , f1
k=1

, ...,
k=1

Qfk ξk , fn

random variables so that Q(F )h,k = Qfh , fk . Therefore, F1 , ..., Fn are independent if and only if Qfh , fk = 0, if h = k. h, k = 1, ..., n,

23

(2.2)

2.4

The white noise function

In order to define the white noise function (which will play an important role in what follows), we shall deal with equivalence class of random variables (rather than random variables), which we briefly discuss in the next subsection.

2.4.1

Equivalence classes of random variables

Let (Ω, F , P) be a probability space and let H be a separable Hilbert space. We denote by R(H) the set of all H-valued random variables. Definition 2.15 We say that X, Y ∈ R(H) are equivalent (and write X ∼ Y ) if P({ω ∈ Ω : X(ω) = Y (ω)}) = 1. One can easily check that X ∼ Y, X, Y ∈ R(H) is an equivalence relation, so that the set R(H) is disjoint union of equivalences classes. We notice that if X ∼ Y then the laws of X and Y coincide. In fact set K = {ω ∈ Ω : X(ω) = Y (ω)}, so that P(K) = 0. Since for any I ∈ B(H) we have X −1 (I) ⊂ Y −1 (I) ∪ K, it follows that P(X −1 (I)) ≤ P(Y −1 (I)) and, exchanging X and Y we see that P(X −1 (I)) = P(Y −1 (I)). Consequently, all random variables belonging to a fixed equivalence class ˜ ˜ X have the same law, which is called the law of X. In the following we shall not distinguish between a random variable X ˜ and the equivalence class X including X, except when needed.

24

Chapter 2

By Lp (Ω, F , P; H), p ≥ 1, we mean the space of all equivalence class of random variables X : Ω → H such that |X(ω)|p P(dω) < +∞.

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

X

Lp (Ω,F ,P;H)

=

|X(ω)|p P(dω)

,

is a Banach space. We shall write Lp (Ω, F , P; H) = Lp (Ω, P; H) for brevity. We prove now that the limit of a convergent sequence in L2 (Ω, P; H) of Gaussian random variables is Gaussian. Proposition 2.16 Let (Xn ) ⊂ L2 (Ω, P; H) be a sequence of Gaussian random variables convergent to X in L2 (Ω, P; H). Then X is a Gaussian random variable and m(X), h = lim m(Xn ), h , h ∈ H,
n→∞

and Q(X)h, k = lim Q(Xn )h, k ,
n→∞

h, k ∈ H.

Proof. Since Xn → X in L2 (Ω, P; H) we have
n→∞

lim m(Xn ), h = lim

n→∞

Xn (ω), h P(dω) =
Ω Ω

X(ω), h P(dω) = m(X), h

and
n→∞

lim Q(Xn )h, k

=

n→∞

lim

Xn (ω) − m(Xn ), h

Xn (ω) − m(Xn ), k P(dω)

=

X(ω) − m(X), h

X(ω) − m(X), k P(dω) = Q(X)h, k .

Let us show now that X is a Gaussian random variable. We have in fact ei x,h (X# µ)P(dy) =
H Ω
1

ei X(ω),h P(dω) = lim = ei m(X),k e− 2
1

n→∞

ei Xn (ω),h P(dω)

= lim ei m(Xn ),h e− 2
n→∞

Q(Xn )h,h

Q(X)h,h

.

x ∈ Q1/2 (H). ∀ x ∈ H. z2 ∈ Q1/2 (H) we have Wz1 (x)Wz2 (x)µ(dx) = z1 .4. However this definition is meaningless because µ(Q1/2 (H)) = 0. H k ∈ N. where Wz (x) = x. Lemma 2. the mapping W can be uniquely extended as a mapping from H into L2 (H. z2 . Q−1/2 z . Q−1/2 z2 µ(dx) = QQ−1/2 z1 . µ) which we denote still by W and call the white noise function. y µ a. Q−1/2 z1 x. Here Q1/2 (H) is the Cameron–Martin space and C(H) the space of all real continuous functions on H. x. Wf is linear in the sense that for all α. z2 . Let us define a mapping W : Q1/2 (H) → C(H).17 For all z1 .e. β ∈ R we have Wf (αx + βy) = αWf (x) + βWf (y).. by Proposition 1. We have in fact Wz1 (x)Wz2 (x)µ(dx) = H H x. Wz (x) = Q−1/2 x. z .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}).13 . Since Q1/2 (H) is dense in H.3) Proof. z → Wz (2. Remark 2.18 Given z ∈ H (not belonging to Q1/2 (H)) it would be tempting to define the random variable Wz by setting. Since Q is compact there exists a complete orthonormal basis (ek ) on H and a sequence of positive numbers (λk ) such that Qek = λk ek . QQ−1/2 z2 = z1 .random variables 25 2.

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

Chapter 3 Brownian Motion
3.1 Stochastic Processes

We are given a probability space (Ω, F , P). We denote by P∗ the outer measure of P. We recall that a null set of Ω is a set of outer measure zero. For any integrable real random variable F we note E(F ) =

F (ω)P(dω).

So, in particular we have F# P(I) = E(1 I (F )), l ∀ I ∈ B(R).

We say that a property π concerning elements of Ω holds P-a.s. if the set where π does not hold is a null set. Definition 3.1 A family X = (X(t))t≥0 of real random variables in (Ω, F , P) is called a real stochastic process in [0, +∞). For any ω ∈ Ω, X(·, ω) is called a trajectory of X. • X is Gaussian if for any n ∈ N and any 0 ≤ t1 < · · · < tn the ndimensional random variable (X(t1 ), ..., X(tn )) is Gaussian. • X is continuous if X(·, ω) is continuous P-a.s. • X is p-mean continuous, p ≥ 1, if (i) X(t) is p-integrable for any t ≥ 0. (ii) We have
t→t0

lim E[|X(t) − X(t0 )|p ] = 0, 27

∀ t0 ≥ 0.

(3.1)

28

Chapter 3

We notice that a p-mean continuous process is not continuous in general. We say that two stochastic processes X and Y are equivalent if for all t ≥ 0 we have X(t, ω) = Y (t, ω), P-a.s..

When X and Y are equivalent we also say that Y is a version of X (or that X is a version of Y ).

3.2

Brownian motion

Definition 3.2 A real Brownian motion B = (B(t))t≥0 on (Ω, F , P) is a real stochastic process such that (i) B(0) = 0 and if 0 ≤ s < t, B(t) − B(s) is a real Gaussian random variable with law Nt−s . (ii) If 0 < t1 < ... < tn , the random variables, B(t1 ), B(t2 ) − B(t1 ), · · · , B(tn ) − B(tn−1 ) are independent. We express condition (ii) by saying that B is a process with independent increments. Lemma 3.3 Let t, s > 0. Then E[B(t)(B(s)] = min{t, s}. Proof. Let for instance t > s. Then we have E[B(t)B(s)] = E[(B(t) − B(s))B(s)] + E[B 2 (s)]. On the other hand, B(t) − B(s) is independent of B(s) so that E[(B(t) − B(s))B(s)] = E[B(t) − B(s)]E[B(s)] = 0. Since the law of B(s) is Ns we conclude that E[B(t)B(s)] = s as required. (3.2)

Brownian motion

29

3.2.1

Construction of a Brownian motion

Consider the probability space (H, B(H), µ), where H = L2 (0, +∞) and µ = NQ , Q being an arbitrary (but fixed) non degenerate Gaussian measure in H. Define B(t) = W1l[0,t] , t ≥ 0, (3.3) where 1 [0,t] (s) = l   1 if s ∈ [0, t],  0 otherwise,

and W is the white noise function defined in Chapter 2. More precisely, for any t ≥ 0 we choose an arbitrary element in the equivalence class of B(t) which we still denote by B(t). Clearly, for any t ≥ 0, B(t) is a Gaussian random variable Nt and for any t > s ≥ 0, B(t) − B(s) = W1l(s,t] is a Gaussian random variable Nt−s . So, B fulfills Definition 3.2(i). Let us prove (ii). Since the system of elements of H, (1 [0,t1 ] , 1 (t1 ,t2 ] , ..., 1 (tn−1 ,tn ] ), l l l is orthogonal, we have by Proposition 2.20 that the random variables B(t1 ), B(t2 ) − B(t1 ), · · · , B(tn ) − B(tn−1 ) are independent. Thus (ii) is proved as well.

3.2.2

Some properties of a Brownian motion

Proposition 3.4 Let B(t), t ≥ 0, be a Brownian motion on (Ω, F , P). Then B is a Gaussian process. Moreover, if 0 < t1 < ... < tn the law of (B(t1 ), ..., B(tn )) is given by P((B(t1 ), ..., B(tn )) ∈ I) = (2π)−n/2 (t1 (t2 − t1 ) × · · · × (tn − tn−1 ))−1/2
I

e

− 2t1 −
1

η2

(ηn −ηn−1 )2 (η2 −η1 )2 −·− 2(t −t 2(t2 −t1 ) n n−1 )

dη,

(3.4) for all I ∈ B(R ).
n

Proof. Let 0 < t1 < ... < tn and set X := (B(t1 ), B(t2 ) − B(t1 ), ..., B(tn ) − B(tn−1 )) Z := (B(t1 ), ..., B(tn )).

. Let t > t0 ≥ 0. be a Brownian motion on (Ω. m ∈ N.4). .. Proposition 3. t2 − t1 . It is enough to show the result for p = 2m. P). η = Q T −1 −1 −1 2 (ηn − ηn−1 )2 η1 (η2 − η1 )2 − ··· − − η = t1 (t2 − t1 ) (tn − tn−1 ) η. Proof. η2 − η1 . B(t2 ) − B(t1 )....5 Let B(t). P).6 Let B(t) be a Brownian motion in a probability space (Ω. the conclusion follows. by Proposition 2.η dη.13 Z is Gaussian with mean 0 and covariance Q(Z) = T Q(X)T ∗ where T ∗ is the transpose of T . Now..30 Chapter 3 Since random variables B(t1 ).. . Moreover. xn ) = (x1 . as easily checked. we have (Q(Z)) η. ∀ (x1 . Since det T = det T ∗ = 1... F . t ≥ 0. T (x1 . x1 + · · · + xn ). Therefore by Proposition 2. ... since T −1 η = (η1 . . m!2m Therefore lim E(|B(t) − B(t0 )|2m ) = 0 t→0 and the conclusion follows. It is clear that Z = T (X). Then B is p-mean square continuous for all p ≥ 1. Exercise 3.. T −1 and so. ηn − ηn−1 ). It remain to show (3. B(tn ) − B(tn−1 ) are independent. F . consider the linear mapping T ∈ L(Rn ) defined by.. we have det Q(Z) = det Q(X) = t1 (t2 − t1 ) × · · · × (tn − tn−1 ).. Prove that the following are Brownian motions.. ... x1 + x2 . . we have E(|B(t) − B(t0 )|2m ) = R |ξ|2m Nt−t0 (dξ) = (2m)! (t − t0 )m . xn ) ∈ Rn . 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. tn − tn−1 ). Since B(t) − B(t0 ) is a Gaussian random variable Nt−t0 .11 it follows that X is a n-dimensional Gaussian random variable with mean 0 and covariance operator Q(X) = diag (t1 .. .

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. Let us prove two basic identities.. . Lemma 3. l Then define T n f (s)dB(s) := 0 j=1 ftj−1 (B(tj ) − B(tj−1 )). t ≥ 0. t > 0. t ≥ 0. 31 3. f0 . B3 (0) = 0.7 We have T E 0 f (s)dB(s) =0 (3. F .6) Proof.6). Identity (3. Let 0 = t0 < t1 < · · · < tn = T . be a Brownian motion in (Ω.. (3. where h > 0 is given.Brownian motion (i) B1 (t) = B(t + h) − B(h). Let us prove (3. (iii) B3 (t) = tB(1/t). We want to define the stochastic integral: T f (s)dB(s). T ) with T > 0. f1 . (ii) B2 (t) = αB(α−2 t). .3 Wiener integral Let B(t).5) is obvious. (iv) B4 (t) = −B(t). where α > 0 is given. We have n E(|Iσ (f )| ) = E j=1 n 2 |f (tj−1 )|2 [B(tj ) − B(tj−1 )]2 (3.. t ≥ 0. t ≥ 0.5) 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. P) and let f ∈ L2 (0. fn−1 ∈ R and set n f= j=1 tj−1 1 (tj −tj−1 ] .

8) and T t E 0 f (s)dB(s) = 0 f 2 (s)ds. T ) it can be uniquely extended T to the whole L2 (0. b. (3. Since S(0. It is enough to prove the result for f of the form n f= i=1 fti−1 (ti − ti−1 ). Denote by S(0. (3.8 Let f.9) The random variable (more precisely. We still denote by I(f ) = 0 f (s)dB(s) this estension. Proposition 3. f → I(f ) = 0 f (s)dB(s). F . the equivalence class of random T variables) 0 f (s)dB(s). T ) the linear space of all step functions. is called the Wiener integral of f in [0.6) it follows that the linear mapping I T S(0. Then I(f ) = T Gaussian random variable Nq with q = 0 |f (s)|2 ds. T ) → L2 (Ω. g ∈ L2 (0. which belongs to L2 (Ω. P). T ). P).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 ≥ 0. It is easy to see that if a. c ≥ 0 we have b c c f (s)dB(s) + a b f (s)dB(s) = a f (s)dB(s). is continuous. T ) ⊂ L2 (0. By (3. It is clear that for any f ∈ L2 (0. T 0 f (s)dB(s) is a real Proof. Exercise 3.9 Let f ∈ L2 (0. T ). Show that T T T E 0 f (s)dB(s) 0 g(s)dB(s) = 0 f (s)g(s)ds. T ). T ) is dense in L2 (0. F . T ) we have T E 0 f (s)dB(s) 2 = 0. T ]. b We define in an obvious way the Wiener integral a f (s)dB(s) for any a.

T ]. < tn−1 = T .. k=1 Let f : [0.10) when n f= k=1 l ftk−1 1 (tk−1 . ∀ t ≥ 0. Let us introduce a stochastic process setting t F (t) = 0 f (s)ds.. In this case we have in fact ∞ n f (s)dB(s) = 0 k=1 ftk−1 W1l(tk−1 . Then we have ∞ Wf = 0 f (s)dB(s). are independent. Since random variables B(t1 ). so that n 33 I(f ) = i=1 fti−1 (B(ti ) − B(ti−1 )).10) It is enough to show (3.tk ] .11 The process F (t). T 0. ∞) → R such that it is integrable in all interval [0.Brownian motion where n ∈ N. ∞). we have that I(f ) is a real Gaussian random variable Nq with n q= i=1 f 2 (ti−1 )(ti − ti−1 ). B(t2 ) − B(t1 ). Proposition 3.1. (3. Let f ∈ L2 (0. t ≥ 0 is p-mean continuous for any p ≥ 1.tk ] = WPn ftk−1 1l(tk−1 . Example 3.2. .10 We use here notations of Section 3. where 0 ≤ t0 < · · · < tn . We now show a relation between the white noise function and the Wiener integral. B(tn ) − B(tn−1 ).tk ] = Wf . 0 = t0 < t1 < . · · · .

Let σ = {t0 . 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 ).9 we have that t F (t) − F (t0 ) = t0 f (s)dB(s) t t0 is a real Gaussian random variable with mean 0 and covariance Therefore q t (2m)! 2m 2 E|F (t) − F (t0 )| = f (s)ds . t→t0 f 2 (s)ds. (3. k = 1.. 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. .. m!2m t0 so that lim E|F (t) − F (t0 )|2m = 0. We note finally. tn } ∈ Σ. that if f ∈ C 1 ([0. T ]) we have T T f (s)dB(s) = f (T )B(T ) − 0 0 f (s)B(s)ds. Proposition 3. ω ∈ Ω. Then by Proposition 3. P-a.s.34 Chapter 3 Proof. P-a. · · · . tk ].12 If f ∈ C 1 ([0.. n. where αk are suitable numbers in the interval [tk−1 . t1 .e..11) Proof. It follows that T |σ|→0 lim Iσ (f ) = f (T )B(T ) − 0 f (s)dB(s)ds. Let p = 2m. . m ∈ N and t > t0 ≥ 0.

13) Notice that the Wiener integral Yα is meaningful since α ∈ (0.14 Let B(t). t ≥ 0.14) it is enough to set σ = r(t − s) + s so that (3. F . sin πα 0 ≤ s ≤ σ ≤ t. 1). 1/2).14) where α ∈ (0.13 For any α ∈ (0. t ≥ 0. be a Brownian motion on a probability space (Ω. To check (3. Proposition 3. yields t σ sin πα B(t) = π dξ(t − σ) 0 α−1 0 (σ − s)−α dB(s) . Proof. 1/2) we have B(t) = where Yα (σ) = 0 sin πα π σ t (t − σ)α−1 Yα (σ)dσ. obviously. P). (3. 1 − α) = 0 π . 0 (3. . We can now prove the result. We are going to show that B possesses a continuous version. We start from the following elementary identity which is valid for any α ∈ (0. (3. To this purpose we shall use a representation formula for B proved in the next proposition. Theorem 3.12) (σ − s)−α dB(s). (1) This requires a proof which is left to the reader.14) becomes 1 (1 − r)α−1 r−α dr = β(α.4 Continuity of Brownian motion Let B(t). t (t − σ)α−1 (σ − s)−α dσ = s π . sin πα Now since. Exchanging integrals . be a Brownian motion on a probability space (Ω. F . 1). P). Then B possesses a continuous version. 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).Brownian motion 35 3.

ω) = (t − σ)α−1 Yα (σ. ω) is a continuous version of B thanks to the following analytic lemma. T ]. π 0 Then B(·. t0 Let us set for ε < 2 .15 Let α ∈ (0. 3. Moreover. (3. in a probability space (Ω. T ].16 Prove that B possesses an H¨lder continuous version with o any exponent β < 1/2.H) . we find |F (t) − Fε (t)| ≤ M 2m − 1 2mα − 1 2m−1 2m εα− 2m |f |L2m (0. H) and F is con0 tinuous at 0. Now set t sin πα B(t. ω)dσ.11. F . P) such that B(·. ω) of the stochastic process Yα which is 2mintegrable with 2m > 1/α.5 The standard Brownian motion Let us consider a Brownian motion B(t).) Therefore F ∈ L∞ (0. 0 Fε is obviously continuous on [ t2 . uniformly on [ t2 . 1/2). t−ε Fε (t) = 0 (t − σ)α−1 f (σ)dσ. T ] for any t0 ∈ (0. t ∈ [0.T . and F is continuous as required. Set t F (t) = 0 (t − σ)α−1 f (σ)dσ. 1 0 Thus limε→0 Fε (t) = F (t).T . Choose a version Yα (·.15) 2m (Notice that (α − 1) 2m−1 > −1.36 Chapter 3 Proof. T . t ≥ 0.H) . ω → B(·. Lemma 3. H). 1]. T ]. Let us prove that F is continuous on [ t2 . 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 ]. . t ∈ [0. m ∈ N with 2m > 1/α and f ∈ L2m (0. ∀ t ≥ 0. Then F ∈ C([0. where C0 = {η ∈ C([0. +∞)) : η(0) = 0}. ω). We denote by B the mapping B : Ω → C0 . T ). This is possible in view of Proposition 3. Exercise 3. T ]. using again H¨lder’s inequalo ity. ω) is continuous for all ω ∈ Ω. Proof.

A := {η ∈ C0 : (η(t1 ). We have set for any k ∈ N...A = Ct1 ....tn+1 .16) Some examples of mappings F are the following..tn .. n ∈ N.. ∀ η ∈ C0 .. η2 ) := k=1 2k (1 η1 − η2 k .. for any nonnegative Borel mapping F : C0 → R. 3. endowed with the metric. as easily checked.. B(C0 )). For n ∈ N.. It is important to notice that B(C0 ) is generated by the cylindrical subsets of C0 that we shall introduce now.t2 . Q is called the Wiener measure on (C0 .tn+k . 0 < t1 < · · · < tn and A ∈ B(Rn ) we define Ct1 .2 The Wiener measure and the standard Brownian motion B : Ω → C0 .tn . η k = sup{|η(t)| : t ∈ [0. the σ-algebra generated by C coincides with B(C0 ) since any ball (with respect to the metric of C0 ) is a countable intersection of cylindrical sets. Let us now consider the σ-algebra B(C0 ).tn . ω) We come back to the mapping B and we denote by Q its law (which is a probability measure on (C0 . η → F (η). Moreover.. d(η1 .t2 . η(tn )) ∈ A} . we have E[F (B(·))] = Ω F (B(·. k]}.A×Rk .1 Some properties of C0 ∞ First we notice that. B(C0 )).. So. .5. .. Note that Ct1 .. C0 .Brownian motion 37 3. + η1 − η2 k ) is a complete metric space.t2 ..5.. Using this identity one can easily see that C is an algebra.. (3. k. ω))P(dω) = C0 F (η)Q(dη). ω → B(·.

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

Then we prove Theorem 3. Proof. and so.Brownian motion 39 3. T ) the set of all decompositions of [0. . (3.. setting σ1 ≤ σ2 if and only if |σ1 | ≤ |σ2 |. Let us now introduce the quadratic variation of Brownian motion B in [0. We introduce a partial ordering on Σ(0. T ). T ]. on a probability space (Ω.. T ) we set |σ| := min{tk − tk−1 : k = 1. T ]. we have E(Jσ ) = T. Since Btk −Btk−1 is a real Gaussian random variable with law Ntk −tk−1 . We say that T is the quadratic variation of B in [0. F . F .n − 1}.19 We have |σ|→0 lim Jσ = T in L2 (Ω. T ) we define n Jσ := k=1 |B(tk ) − B(tk−1 )|2 . P). Then for any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. . T ] σ = {0 = t0 < t1 < · · · < tn = T }.6 Quadratic variation of the Brownian motion In this section we are given a real continuous Brownian motion B(t).17) Moreover n 2 E|Jσ |2 = E k=1 n |B(tk ) − B(tk−1 )|2 n =E k=1 |B(tk ) − B(tk−1 )| + 2 h<k=1 4 E|B(th ) − B(th−1 )|2 |B(tk ) − B(tk−1 )|2 . For any σ = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0. t ≥ 0. For any T > 0 we denote by Σ(0. P). 2 2 E(|Jσ − T |2 ) = E(Jσ ) − 2T E(Jσ ) + T 2 = E(Jσ ) − T 2 .

19 is that almost all trajectories of the Brownian motion B have not bounded variation (2) .17).. (2) . T )} has outer probability zero. substituting (3. ω) ∈ BV (0. T ] → R. we have n n E|B(th ) − B(th−1 )| |B(tk ) − B(tk−1 )| = h<k=1 2 2 (th − th−1 )(tk − tk−1 ). since B(th ) − B(th−1 ) and B(tk ) − B(tk−1 ) are independent. Let f : [0. 2 =2 k=1 (tk − tk−1 )2 → 0. An important consequence of Theorem 3. V (f ) is called the variation of f . Then for any σ = {0 = t0 < t1 < · · · < . h<k=1 (3.20 We have P∗ (VT ) = 0. T ) is the set of all functions f : [0. In other terms the set VT := {ω ∈ Ω : B(·. we obtain n E |Jσ − T | as |σ| → 0.20) = 2 k=1 (tk − tk−1 )2 + T 2 . In fact the following result holds. (3. (3.20) on (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. Proposition 3. BV (0.. T ) we n set Vσ (f ) = k=1 |f (tk ) − f (tk−1 )| and define V (f ) := supσ∈Σ Vσ (f ).18) and.19) Therefore n n E|Jσ |2 = 3 k=1 n (tk − tk−1 )2 + 2 n (th − th−1 )(tk − tk−1 ) h<k=1 2 = 2 k=1 n (tk − tk−1 ) + k=1 2 (tk − tk−1 ) . Now. tn = T } ∈ Σ(0.

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

Exercise 3. We have n (3. (iii) We have E |B(t) − B(s)|2 = n(t − s).42 Chapter 3 Let B be a Brownian motion in Rn . B(t) − B(s) is a Gaussian random variable with law N(t−s)In .Qt . t ≥ 0.25) where A∗ and C ∗ are the adjoint of A and C respectively. where In represents the identity in Rn . Exercise 3. (ii) E[Bi (t)Bj (t)] = 0 if i = j. (i) If t > s. Prove that the law of Z(t) in Rd is given by NetA x.23 Prove that for 0 ≤ s < t we have E |B(t) − B(s)|4 = (2n + n2 )(t − s)2 . Let us check (iii).23) Z(t) = etA x + 0 e(t−s)A CdB(s). where Qt = 0 t ∗ (3.22) E |B(t) − B(s)| 2 = k=1 E |Bk (t) − Bk (s)|2 = n(t − s). . t ≥ 0.24) esA CC ∗ esA ds. (3. Then the following properties are easily checked. C ∈ L(Rd ) and set t (3.24 Let A.

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

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

D = {A ∈ Ft : 1 A is independent of W (s2 ) − W (s1 )}. Proof... one can show easily that ∞ n=1 An ∈ D. D contains the algebra of all cylindrical set belonging to Ct (which is a π-system).4 (one-zero law) Assume that A ∈ F0+ . (4. where n ∈ N. and let ϕ be a real random variable Ft –measurable. and W has independent increments.tn − 1 . Remark 4. h > 0.. D is a λ-system.....1) On the other hand. It is clear that A is independent of G ...5 For any t ≥ 0 denote by Ft the σ-algebra generated by Ft and all null sets of Ω (called the completion of Ft ). we claim that G = B(C0 ). but this follows from the identity j→∞ lim Dt1 − 1 .h. Moreover. Then W (s2 ) − W (s1 ) and ϕ are independent. so that P2 (A) = P(A) which yields P(A) equal to zero or one.. ω(tn ) − ω(1/j)) ∈ I} = Ct1 .I .. t > 0.4 one can easily show that (Ft )t≥0 is both right and left continuous. Let A ∈ F0+ .tn . It is enough to show that for any A ∈ Ft . 1 .Markov property 45 Lemma 4. j→∞ Since G = B(C0 ) we can set in (4. 0 < t1 < · · · < tn . Now the claim follows from Dynkin’s theorem (Theorem A...1 in Appendix A). I ∈ B(Rn ).h. in other words that Ft coincides with the set D defined below. ..3 Let s2 > s1 ≥ t > 0. Then either P(A) = 1 or P(A) = 0. In fact if A ∈ D it is obvious that Ac ∈ D. if (An ) is a sequence in D consisting of disjoint sets.. Next result shows that F0+ contains only trivial sets. Proposition 4. since it belongs to all Ft .I j j j = lim {ω ∈ Ω : (ω(t1 ) − ω(1/j).tn .. .I = {ω ∈ Ω : (ω(t1 + h) − ω(h).. ω(tn + h) − ω(h)) ∈ I}. Denote by G the σ-algebra generated by all sets of the form Dt1 . W (s2 ) − W (s1 ) and 1 A are l independent..1) G = A... Moreover. To prove the claim it is enough to show that any cylindrical set Ct1 . Proof. ∀ G ∈ G.tn . By using Proposition 4.I belongs to G . l Since W is a process with independent increments... . Then we have P(A ∩ G) = P(A)P(G).

In fact (τ ) Ct1 .2 Stopping times A nonnegative extended (that is with values in [0.. . for all t ≥ 0. but it is a stopping time with respect to the filtration (Ft+ )t≥0 . the σ-algebra generated by all Ct1 . ω(tn )) ∈ I} = Ct1 .I is Fτ -measurable.I ∩ {τ ≤ t} = Ct1 . (ω(t1 ). In other words we have Fτ ⊃ σ(τ ). In fact ∞ {τ ≤ t} = k=1 τ ≤t+ 1 k ∈ Ft+ .tn ..tn . Moreover.... then {τ > t} and {τ = t} belong obviously to Ft for all t ≥ 0.I in included in Fτ and one can show that it coincides with Fτ . We claim that Ct1 . .tn .. (τ ) (τ ) (τ ) Then τ is not in general a stopping time with respect to (Ft )t≥0 ... In fact.6 Let τ be an extended random variable such that {τ < t} ∈ Ft . τ is Fτ -measurable. B(C0 )... < tn and I∈B(R) we define Ct1 . For 0 < t1 < ...I ∩ {tn < τ ≤ t} So.. Remark 4. if A = {τ ≤ s} we have A ∩ {τ ≤ t} = {τ ≤ t ∧ s} ∈ Ft∧s ⊂ Ft ......tn .tn ... Let us describe the σ-algebra Fτ .. Q) is called a stopping time with respect to the filtration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0.46 Chapter 4 4.. If τ is stopping time.. where σ(τ ) is the σ-algebra generated by τ ....I ∩{tn < τ }.. To any stopping time τ we associate the σ-algebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}...I = {ω ∈ Ω : tn (ω) < τ. +∞]) random variable τ in (C0 .tn .

(4.Markov property 47 Exercise 4. Then we have A ∩ τn = so that A ∈ Fτn . τn is a stopping time. if t = 2k with k ∈ N we have n {τn = t} = Finally. 0 < t1 < · · · < tk < · · · ω ∈ Ω.3) ∀ t ≥ 0. . (4. Proof. Proposition 4. Then Wτ is Fτ -measurable. let A ∈ Fτ . Show that in this case Fτ is the σ–algebra Fτ : = {A ∈ F : A ∩ {τ = µk } ∈ Fµk for all k ∈ N}. In fact. We start by showing that Wτ is Fτ -measurable. k 2n =A∩ k−1 k ≤τ < n n 2 2 ∈Fk. Assume first τ discrete.8 Let τ be a stopping time.2) It is clear that the sequence (τn ) is decreasing. Moreover.7 Assume that the nonnegative random variable τ is discrete.9 Let τ be a stopping time and set Wτ (ω) = W (τ (ω). Proposition 4. Define for any n ∈ N and ω ∈ Ω τn (ω) = k 2n if k−1 k ≤ τ (ω) < n . ω). n 2 k k−1 ≤τ < n n 2 2 ∈ Ft . n 2 2 k ∈ N. ∀ k ∈ N. We want to extend several properties concerning time t to general stopping times τ . Show that τ is a stopping time if and only if {τ = µk } ∈ Fµk for all k ∈ N. Proof. that is that τ (Ω) = (µk )k∈N where µk is an increasing sequence of positive numbers. Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. τ (Ω) = {tk }. that is A ∩ {τ ≤ t} ∈ Ft .

Let now τ be arbitrary.t] {W (s) ≤ a} = {W (s) ≤ a} ∈ Ft . Let I ∈ B(R). Since W is continuous we have n→∞ ω ∈ Ω. the conclusion holds in this case.t]∩Q Consequently. by Remark 4. Example 4. s∈[0. Then {τa > t} = s∈[0.2) and set Wτn (ω) = W (τn (ω). Then we have {τ ≥ t} = s∈[0. ω).t] {W (s) < a} = {W (s) < a} ∈ Ft . Fix t ≥ 0. ω ∈ Ω. let τn be defined by (4. lim Wτn (ω) = Wτ (ω). ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ I} ∩ {τ ≤ t} ∩ Ak ] ∈ Ft . k ∈ N.4) τa = inf{t ≥ 0 : W (t) = a}. By the previous argument we have {Wτn ∈ I} ∩ {τn ≤ t} ∈ Ft Now the conclusion follows letting n → ∞. τ is a stopping time with respect to filtration {Ft+ }t≥0 . .t]∩Q So. Let now τ = inf{t ≥ 0 : W (t) > a}. Then {Wτ ∈ I} ∩ {τ ≤ t} = = = ∞ k=1 [{Wtk ∞ k=1 [{Wτ Chapter 4 ∀ω ∈ Ak . ∞ {k∈N: tk ≤t} [{Wtk So. (1) We use the convention that the infimum of the empty set is +∞.10 Let a ∈ R and set (1) for all I ∈ B(R). τa is a stopping time with respect to the filtration (Ft )t≥0 .48 and set Ak = {τ = tk }. k ∈ N. s∈[0. (4.6. Then we have Wτ (ω) = W (tk )(ω).

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. 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). (4.5) ∀ i ∈ N.5) is proved. is a Brownian motion for any h > 0.5) follows letting n tend to infinity. Then C(t) := W (t + τ ) − W (τ ).5) it follows that C(t) is a Gaussian random variable Nt . Let now τ be general and let (τn ) be the sequence of finite stoppping times defined by (4. We want now to show that the same holds when h is replaced by a stopping time. is a Brownian motion. Continuity of C(t) is obvious. t ≥ 0. We have just proved that E eiα(W (t+τn )−W (τn )) = e− 2 α t .Markov property 49 4. Proposition 4. Let us first prove that the law of C(t) is Nt . By (4. Proof. 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. τ (Ω) = (tk ) and set Ai = {τ = ti } ∈ Fti .2). . l Since 1 Ai and W (t + ti ) − W (ti ) are independent. 1 2 α ∈ R. Assume first that τ is discrete. Now (4.11 Let τ be a stopping time. Then we have ∞ ∞ 1 2 t ≥ 0. α ∈ R. 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 )) .

is the unique solution of the Dirichlet problem above.t we have Pt ϕ(x) = E[ϕ(W (t) + x)] = √ 1 2πt +∞ +∞ −∞ e− 2t (x−y) ϕ(y)dy 1 2 (4. ϕ ∈ Bb (R). t > 0. we define the transition semigroup Pt ϕ(x) = E[ϕ(W (t) + x)]. ∀ t > 0. There is a simple deterministic proof based on maximum principle and a stochastic proof. o Exercise 4.50 Chapter 4 4. (4. t ≥ 0. Remark 4. Given ϕ ∈ Bb (R) we want to study the evolution in time of ϕ(W (t) + x). s ≥ 0. Notice that Pt coincides with the heat semigroup in R. x) = Pt ϕ(x) is continuous. t ≥ 0. x) = ϕ(x). x ∈ R. (4. ∀ x ∈ R. t ≥ 0. is a semigroup of linear operators in Bb (R).13 Prove that for t > s ≥ 0. that Pt .  2   u(0. x ∈ R.9) . which we will present later. Pt−s ϕ(x) = E[ϕ(W (t) − W (s) + x)]. (4. x) = Pt ϕ(x). +∞) × R → R.7) = −∞ gt (x − y)ϕ(y)dy. bounded and Borel functions and by Cb (R) the subspace of Bb (R) of those functions which are uniformly continuous and bounded on R. that is P0 = I and where gt (ξ) = √ Pt+s = Pt Ps . In fact one checks easily that if ϕ ∈ Cb (R) then the function u : [0. ∀ t.8) 2πt We deduce. x ∈ R. x). ξ2 1 e− 2t . u(t. ϕ ∈ Bb (H). based on Itˆ’s formula. ξ ∈ R. x ∈ R. infinitely differentiable and fulfills   ut (t.12 One can show that u(t. To this purpose.4 Transition semigroup We shall denote by Bb (R) the set of all real. x) = 1 uxx (t. by an explicit computation.6) Since the law of W (t) + x is Nx.

they are recalled in Appendix A. Proposition 4. ∀ A ∈ Fs .15 Let s > 0. By Proposition B. η a Fs -measurable random variable and ϕ ∈ Bb (R). where (recall Exercise 4.Markov property 51 4. We are here concerned with the stochastic process X(t) = X(t. Proof.10) (Pt−s ϕ)(X(s))dP. x) = W (t) + x. (4.3 we have E[ϕ(X(t))|X(s)] = E [E[ϕ(X(t))|Fs ]|X(s)] = E[Pt−s ϕ(X(s))|X(s)] = Pt−s ϕ(X(s)) = E[ϕ(X(t))|Fs ].14 For any t > s > 0 and any ϕ ∈ Bb (H) we have E[ϕ(X(t))|Fs ] = (Pt−s ϕ)(X(s)).5 Markov property In this section we shall use several properties of conditional expectation. (4. So. Exercise 4. Equivalently ϕ(X(t))dP = A A t ≥ 0. where x ∈ R.13) h(u) = E[ϕ(u + V )] = E[ϕ(u + W (t) − W (s))] = Pt−s ϕ(u). To prove the last statement notice that by Proposition B. . Show that E[ϕ(W (t) + η|Fs ] = (Pt−s ϕ(η)).11) Moreover X(·) is a Markov process.6 it follows that E[ϕ(X(t))|Fs ] = E[ϕ(U + V )|Fs ] = h(U ).10) is proved. Set X(t) = W (t) + x = (W (s) + x) + (W (t) − W (s)) =: U + V. (4. Notice that U is Fs -measurable and V is independent of Fs .

∞ (Pt−τ ϕ)(W (τ ))dP = A ∞ i=1 A∩{τ =ti } (Pt−ti ϕ)(W (ti ))dP = i=1 ∞ A∩{τ =ti } E[ϕ(W (t))|Fti ]dP = i=1 A∩{τ =ti } ϕ(W (t))dP = A ϕ(W (t))dP. Therefore.13) is proved. .10) and taking into account that by the definition of Fτ we have A ∩ {τ = ti } ∈ Fti .13) Proof. Assume first that τ is of the form τ (Ω) = (tk )k∈N . by (4. ∀ A ∈ Fτ .. Proposition 4.16 Let τ be a stopping time and let t ≥ τ and ϕ ∈ Bb (H). Let A ∈ Fτ . 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. we can write. .. (4.1 Strong Markov property We now consider conditional expectation with respect to Fτ where τ is a stopping time.. Therefore. (4. n. so that X(t) = W (t). We set x = 0 for simplicity. i = 1.12) Equivalently ϕ(X(t))dP = A A (Pt−τ ϕ)(X(τ ))dP. (4.Then we have E[ϕ(X(t))|Fτ ] = (Pt−τ ϕ)(X(τ )).52 Chapter 4 4.5.

M (t) ≥ a) = P(B(t) ≥ a). • Tb = inf{t ≥ 0 : B(t) = b}. s∈[0. • m(t) = min B(s). Lemma 4.2). 4. Then we have P(B(t) ≤ a. Property (4.17 Let a ≥ 0 and t ≥ 0.14) .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. t ≥ 0. • M (t) = max B(s). Then by (4.15) To find the laws of Ta with a ≥ 0 and M (t) the following lemma is useful. Now the conclusion follows letting n → ∞. Recall that (Proposition 4. a ≥ 0 (4.16) t ≥ 0.8) F τ ⊂ F τn for all n ∈ N. Proof.t] Notice that {Ta ≤ t} = {M (t) ≥ a}. t ≥ 0. Let A ∈ Fτ . t ≥ 0.t] b ∈ R.Markov property 53 Let now τ be an arbitrary stopping time and let (τn ) be defined by (4. taking into account that {Ta ≤ t} = {M (t) ≥ a} (4. (4.13) it follows that ϕ(W (t))dP = A A (Pt−τn ϕ)(W (τn ))dP for all A ∈ Fτ . and {Ta ≤ t} = {m(t) ≤ a}. s∈[0. We have.12) is called the strong Markov property of W .

a] (W (t))|FTa ]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞.a] (a)]dP = {Ta ≤t} E[Pt−Ta 1 [a.17) . l E[Pt−Ta 1 (−∞. Ta ≤ t) = {Ta ≤t} Chapter 4 1 (−∞. l On the other hand. a > 0. as easily checked. Proposition 4.a] (W (Ta ))]dP l = {Ta ≤t} E[Pt−Ta 1 (−∞.a] (W (t))|FTa ]dP. M (t) ≥ a) = P(W (t) ≤ a. By the strong Markov property it follows that P(W (t) ≤ a. l l Therefore P(W (t) ≤ a. W (t) ≥ a). Ps 1 (−∞.+∞) (a). Proof. l since {Ta ≤ t} ∈ FTa .a] (a) = Ps 1 [a.+∞) (a)]dP l = {Ta ≤t} E[1 [a. we have. M (t) ≥ a) = P(W (t) ≥ a). M (t) ≥ a) = {Ta ≤t} E[1 (−∞. (4. W (t) ≤ a) + P(M (t) ≥ a.18 (Reflection principle) For all a ≥ 0 we have P(M (t) ≥ a) = 2P(W (t) ≥ a).+∞) (W (t))|FTa ]dP l = P(W (t) ≥ a.a] (W (t))dP l = {Ta ≤t} E[1 (−∞. Write P(M (t) ≥ a) = P(M (t) ≥ a. M (t) ≥ a) = {Ta ≤t} ∀ s > 0.54 P(W (t) ≤ a.a] (a)]dP.

Then we have a2 a ((Ta )# P)(dt) = √ e− 2t dt. By Proposition 4. Corollary 4.18 for any a ≥ 0 P(M (t) ≥ a) = 2P(W (t)| ≥ a) = √ 2 2πt +∞ a e− 2t dξ ξ2 = P(|W (t)| ≥ a).+∞) (ξ)dξ. +∞)) are different.18) Proof. η2 a2 d a P(Ta ≤ t) = √ e− 2t dt.19 (Law of M (t)) For all t ≥ 0 we have ξ2 2 (M (t)# P)(dξ) = √ l e− 2t 1 [0. it is clear that P(M (t) ≥ a.14) and Proposition 4. W (t) ≥ a) = P(W (t) ≥ a) so. in particular M (t) is increasing whereas |W (t)| is not. Corollary 4. Obviously the laws of M (·) and |W (·)| on C0 ([0. though random variables M (t) and |W (t)| are different. dt 2πt3 which implies the conclusion.20 From Corollary 4. 2πt (4. Remark 4.18 we can easily deduce the expressions of the laws of M (t) and Ta for all a ∈ R. We have in fact by Proposition 4.19) Proof. Moreover.21 (Law of Ta ) Let a ≥ 0 and t ≥ 0. . W (t) ≤ a) = P(W (t) ≥ a). 2πt3 (4. By (4.Markov property 55 Now. by Lemma 4. The following results can be proved similarly.17 we have P(M (t) ≥ a.18 we have 2 P(Ta ≤ t) = P(M (t) ≥ a) = √ 2πt 2 =√ 2π Therefore +∞ at−1/2 +∞ a e− 2t dξ ξ2 e− 2 dξ. the conclusion follows.19 it follows that at fixed time t the law of M (t) coincides with that of |W (t)|.

Then we have P(W (t) ≥ a. U (t) is called the Brownian motion reflected in 0 (iii) V (t) = W (t ∧ τx ) + x. x ≥ 0.21) Corollary 4. Then we have a2 |a| e− 2t dt.22 Let a ≤ 0 and t ≥ 0.22) Corollary 4. (i) Y (t) = W (t) + x. τx ]. (4. V (t) is called the Brownian motion .20) Proposition 4. 2πt (4. ((Ta )# P)(dt) = √ 2πt3 (4.a] (ξ)dξ. ∀ t ∈ [0. m(t) ≤ a) = P(W (t) ≤ a).7 Application to partial differential equations τx = inf{t ≥ 0 : W (t) + x = 0} = T−x .25 (Law of Ta ) Let a ∈ R and t ≥ 0.24 (Law of m(t)) For all t ≥ 0 we have (m(t)# P)(dξ) = − √ ξ2 2 e− 2t 1(−∞. For any x ≥ 0 we set in this section Moreover we consider the following processes which take values in [0. t ≥ 0.56 Lemma 4.23) 4. (ii) U (t) = |W (t) + x|.23 (Reflection principle) For all a ≤ 0 we have P(m(t) ≤ a) = 2P(W (t) ≤ a). +∞). absorbed in 0 t ≥ 0. Chapter 4 (4. Y (t) is called the Brownian motion killed in 0.

Proposition 4.Markov property 57 4. t > 0    2   (4. using the strong Markov property we find that. . l where ϕ is extended to R by setting ϕ(−x) = ϕ(x). t > 0. x) is the solution of the Dirichlet problem in [0. (4. E[ϕ(W (t) + x)1 t>τx ] = E[1 t>τx (Pt−τx ϕ)(0)] =: E[ψ(τx )]. x ≥ 0.25)  u(t.1 The Dirichlet problem in the half-line ∀ t ∈ [0. x ∈ H.26 We have +∞ u(t.24) We are here concerned with the process Y (t) = W (t) + x. +∞). Proof. We are going to show that u(t. x). x) = 1 uxx (t. e− 2(t−λ) ϕ(ξ)dξ. l t ≥ 0.   ut (t.      u(0. x ≥ 0. x) = ϕ(x). Define for any ϕ ∈ Bb ([0. (4. x) = 0 [gt (x − y) − gt (x + y)]ϕ(y)dy. x > 0.26) where g is defined by (4. +∞)) Ut ϕ(x) := u(t. 0) = 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. t ≥ 0. l l where ψ(λ) = 1 t>λ l 1 2π(t − λ) R x ≥ 0. τx ].7. x) := E[ϕ(W (t) + x)1 t≤τx ].8). ξ2 λ > 0. We have u(t. x) = E[ϕ(W (t) + x)1 t≤τx ] l = Pt ϕ(x) − E[ϕ(W (t) + x)1 t>τx ].

a We recall that Erfc (a) = 2 √ π . we see that +∞ Qt ϕ(x) = 0 (2) [gt (x − y) + gt (x + y)]ϕ(y). Replacing in the last integral y with −y. t ≥ 0.7.y = − √ e− 2t = −gt (x + |y|) ∂x 2πt we get u(t. Moreover U0 = I and Ut+s = U (t)U (s) for all t. x) is the solution of the Dirichlet problem (4. Ut ϕ(x) = u(t.y ϕ(y)dy. It is easy to check. (x+|y|)2 1 ∂ Gx. x) = R gt (x − y)ϕ(y)dy − R gt (x + |y|)ϕ(y)dy.y = 0 gt−s (y)gs (x)ds = 1 Erfc 2 |x| + |y| √ 2t . Since.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. recalling the law of τx (see (4. R where (2) t Gx.2 The Neumann problem U (t) = |W (t) + x|. that if ϕ ∈ Cb ([0. We consider the process For any ϕ ∈ Bb ([0. for x > 0. +∞)). +∞ −r 2 e dr.58 Next. 4. s ≥ 0.25). and the conclusion follows. by a direct computation. +∞)) we set Qt ϕ(x) = E[ϕ(|W (t) + x|)] = (2πt)−1/2 R e− |x−y|2 2t ϕ(|y|)dy. x ≥ 0.

x ≥ 0. x ≥ 0. t ≥ 0    2   +∞ Zt ϕ(x) =  uxx (t. +∞)). +∞)). [gt (x − y) − gt (x + y)]ϕ(y)dy + √ 2πt −∞ 0 If ϕ ∈ Cb ([0. s ≥ 0. ∞) and solves the following Neumann problem   ut (t. t ≥ 0.Markov property 59 where gt is defined by (4.24). ∞). ϕ(B(t ∧ τx ) + x)dP ϕ(W (t) + x)dP + ϕ(0)dP. ∞) × [0. .8). 0) = 0. So x y2 ϕ(0) e− 2t dy. x) = 1 uxx (t. t > 0. x) = 1 uxx (t. ∞) × [0. x) = Zt ϕ(x) we see that u is the solution to the Ventzell problem.      u(0. {t≥τx } = {t<τx } since W (τx ) + x = 0. 4. t ≥ 0.      u(0. x) = Qt ϕ(x) is continuous in [0.   ut (t. where Ut is defined by (4. +∞)) then u(t. x) = ϕ(x). x). infinitely differentiable in (0. Let us consider the stochastic process.3 The Ventzell problem V (t) = W (t ∧ τx ) + x.7. where x ≥ 0. Set Zt ϕ(x) = E[ϕ(W (t ∧ τx ) + x)]. t > 0. x) = ϕ(x). setting u(t. Moreover Q0 = I and Qt+s = Q(t)Q(s) for all t. Zt ϕ(x) = Ω ϕ ∈ Bb ([0. So. x ≥ 0. Therefore Zt ϕ(x) = Ut ϕ(x) + ϕ(0) P(T−x ≤ t). 0) = 0. x). x ≥ 0. Now it is easy to check that if ϕ ∈ Cb ([0.    2    ux (t. x ≥ 0.

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

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

3) is proved. t ∈ [0. Then I(F ) ∈ L2 (Ω. Let us prove (5. 2 Proposition 5.4). Notice now that for j < k the random variable Fj−1 Fk−1 [B(tj ) − B(tj−1 )]. n − 1.. (5. We have n E[I(F )] = j=1 E[Fj−1 (B(tj ) − B(tj−1 ))]. 0 = t0 < t1 < · · · < tn = T and Fi is Fti -measurable for any i = 0. F . P) and we have T E 0 T F (s)dB(s) 2 T =0 E(|F (s)|2 )ds. Therefore we have n E[I(F )] = j=1 E[Fj−1 ]E[B(tj ) − B(tj−1 )] = 0 and (5.4) E 0 F (s)dB(s) = 0 Proof.3) (5. For any elementary process F (t).. it is independent of B(tj )−B(tj−1 ).3).2) Obviously any elementary process is adapted. 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 )] .62 The Itˆ integral o where n ∈ N. T ]..3. 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 )). 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. 1.2 Assume that F ∈ EB (0. T ). by Lemma 4. Let us prove (5. . Since Fj−1 is Fj−1 measurable. . (5.

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

T ].5) (5.64 In view of (5. the mapping T 2 EB (0. T ) are called predictable.7) We can define in an obvious way the Itˆ integral o interval [a. the Itˆ integral can be uniquely defined by extension for any preo dictable square integrable process F (t).3 it follows that if F and G are predictable square integrable processes we have T T E 0 F (s)G(s)dB(s) = 0 E[F (s)G(s)]ds. from Exercise 5. for any a. 2 is an isometry. T ] we have c b c F (s)dB(s) = a a F (s)dB(s) + b F (s)dB(s). T E 0 T F (s)dB(s) 2 T =0 E(|F (s)|2 )ds. T ) ⊂ ZT → L2 (Ω. Let us now present a characterization of predictable processes (that is of 2 space EB (0. Note first that an elementary process is a linear combination of processes of the form F 1 [a. c ∈ [0. T ) 2 of EB (0. Therefore it can be uniquely extended to the closure EB (0.6) E 0 F (s)dB(s) = 0 Moreover. T ) in ZT . b. So.4). P)F → 0 The Itˆ integral o F (s)dB(s). b] ⊂ [0. b a (5. FT . T )). and b b E a F (s)dB(s) = a (E|F (s)|2 )ds.b) . Moreover. . 2 Processes belonging to EB (0. (5. l with F Fa -measurable. t ≥ 0 and the following properties are fulfilled. We have b F (s)dB(s) in any E a F (s)dB(s) 2 = 0.

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

tn } ∈ Σ(0.9) |σ|→0 Consequently we have T |σ|→0 lim Iσ (F ) = 0 F (s)dB(s) in L2 (Ω. is continuous. T ).. T ] and the mapping [0.66 The Itˆ integral o 5. in L2 ([0. F . .10) Example 5.11) Let σ = {t0 . L2 (Ω)) then F (t) is Ft -measurable for all t ∈ [0.. · · · . dt × P). t1 .. 2 2 2 . tn } ∈ Σ(0. T ) consider the elementary process n Fσ := j=1 F (tj−1 )1 [tj−1 . 2 (5. T ].2 Itˆ integral for mean square continuous o processes We shall denote by CB ([0. Write B(tk−1 )(B(tk ) − B(tk−1 )) = B(tk−1 )B(tk ) − B 2 (tk−1 )) 1 1 1 1 = − B 2 (tk ) + B(tk−1 )B(tk ) − B 2 (tk−1 ) + B 2 (tk ) − B 2 (tk−1 ) 2 2 2 2 = 1 2 1 1 B (tk ) − B 2 (tk−1 ) − (B(tk ) − B(tk−1 ))2 . 2 Clearly Fσ ∈ EB (0. t → F (t). P. T ) and. t1 . P). T ] × Ω.tj ) l and set T n Iσ (F ) := 0 Fσ (s)dB(s) = j=1 F (tj−1 )(B(tj ) − B(tj−1 )). We recall that if F ∈ CB ([0. T ]. T ] → L2 (Ω. (5. F . For any decomposition σ = {t0 . P). L2 (Ω)) the space of all stochastic processes which are mean square continuous and adapted. (5. using the continuity of F one can check easily that lim Fσ = F.8 Let us prove that T 0 1 B(t)dB(t) = (B 2 (T ) − T ).

2 t ≥ 0. is not a process with independent increments in general (unless f is deterministic). F .10 Let 0 ≤ t1 ≤ t2 ≤ t3 ≤ t4 ≤ T . t ∈ [0. in L2 (Ω. We first notice that X(t). 2 and n |σ|→0 lim B k=1 tk + tk−1 2 (B(tk ) − B(tk−1 )) = 1 2 B (T ). X(t). in L2 (Ω.19). 2 Therefore the definition of the Itˆ integral depends on the particular form of o the integral sums. has orthogonal increments (in the sense of L2 (Ω. Proposition 5. dt × P and set X(t) = 0 F (s)dB(s). P). Then we have E[(X(t2 ) − X(t1 ))(X(t4 ) − X(t3 ))] = 0 . take for instance t X(t) = 0 B(s)dB(s) = 1 (B 2 (t) − t). t ≥ 0. T ] × Ω. 5. T ]. P)) as the following result shows. P).9 Prove that n |σ|→0 lim B(tk )(B(tk ) − B(tk−1 )) = k=1 1 (B 2 (T ) + T ). k=1 Recalling that the quadratic variation of B is T (Theorem 3. However. we deduce that T 1 B(t)dB(t) = lim Iσ (B) = (B 2 (T ) − T ). P.3 The Itˆ integral as a stochastic process o t Let F ∈ L2 ([0.Chapter 5 Then we have Iσ (B) = 1 1 2 B (T ) − 2 2 n 67 (B(tk ) − B(tk−1 ))2 . F . |σ|→0 2 0 Exercise 5. t ≥ 0. F .

we have E[X(t)|Fs ] = X(s) + E s t F (r)dB(r)|Fs . P. Then X ∈ CB ([0.11 Let F ∈ L2 ([0. t ≥ 0.t4 ] F (s)dB(s) l = 0 1 [t1 .t4 ] E(F 2 (s))ds = 0. Proposition 5. T ]. T ].12 X(t). Since t X(t) − X(s) = s F (r)dB(r). We show now that X(t). For this we first prove that it is a martingale with respect to the filtration (Ft ) (see Appendix C). so that t→t0 lim E(|X(t) − X(t0 )|2 ) = 0. T ] we have t E(|X(t) − X(t0 )|2 ) = t0 E(|F (r)|2 )dr .68 Proof. t ≥ 0. t0 ∈ [0. Proposition 5. dt×P). is a continuous process. . T ]. Let t > s. We know that for any t ∈ [0.t2 ] F (s)dB(s) l 0 1 [t3 . taking into account (5. is a Ft –martingale Proof. for any t. We have in fact. T ]×Ω.7) E[(X(t2 ) − X(t1 ))(X(t4 ) − X(t3 ))] t2 t4 The Itˆ integral o =E t1 T F (s)dB(s) t3 F (s)dB(s) T =E 0 T 1 [t1 . t ∈ [0. Ft . then that it is a continuous process. X(t) ∈ L2 (Ω. L2 (Ω)). The conclusion follows. l l We are going to show that X(t). Proof. Moreover. is mean square continuous. P).t2 ] 1 [t3 .

ti ) . T ] × Ω.Chapter 5 So. since Fi−1 is Fi−1 –measurable and B(ti ) − B(ti−1 ) is independent of Fi−1 . 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 } = 0.12) when F is an elementary process. t ∈ [0. l where s = t1 . F . dt × P) t Fn (s)dB(s). dt × P) and let t X(t) = 0 F (s)dB(s). taking into account that Fs ⊂ Fi−1 .T ] 0 E|F (s)|2 ds. (5. t (5. T ]. Then X has a continuous version and T E sup |X(t)|2 ≤ 4 t∈[0.12) Notice that this is not obvious since s F (r)dB(r) is not independent of Fs in general (1) . It is enough to prove (5. P.12) is proved and the conclusion follows. We are now ready to prove the continuity of X. it remains to prove that t 69 E s F (r)dB(r)|Fs = 0. T ) such that Fn → F and set Xn (t) = 0 (1) in L2 ([0. Let (Fn ) ⊂ EB (0. n F = i=1 Fi−1 1 [ti−1 . Theorem 5. In this case. So. T ]. . T ] × Ω.13 Let F ∈ L2 ([0.13) 2 Proof. P. · · · . because F (r) contains in general the “story” of the Brownian motion from 0 to r. tn = t and Fi−1 ∈ L2 (Ω. (5. n ∈ N. t ∈ [0. P).

1 Itˆ integral with stopping times o Stopping times We proceed here as in Section 4. A nonnegative extended random variable τ in (Ω. T ]) for almost all ω and its limit. Consequently (Xn )(ω) is Cauchy in C([0. F. P) is called a stopping time with respect to the filtration (Ft )t≥0 if {τ ≤ t} ∈ Ft for all t ≥ 0. t ∈ [0. which coincides with X(ω) is continuous. T ]. they will be omitted.4 5. Proposition 5. Then W (τ ) is Fτ -measurable and W (t + τ ) − W (τ ).12 we see that X(t). m ∈ N E sup |Xn (t) − Xm (t)|2 t∈[0. Then there exists a decreasing sequence (τn ) of discrete stopping times convergent pointwise to τ such that Fτn ⊃ Fτ for all n ∈ N. 5. is a continuous Ft –martingale. .2. ω ∈ Ω. Proposition 5.4.T ] T ≤ 4E(|Xn (T ) − Xm (T )|2 ) = 4E 0 |Fn (s) − Fm (s)|2 ds . P). Then by Corollary C. So. The proofs of the two following propositions are completely similar to that of Proposition 4. Taking into account Proposition 5.6 it follows that for any n. F.70 The Itˆ integral o Since B(t) is continuous it is clear that Xn (t) is continuous for all n ∈ N.8 and 4.14 Let τ be a stopping time. t ≥ 0 is a Brownian motion in (Ω.8.15 Let τ be a stopping time and set W (τ )(ω) = W (τ (ω))(ω). To any stopping time τ we associate the σ-algebra Fτ : = {A ∈ F : A ∩ {τ ≤ t} ∈ Ft for all t ≥ 0}.

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

Let (Ft )t∈[0. m. T ] × Ω. if s ∈ [tk−1 . Then we have T T T E 0 f (s)dBi (s) 0 g(s)dBj (s) = δi. P. F . L(Rm . t≥0 Let m ∈ N be fixed and consider a standard m-dimensional Brownian motion in the probability space (Ω. tk ) with k ≤ n we have h(s) = 1 (Ak ∪. j = 1. P. Rd )).T ] be the natural filtration of B (augmented with all P-null sets of Ω) . dt×P)). We define the Itˆ o integral of F as the d-dimensional process T m T F (t)dB(t) 0 i = j=1 0 Fi.72 so that h(s) = 1 A2 ∪···∪An = 1 Ac . P). P. g ∈ L2 ([0. T ] × Ω. L(Rm .j (t)dBj (t).17 Let f. i = 1. We shall denote this space by L2 ([0.j 0 E[f (s)g(s)]ds... T ]×Ω..... Rd ))). (5.5 Multidimensional Itˆ integrals o B(t) = (B1 (t). dt × P). l l 1 Similarly.. Rd ) (that is such that any matrix element belongs to L2 ([0. First we need a lemma whose simple proof is left to the reader. We shall define the Itˆ integral for predictable processes with values o in L(Rm . .. i.∪An )c . T ] × Ω. 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.15) Let now F ∈ L2 ([0. Bm (t)). d. Lemma 5. dt × P. P.. . . l 5...

. (5. dB(t) = 0 E|F (t)|2 dt. Proof. Rm ) is isomorphic to Rm and F becomes a vector F = (F1 . d m 0 T E|I(F )| = i=1 j=1 2 E[Fi. Rd )).j (t)dBj (t) and. d.Chapter 5 73 Proposition 5. dt × P. Fm ). It follows that d m T 2 E|I(F )|2 = i=1 E j=1 0 Fi. L(Rm . Then we have m T (I(F ))i = j=1 0 Fi. dB(s) 0 and formula (5. · · · .16) where Tr denotes the trace..16).16) reduces to T 2 T E 0 F (t). . Remark 5. P. In this case we shall write the Itˆ integral of F as o T F (s). taking into account (5. which yields (5.j (t)dBj (t).19 Assume that d = 1 so that L(Rd .15). i = 1. Set I(F ) = T 0 F (t)dB(t).j (t)2 ]dt. T ] × Ω.17) .18 Let F ∈ L2 ([0. Then we have T 2 T E 0 F (t)dB(t) = 0 E[Tr (F (t)F ∗ (t))]dt. (5..

74 The Itˆ integral o .

P) be a probability space. x∈R and k ϕ k = ϕ 0 + j=1 sup |Dj ϕ(x)|. o k We need some notations.1 Introduction Let (Ω. continuous and continuous in mean square. dt × P) and consider the stochastic process t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s).1) where x ∈ R. σ ∈ L2 ([0. t ≥ 0. o Given a regular real function ϕ. 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.Chapter 6 The Itˆ formula o 6. X is adapted. F . x∈R 75 . We are given two stochastic processes b. we are going to give a meaning to the Itˆ’s differential ϕ (X(t)). (6. (Ft )t≥0 the natural filtration of B augmented with the null sets of P and P the σ-algebra of all predictable events (also augmented with the null sets of P). If ϕ ∈ Cb (R) we set ϕ 0 = sup |ϕ(x)|. P. T ] × Ω. We set dX(t) = b(t)dt + σ(t)dB(t) and call dX(t) the Itˆ differential of X. B a real Brownian motion.

2 t ≥ 0.3) t ≥ 0. 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. T ). L2 (Ω.2) in the differential form. Put (dB)2 = dt and neglet the terms of order greater than dt. 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 (6. F .4) 1 2 σ (t)ϕ (X(t)) + b(t)ϕ (X(t)) dt. T ]. k=1 . + or. Set Jη := n F (tk−1 )(B(tk ) − B(tk−1 ))2 . Tthe following result on quadratic sums of a process is a generalization of Theorem 3. 2 + 0 t ≥ 0.2 below.5) Proof. P)) and let η = {0 = t0 < t1 < · · · < tn = T } ∈ Σ(0.2 Let F ∈ CB ([0. F . also as ϕ (X(t)) = ϕ (X(t))dX(t) + 1 2 σ (t)ϕ (X(t))dt. (6.1 One can deduce formally Itˆ’s formula by proceeding as folo lows. Remark 6. setting ϕ (X(t)) = ϕ (X(t))σ(t)dB(t). P) (6. We shall write (6.19. Writing (dB)2 = dt is justified by Lemma 6. that is terms with (dt)2 and dt dB(t). o t Chapter 6 ϕ(X(t)) = ϕ(x) + 0 t ϕ (X(s))σ(s)dB(s) (6. Lemma 6.2) 1 2 σ (s)ϕ (X(s)) + b(s)ϕ (X(s)) ds.76 We shall prove the following Itˆ’s formula.

(6.The Itˆ formula o It is enough to prove that  |η|→0 77 n 2   = 0. To prove (6.6) write  E  Jη − n 2   2 F (tk−1 )(tk − tk−1 ) k=1  = E n   F (tk−1 ) |B(tk ) − B(tk−1 )|2 − (tk − tk−1 ) k=1 n = k=1 E |F (tk−1 )|2 |B(tk ) − B(tk−1 )|2 − (tk − tk−1 ) n 2 +2 j<k=1 E F (tj−1 )[|B(tj ) − B(tj−1 )|2 − (tj − tj−1 )] F (tk−1 )[|B(tk ) − B(tk−1 )|2 − (tk − tk−1 )] Since the Brownian motion has independent increments. .6) lim E  Jη − k=1 F (tk−1 )(tk − tk−1 ) since. obviously n |η|→0 T lim F (tk−1 )(tk − tk−1 ) = k=1 0 F (s)ds in L2 (Ω. 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. F . the last sum vanishes. P).7) = k=1 E|F (tk−1 )|2 E |B(tk ) − B(tk−1 )|2 − (tk − tk−1 ) 2 .

8) where p ∈ N. Since Cb (R) is dense in Cb (R) it is enough to show (6. In this case we have b(t) = b0 .. We start by proving (6.2) in [0. t ∈ [0. t ∈ [0.8) and X by (6.2) when 3 ϕ ∈ Cb (R).λi ) . The conclusion follows. 0 = λ0 < λ1 < · · · < λp and bi . p p b= i=1 bi−1 1 [λi−1 . we have  E  Jη − k=1 n n 2 Chapter 6   F (tk−1 )(tk − tk−1 ) =2 k=1 E[|F (tk−1 )|2 ](tk − tk−1 )2 n ≤ 2|η| k=1 E[|F (tk−1 )|2 (tk − tk−1 )] → 0. b and σ given by (6. 2 Lemma 6. t] with t ≤ λ1 . λ1 ] and X(t) = b0 t + σ0 B(t).78 since F (tk−1 ) and B(tk ) − B(tk−1 ) are independent. Now we are in position to prove Itˆ’s formula.. l σ= i=1 σi−1 1 [λi−1 . taking into account that E[|B(tk ) − B(tk−1 )|2 ] = (tk − tk−1 ). 3 2 Proof. First we assume that b o and σ are elementary processes. 1. Let η = {t0 = 0 < t1 < · · · < tN = t}. p − 1.1). σi are Fti -measurable for any i = 0. . as |η| → 0.3 Let ϕ ∈ Cb (R). E[|B(tk ) − B(tk−1 )|4 ] = 3(tk − tk−1 )2 . Then identity (6. .2) holds. Now. l (6. x ∈ R..λi ) . λ1 ]. Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]. σ(t) = σ0 .

3 .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. 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 . F . (6. P).1 | ≤ 1 ϕ 2 |b0 |2 (tk − tk−1 )2 → 0 as |η| → 0 2 k=1 N .11) It is easy to check that lim I2.9) Concerning I1 we have N I1 = k=1 ϕ (X(tk−1 ))(b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 )). (6. P) |η|→0 |η|→0 (6.The Itˆ formula o On the other hand. F . (6. So.2 = 0 in L1 (Ω.1 + I2.12) In fact |I2.10) 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 =: I2.2 + I2.

P). |ϕ (ξk ) − ϕ (X(tk−1 ))| ≤ ϕ 0 (1 − ξ)|X(tk ) − X(tk−1 )|.3 = 0 ϕ (X(s))σ 2 (s)ds in L2 (Ω. N |Rη | ≤ ϕ Consequently N 3 k=1 |X(tk ) − X(tk−1 )|3 .13) So. . (6.80 and (1) N Chapter 6 E|I2. (6. F . by Lemma 6. N |Rη | ≤ 3 ϕ 3 |b0 |3 k=1 (1) |tk − tk−1 |3 + 3 ϕ 3 |σ0 |3 k=1 |B(tk ) − B(tk−1 )|3 since E|B(t)| ≤ [E|B 2 (t)|]1/2 = t1/2 .14).2 | ≤ ϕ 2 |b0 | |σ0 | k=1 N (tk − tk−1 )E|B(tk ) − B(tk−1 )| ≤ ϕ 2 |b0 | |σ0 | k=1 (tk − tk−1 )3/2 → 0 as |η| → 0.14) Let us prove (6. where ξk = (1 − ξ)X(tk−1 ) + ξX(tk ). 3 Since ϕ ∈ Cb (R) we have by the mean value theorem. the conclusion will follow provided |η|→0 lim E|Rη | = 0. so that. We have N 1 Rη = k=1 0 (1 − ξ)[ϕ (ξk ) − ϕ (X(tk−1 ))](X(tk ) − X(tk−1 ))2 dξ. Moreover.2 it follows that t |η|→0 lim 2I2. we deduce setting 1 − ξ ≤ 1.

N 3 k=1 E(|Rη |) ≤ 3 ϕ 3 |b0 | |tk − tk−1 | + 3 ϕ 3 |σ0 | 3 3 √ N 15 k=1 |tk − tk−1 |3/2 → 0. We finally prove 2 Theorem 6. Proof. T ].2) we have t ϕ(Xj (t)) = ϕ(x) + 0 t ϕ (Xj (s))σj (s)dB(s). s ∈ [0. 2 + 0 Now the conclusion follows by the dominated convergence theorem letting j → ∞.4 Let x ∈ R. Then identity (6. b. σ ∈ L2 ([0. Taking expectation in the Itˆ formula we find a useful identity which o allows to estimate the expectation of ϕ(X(t)).10)) j→∞ lim Xj = X in CB ([0. T ] × Ω. The proof is complete when t ≤ λ1 . for any j ∈ N. (2) Since E|B(t)|3 ) ≤ [E(B(t)6 )]1/2 = √ 15. dt × P) and ϕ ∈ Cb (R).16) 1 σj (s)ϕ (Xj (s)) + bj (s)ϕ (Xj (s)) ds. as |η| → 0. T ].The Itˆ formula o and so (2) 81 . Let (bj ) and (σj ) be sequences of elementary processes such that j→∞ lim bj = b. P. . dt × P). T ]. t t Xj (t) = x + 0 bj (s)ds + 0 σj (s)dB(s). T ] × Ω.15) Then we have (see (5. Moreover by (6. Set. (6. L2 (Ω)). j→∞ lim σj = σ in L2 ([0. (6. 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) holds for all t ∈ [0. P.

Example 6. 0 (6.18) and assume in addition that t E 0 |ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)|ds < +∞. Let t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s). T ] × Ω. b. dt × P) and ϕ ∈ C 2 (R). T ]. (6. Then t E(|X(t)|2 ) = |x|2 + E 0 (σ 2 (s) + 2X(s)b(s))ds. P.1 The Itˆ formula for unbounded functions o We want now to show that formula (6. (6. t ∈ [0. Then condition (6. 2 Cb (R) Proof of Proposition 6. b. Then E[ϕ(X(t))] = ϕ(x) + 1 E 2 t [ϕ (X(s))σ 2 (s) + 2ϕ (X(s))b(s)]ds. .1.5 Assume that x ∈ R.19) Then E[ϕ(X(t))] < +∞ and (6.17) also holds without the assumption that ϕ is bounded.17) holds. T ] × Ω. dt × P) and 2 ϕ ∈ Cb (R). For any R > 0 consider a function ϕR ∈ such that ϕ(x) if |x| ≤ R.7 Take ϕ(x) = x2 .82 Chapter 6 Proposition 6. provided the integrand in the right hand side is summable. σ ∈ L2 ([0.6. P.19) becomes t E 0 |σ 2 (s) + 2X(s)b(s)|ds < +∞ which is clearly fulfilled. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dB(s). ϕR (x) = 0 if |x| ≥ R + 1. σ ∈ L2 ([0. Proposition 6. T ]. t ∈ [0.17) 6.6 Assume that x ∈ R.

T ] τR = It is clear that τR is increasing and bounded by T .23) 1 s<(t∧τR ) [ϕ (X(s))σ (s) + 2ϕ (X(s)b(s)]ds.22) Taking expectation we obtain E[ϕ(X(t ∧ τR ))] − ϕ(x) 1 = E 2 t (6. t∈[0.   t∈[0. We know that X(·. we can let R → ∞ obtaining the conclusion. As an application of Proposition 6. applying Itˆ’s formula (6.20) t ϕR (X(s)))σ(s)dB(s). (6. in view of Proposition 5. Then we have τR (ω) = T for all R > M (ω).21) Now.The Itˆ formula o Then.2) to ϕR (X(t)). say M (ω).s.16 we can write ϕ(X(t ∧ τR )) − ϕ(x) = 1 2 + 0 t 1 s<(t∧τR ) [ϕ (X(s))σ 2 (s) + 2ϕ (X(s)b(s)]ds l 0 t 1 s<(t∧τR ) ϕ (X(s)))σ(s)dB(s). by the assumption (6. l (6. For such a ω. Let now τR be the stopping time   inf{t ∈ [0.21) and the dominated convergence theorem.6 let us estimate E where F is predictable and m ∈ N. R→∞ lim τR = T P–a.19). ω) is continuous for almost all ω ∈ Ω. (6. T 0 2m F (s)dB(s) . So. T ] : |X(t)| ≥ R} if sup |X(t)| ≥ R. m > 1. l 2 0 Now.. ω) attains the maximum. 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. X(·.T ]   T  if sup |X(t)| < R.

P. t ∈ [0.26) From which 0 E|X(t)|4 dt ≤ 36T 2 0 E|F (t)|4 dt. Assume that x ∈ Rd . (6. Substituting this in (6. T ] .19) holds so that. dt × P. dt × P. We can now easily iterate the previous argument taking successively m = 3.84 Chapter 6 Proposition 6. by Proposition 6. 6.6 we have t E[|X(t)|4 ] = 6E 0 |X(s)|2 |F (s)|2 ds .25) yields T E[|X(t)|4 ] ≤ 36T E 0 |F (t)|4 dt. T ] × Ω. Set t t X(t) = x + 0 b(s)ds + 0 σ(s)dW (s). dt × P) is dense in L2m ([0. T ] × Ω. T ] × Ω. Rd )). Rd ) and σ ∈ L2 ([0. We start from the case m = 2. L(Rm .2 Itˆ’ formula for a vector valued process o Let d. T ] × Ω. yields T T 1/2 T 1/2 E|X(t)| dt ≤ 6T E 0 0 T 4 |X(t)| dt T 4 E 0 |F (t)| dt 4 . m ∈ N. It is enough to prove (6. dt × P). P. Then X ∈ L2m ([0.8 Assume that F ∈ L2m ([0. P.24) Proof. dt × P) and we have T E[|X(T )| 2m ] ≤ [m(2m − 1)] T m m−1 0 E |F (t)|2m dt. (6. T ]. 4 and so on. P. Then (6.25) Integrating between 0 and T . (6.24) when F is bounded (because L∞ ([0.24) is proved for m = 2. setting ϕ(x) = x4 . By H¨lder’s inequality it follows that o t 1/2 t 1/2 E[|X(t)|4 ] ≤ 6 E 0 |X(s)|4 ds E 0 |F (s)|4 ds . T ] × Ω. t ∈ [0. (6. m ∈ N. and set t X(t) = 0 F (s)dB(s). T ] × Ω. dt × P)). So. P. P. b ∈ L2 ([0.

o t 85 ϕ(X(t)) = ϕ(x) + 0 t Dϕ(X(s)). If i = j.j 0 Proof. T ]. Let η = {0 = t0 < t1 < · · · < tn = T } be a decomposition of [0. (6. in L2 (Ω. Lemma 6. Let us start with a preliminary lemma. j ∈ {1. L2 (Ω)) and let i.28) The proof is similar to that of the one-dimensional case seen before.9 Let f ∈ CB ([0. m}.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. Let i = j and set n η Ii.j )2 ] = E h.27) for all t ∈ [0. T ].. P). Then we have n σ E[(Ii. t ≥ 0. σ(t)dB(t) + 1 Tr[(σσ ∗ )(t)D2 ϕ(X(t))] + b(t). Dϕ(X(s)) 2 + 0 ds.. 1 Tr[(σσ ∗ )(s)D2 ϕ(X(s))] + b(s). We shall write (6. (6.2.29) f (s)ds. Then we have n |σ|→0 lim f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )) k=1 T (6. Dϕ(X(t)) 2 dt. F .j := k=1 f (tk−1 )(Bi (tk ) − Bi (tk−1 ))(Bj (tk ) − Bj (tk−1 )). So.27) in the differential form ϕ (X(t)) = Dϕ(X(t)). = δi. σ(s)dB(s) . . 2.The Itˆ formula o We are going to prove the following Itˆ’s formula. we shall only sketch some points of the proof.29) follows from Lemma 6. T ]. (6..

λ1 ]. t] with t ≤ λ1 .λi ) . (3) On the other hand. b0 (tk − tk−1 ) + σ0 (B(tk ) − B(tk−1 ) . h and D2 ϕ(x)(h. l σ= i=1 σi−1 1 [λi−1 . Then identity (6. h.λi ) . . (6. k ∈ Rd . X(t) = b0 t + σ0 B(t). o p p b= i=1 bi−1 1 [λi−1 . 2 Lemma 6.30) where p ∈ N. l (6.30). Rd ) and σi ∈ L2 (Ω. and σ(t) = σ0 . k for all x. X(tk ) − X(tk−1 ) + 1 2 N D2 ϕ(X(tk−1 ))(X(tk ) − X(tk−1 )).6) in [0. We proceed as in the proof of Lemma 6. We have b(t) = b0 . X(tk ) − X(tk−1 ) + Rη k=1 =: I1 + I2 + I3 . Fti . P. λ1 ] t ∈ [0. .. by Taylor’s formula we can write N ϕ(X(t)) − ϕ(x) = k=1 Dϕ(X(tk−1 )). L(Rm .. We use the notations Dϕ(x)h = Dϕ(x). 0 = λ0 < λ1 < · · · < λp bi ∈ L2 (Ω.. Fti . taking ϕ ∈ Cb (Rd ) and proving (6. 1.27) holds.86 Chapter 6 as |σ| → 0.3. x ∈ Rd and let b and σ given by (6. 3 Proof. P. p − 1.10 Let ϕ ∈ Cb (Rd ). Rd )) i = 0. Let η = {t0 = 0 < t1 < · · · < tN = t}. Then we obviously have N ϕ(X(t)) − ϕ(x) = k=1 [ϕ(X(tk )) − ϕ(X(tk−1 ))]. Now we prove Itˆ’s formula when b and σ are elementary processes as. t ∈ [0. k) = D2 ϕ(x)h.31) Concerning I1 we have N I1 = k=1 (3) Dϕ(X(tk−1 )).

j ϕ σi. (6.3 . σ(s)dB(s) in L2 (Ω. proceeding as before.1 +I2. b(s) ds+ 0 Dϕ(X(s)).2 +I2. (6. we have N 2I2.β=1 Therefore. we see that |η|→0 lim E|Rη | = 0.3 = = D2 ϕ(X(tk−1 ))(σ(B(tk ) − B(tk−1 ))).j ϕ(X(s)) σi.β (s)ds 0 i.α (s)σi.2 = 0 in L1 (Ω.35) .j=1 α. P).34) Moreover.32) Concerning I2 we write N 2I2 = k=1 D2 ϕ(X(tk−1 ))b0 . b0 (tk − tk−1 )2 N +2 k=1 N D2 ϕ(X(tk−1 ))b0 . σ0 (B(tk ) − B(tk−1 )) (tk − tk−1 ) + k=1 D2 ϕ(X(tk−1 ))σ0 (B(tk )−B(tk−1 )).33) It is easy to check that |η|→0 lim I2.α (Bα (tk ) − Bα (tk−1 )) σi.1 = lim I2.3 = = 0 Tr [D2 ϕ(X(s))(σσ ∗ (s))]ds. k=1 i.j=1 α=1 t lim 2I2. P) |η|→0 (6. σ(B(tk ) − B(tk−1 )) k=1 N d m 2 Di. F . t |η|→0 t 87 lim I1 = 0 Dϕ(X(s)).The Itˆ formula o So. taking into account Lemma 6. F .9 we have t |η|→0 d m 2 Di.β (Bβ (tk ) − Bβ (tk−1 )). σ0 (B(tk )−B(tk−1 )) =: I2. Now. (6.

36) dϕ(X(t)) = ϕ (X(t))dX(t) + where σ(t) = (σ1 (t). ... k = 1. dt × P). dt × P : Rd ).88 Chapter 6 The proof is complete when t ≤ λ1 . T ] × Ω.4 we obtain the result Theorem 6. σ(t) dt. P. P.12 Let d = 1.. m = 1 bi . i = 1. 2. . σi ∈ L2 ([0. Finally. i = 1. Let ϕ ∈ 2 Cb (R). Set X(t) = b(t)dt + σdB(t). 2 = . dt × P : L(Rm .. m ∈ N.. Exercise 6.. dt × P). Prove that dϕ(X(t)) = Dϕ(X(t)). m. P. Set m t t X(t) = 0 b(s)ds + k=1 0 σk (s)dBk (s). T ] × Ω.. dX(t) + 1 D2 ϕ(X(t))σ(t). σ ∈ L2 ([0. Exercise 6. b. 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. Rd )).. 2 (6. proceeding as we did for the proof of Theorem 6. 2 (6.. T ]. Let moreover ϕ ∈ Cb (Rd ). T ] × 2 Ω. Then identity (6. . x ∈ Rd and ϕ ∈ Cb (Rd ).37) ...13 Let d ∈ N. T ] × Ω.27) holds for any t ∈ [0.11 Let b ∈ L2 ([0.. 2 where σ = (σ1 . d. Prove that 1 ϕ (X(t))|σ(t)|2 dt. σd ). σm (t)). σk ∈ L2 ([0.

2 b S ∈ L(Rr . By a solution of equation (7. We shall write (7. t ≥ 0. (7. T ] × Rd → Rd and σ : [0.1) in differential form as   dX(t) = b(t. This suggests to endow L(Rr . L(R . for all G ∈ CB ([0.Chapter 7 Stochastic evolution equations We are given two positive integers r. T ] × Rd → L(Rr . T ]. T ] we mean a function X ∈ CB ([s. based on the identity b 2 b E a G(t)dB(t) 2 r = a d E [Tr (G(t)G∗ (t))] dt. (7. T ]. in a probability space (Ω. We denote by (Ft )t≥0 the natural filtration of B(t) (augmented with all P-null sets of Ω). L (Ω. (7.1) on the interval [s. Rd ). η ∈ L2 (Ω.1) we shall use a fixed point argument. T ). Rd ) with the Hilbert–Schmidt norm. L2 (Ω. R ))) and 0 ≤ a < b ≤ T. P.1). X(t))dt + σ(t. t ∈ [s. Rd )) that fulfills equation (7. X(t))dB(t). T ]. d and an r-dimensional standard Brownian motion B(t). b is called the drift and σ the diffusion coefficient of the equation. X(u))dB(u).2)  X(s) = η. Rd ) G(t) 2 HS E a G(t)dB(t) = a E dt. setting S and to write b HS : = [Tr(SS ∗ )]1/2 . In order to solve (7. Fs .3) 89 . Rd ).1) where s ∈ [0. Let us consider the following integral equation t t X(t) = η + s b(u. P). b : [0. F . X(u))du + s σ(u.

y) and |b(t. T ]. X(u))dB(u). Define γ1 (X)(t) := s t t b(u.5) Notice that. σ(u. Step 1. x) 2 HS 2 HS ≤ M 2 |x − y|2 (7. Rd ). x) − b(t. x. Proof. Fs . L2 (Ω.5) is a consequence of (7. X(u))du. T ] × Rd . y)|2 + σ(t.1) is equivalent to the following. Hypothesis 7.1 Existence and uniqueness The standard assumptions for the well-posedness of problem (7. T ).1) has a unique solution X ∈ CB ([s. X ∈ CB . We are going to solve (7. (7.1 Assume that Hypothesis 7.4) ≤ M 2 (1 + |x|2 ). t ∈ [s. T ].1 holds and let s ∈ [0. T ]. P. (ii) There exists M > 0 such that for all t ∈ [0.4). t ∈ [s. X ∈ CB . s X ∈ CB .6) . x) − σ(t. γ1 and γ2 map CB into itself.90 Chapter 7 7. x)|2 + σ(t. Theorem 7. Then equation (7. (7.1) are the following.1) by a fixed point argument in the space CB := CB ([s. (7.1 (i) b and σ are continuous on [0. after possibly changing the constant M . η ∈ L2 (Ω. Rd )). L2 (Ω. T ] γ2 (X)(t) := and set γ(X) := η + γ1 (X) + γ2 (X). Rd )). T ]. Then problem (7. X = η + γ1 (X) + γ2 (X) = γ(X). y ∈ Rd . we have |b(t.

γ1 (X) − γ1 (Y ) Furthermore CB ≤ M (T − s) X − Y CB . Concerning γ2 we have taking into account (7.5). We have. X(u)) − σ(u. X(u)) 2 HS )du ≤ M2 s (1 + |X(u)|2 )du ≤ M 2 (t − s)(1 + X 2 CB ) So. we see that γ2 maps CB into itself. ≤ M 2 (t − s) X − Y .7) t E|γ2 (X)(t) − γ2 (Y )(t)|2 = s E( σ(u. using the H¨lder inequality and taking into aco count (7. γ is Lipschitz continuous. γ1 maps CB into itself and γ1 (X) CB ≤ M (t − s)(1 + X CB ). X. using again the H¨lder inequality and taking o into account (7. Let X. T ]. X(u)) − b(u.5).3) and (7. (1 + |X(u)|2 )du ≤ M 2 (t − s)2 (1 + X Since γ1 (X)(t) is Ft –measurable for all t ∈ [s. X(u))|2 du ≤ M 2 (t − s) s 2 CB ). Y ∈ CB (7. t E|γ2 (X)(t)| = s t 2 E( σ(u. Y ∈ CB . Y (u)) 2 HS )du 2 CB . Step 2.4). t |γ1 (X)(t) − γ1 (Y )(t)|2 ≤ (t − s) s t 2 s |b(u. t t |γ1 (X)(t)|2 ≤ (t − s) s |b(u. Y (u))|2 du ≤ (t − s)M Consequently |X(u) − Y (u)|2 du ≤ (t − s)2 M 2 X − Y 2 CB du.Stochastic evolution equations 91 Concerning γ1 we have.

s.10) Proof. s. T ])) and so it is a continuous process. s. s. s.92 and so. η). s.9) does not hold we choose T1 ∈ (s. If (7.1) on [s.1 it follows that Z(t) = X(t. X. Define Z(t) = X(t. Then X(t. Remark 7.3 Assume that Hypothesis 7. η).1). (7. η)). Fs . s. Y ∈ CB . η)). C([s. T ]. Now we repeat the proof with T1 replacing s and in a finite number of steps we arrive to the conclusion. and so.1 holds and let η ∈ L2 (Ω. Whe shall use greek letters for stochastic initial data and latin letters for deterministic ones.13 it follows that there exists a version of the solution X(·. r. By the uniqueness part of Theorem 7. Z(t))dt + σ(t. (7. as required.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. γ2 (X) − γ2 (Y ) CB Chapter 7 ≤M √ T −s X −Y CB . Z(t))dB(t). T ] such that M T1 − s + T1 − s ≤ 1/2.7) and (7. CB . t ∈ [s. η) = X(t. X(r. Y ∈ CB . Then by the previous argument there is a unique solution to (7. 0 ≤ s ≤ r ≤ t ≤ T.  Z(r) = X(r.2 By Theorem 5. η) which belongs to L2 (Ω. P. Let us prove the co-cycle law. Now if T − s is such that √ M T − s + T − s ≤ 1/2.8) By (7. T1 ]. it possesses a unique fixed point. . Rd ). (7. r. In the following we shall denote by X(·. η) = X(t. s. Proposition 7. η) the solution of problem (7. Then Z solves the problem   dZ(t) = b(t. X(r.9) γ is a 1/2–contraction on CB .

t t XN +1 (t. s. s. n. l (7. More precisely. x). T ]. (7. k = 1.4 By the contraction principle it follows that the solution X(t. (7. s. gives some information about the relationship between X(t. η) of problem (7. xk )) in Ak . XN (u. . η)) = b(u. η) = XN (t. n. η ∈ L2 (Ω..Stochastic evolution equations 93 Remark 7. Proposition 7. s.12) Next result. Assume that it holds for a given N ∈ N.. s. η).. and A1 . xk ) in Ak . . s. We claim that n XN (t. η))dB(u). xk )) in Ak . s.1 holds and that n η= k=1 xk 1 Ak .. P. Then we have X(t. s. s. η) = k=1 XN (t. η) = η and for any N ∈ N. s. s. η) = η + s b(u.. (7. XN (u. so that XN (t.. k = 1. xk )1 Ak .. XN (u. x) is a Markov process. Fs . s. σ(u. Let XN be defined by (7.. define X0 (t.11) Then we have N →∞ lim XN (·.5 Assume that Hypothesis 7... s. . Rd ) and X(t.13) where x1 ..11). s. An are mutually disjoints sets in Fs such that n Ω= k=1 Ak . η) in CB ([s. η) = X(·. .. Rd )). s. xn ∈ Rd . s. Then we have b(u. XN (u. XN (u.15) Once (7.. η)) = σ(u. .. x ∈ Rd . Let us proceed by recurrence. k = 1. Equality (7.1) can be obtained as a limit of successive approximations. . l ∀ N ∈ N. s. s. which as we shall see plays an important rˆle in proving that o X(·.. l k=1 (7. η) = n X(t. the conclusion follows letting N tend to infinity.15) is clear for N = 0. η))du + s σ(u.14) Proof. XN (u. xk )1 Ak .15) is proved. L2 (Ω. s. n. s.

1. s. using inequality (6. T ]. XN (u. where A ∈ L(Rd ). P.2 Examples Example 7. In particular X(·. s. s. η)) = k=1 1 Ak σ(u. Rd )). L2m (Ω. s. T ]. T ). Rd )). XN (u. η ∈ L2m (Ω. 7. s.1. C ∈ L(Rr .1 Solution of the stochastic differential equation in the space CB ([s. s. s.16) . Theorem 7. xk ) + l t b(u. Fs . XN (u. η) ∈ CB ([s. s. L2m (Ω.1 holds and let m ∈ N. T ].1 by a fixed point argument in the space m CB := CB ([s. ∀ x ∈ Rd . η)) = k=1 n Chapter 7 n 1 Ak b(u. Proof. XN (u. xk )). X(0) = x. s. s. η) = k=1 1 Ak X0 (t. T ]. Rd )). L2m (Ω.8. s. XN (u.24) proved in Proposition 6. s ∈ [0. Rd ). XN (u. Then problem (7. the conclusion follows. x) ∈ CB ([s.6 Assume that Hypothesis 7.7 Consider the stochastic differential equation dX = AXdt + CdB(t). l Consequently n t XN +1 (t. L2m (Ω. (7. So. xk ) l and (7. Rd ) and x ∈ Rd . Rd )). l σ(u.1) has a unique solution X(·. We proceed as in the proof of Theorem 7.15) holds for N + 1. 7.94 so that b(u. xk )du s n + s σ(u. xk )). xk ))dB(u) = k=1 1 Ak XN +1 (t.

20) For this we check that X(t) given by (7.1 applies. t t e(t−s)A CdB(s) = CB(t) + A 0 0 t e(t−s)A CB(s)ds. Y fulfills the equation Y (t) = AY (t) + x + CB(t). By substituting Y (t) in (7.Stochastic evolution equations 95 Clearly Theorem 7. (7. (7. (7.19) is given by 1 2 X(t) = et(a− 2 c ) ecB(t) x.17) Setting t Y (t) = 0 X(s)ds.19) where a. t ∈ [0. (7.16) has a unique solution X(t) which fulfills the integral equation t X(t) = x + A 0 X(s)ds + CB(t).8 Let r = d = 1 and consider the stochastic differential equation dX = aXdt + cXdB(t).18) Example 7. t ∈ [0. Then we have 2 dF (t) = a− 1 2 c dt + cdB(t) 2 . T ]. we find X(t) = e x + 0 tA e(t−s)A CdB(s). thanks to Proposition 3. We want to show that the solution of (7. Y (0) = 0. t ≥ 0.12. c. which can be easily solved by the method of variation of constants. Taking into account that.19). T ]. T ]. x ∈ R. Again Theorem 7. X(0) = x. t ∈ [0.17) yields t X(t) = A 0 e(t−s)A (x + CB(s))ds + x + CB(t).20) solves (7.1 applies so that (7. Write X(t) = eF (t) where F (t) = t a − 1 c2 + cB(t). We obtain t Y (t) = 0 e(t−s)A (x + CB(s))ds.

V (t. x. ω) − σ(t. L2 (Ω. Rd ) × Ω → Rd are such that: Hypothesis 7.21) where A. T ] × L(Rr . ω)dB(u). ω)).25) (ii) For any Y ∈ CB ([0. y. ω) − b(t. Rd )) we have U ∈ CB ([0. T ]. y ∈ Rd .23) Here η ∈ L2 (Ω. ω). x. for all t ∈ [0. x. L(Rr . C ∈ L(Rd ). ω) 2 HS 2 HS ≤ M 2 |x − y|2 (7.22) 7. L2 (Ω. ω)|2 + σ(t. U (t. (7. The following result can be proved as Theorem 7. by Itˆ’s formula. (7. T ]. ω) = σ(t. T ]. ω).3 and 7. ω)du + s σ(u. (7. x.96 and. T ]. .24) ≤ M 2 (1 + |x|2 ). ω) = η(ω) + s b(u. ω)). ω) = b(t. X(u. Show that the solution of (7. Rd )) and V ∈ CB ([0. T ]. Fs . ω ∈ Ω |b(t. Exercise 7. t t X(t.4) one deals with stochastic differential equations having random coefficients. ω).21) is given by 2 X(t) = et(A−C /2) eCB(t) x.9 Let r = 1 and consider the differential stochastic equation dX = AXdt + CXdB(t). Rd ))) where. b : [0. ω). Y (t. x. 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).2 (i) There exists M > 0 such that for all t ∈ [0. y. ω)|2 + σ(t.3 Differential stochastic equations with random coefficients In some situations (see Subsections 7. ω ∈ Ω. L2 (Ω. T ] × Rd × Ω → Rd and σ : [0.1.1. X(u. x ∈ Rd and AC = CA. Rd ). Y (t. (7. X(0) = x. ω) and |b(t.

So. dB(t) . Write X(t) = eH(t) where H(t) = − Then we have 1 dH(t) = − |F (t)|2 dt + F (t). t ≥ 0. s.1 Continuous dependence on data Continuous dependence on mean square We assume here that Hypothesis 7.2. Now it is easy to check that Theorem 7.11 Let d = 1 and consider the stochastic differential equation   dX(t) = X(t) F (t). dB(t) . (7. t ∈ [0. Example 7. Fs .26).26)  X(0) = x. First we show that E|X(t. dB(t) = X(t) F (t). where F ∈ CB (0. s and Lipschitz o continuous on η in mean square. t ≥ 0.10 applies and so there exists a solution X of (7. dB(s) . = eH(t) F (t).2 holds. 7.27) solves (7. L2 (Ω. dB(t) .dB(s) x. Rd ). L∞ (Ω.Stochastic evolution equations 97 Theorem 7. T . Rd )). Let us show that X(t) = e− 2 1 Rt 0 Rt |F (s)|2 ds+ 0 F (s). . T ) and η ∈ L2 (Ω.27) For this we check that X(t) given by (7.26). T ].27) is proved.23) has a unique solution X ∈ CB ([s. Then problem (7. (7. η)|2 is bounded. We are going to prove that the solution X(t.2 7. 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).10 Assume that Hypothesis 7. T ]. Rd )). Let s ∈ [0.1 holds. eH(t) |F (t)|2 dt t ≥ 0. (7. s. η) to (7.1) is H¨lder continuous on t.

The conclusion follows from the Gronwall lemma. Fs . Writing for short X(t. s. s. η) with respect to t. we have t 2 2 (T −s+1) . Consequently E (|X(t)|2 ) ≤ 3E(|η|2 ) + 3M 2 ((T − s)2 + (T − s)) t +3M ((T − s) + 1) s 2 E |X(u)|2 du.1 holds. T ] and η ∈ L2 (Ω. η)|2 ≤ C(T. E(|η|2 ))(t − t1 ). We note that. (7. η) − X(t1 . X(u))du +3 s E( σ(u. s. Fs .13 Assume that Hypothesis 7. We now study the regularity of X(t. Rd ). Then for all s ∈ [0. η)|2 ≤ 3[E(|η|2 ) + M 2 ((T − s)2 + (T − s)]e3M Proof. E(|η|2 )) such that we have E |X(t. η) = X(t).30) . (7. by Lemma 7.98 Chapter 7 Lemma 7. Let 0 ≤ s ≤ t1 < t ≤ T and η ∈ L2 (Ω. Then there exists a constant C1 (T.29) We start with the regularity of X(t. P.12 Assume that Hypothesis 7. s. E(|η|2 )). s. E(|η|2 )) such that E |X(t. s.12.28) E (|X(t)| ) ≤ 3E(|η| ) + 3E s t 2 2 b(u. Proposition 7. η) with respect to t. 0 ≤ s < t ≤ T. there exists a constant C(T. (7. X(u)) 2 HS )du. By Hypothesis 7. Rd ) we have E |X(t. s.1(ii) and the H¨lder inequality we deduce that o t E (|X(t)|2 ) ≤ 3E(|η|2 ) + 3M 2 (t − s) s t (1 + E |X(u)|2 )du +3M 2 s (1 + E |X(u)|2 )du. s.1 holds. η. η)|2 ≤ C1 (T.

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

1/2). let 0 ≤ s < t ≤ T and x. s1 .1 holds. s1 .3 Almost sure continuity and h¨lderianity o of trajectories In this section we show that X(·. First we need a lemma. s.33) Now from Proposition E. η)) − X(t.17 Assume that Hypothesis 7. s. .30). arguing as in the proof of Proposition 7. Let 0 ≤ s ≤ t1 < t ≤ T. Then the Sobolev embedding theorem (also stated in Appendix E) will imply that X(·. Then there exists a constant C1 (T. x ∈ Rd and m ∈ N.16 Assume that Hypothesis 7. |x|2 ))(t − t1 )m . we consider almost sure regularity of X(t. s. s. (7. s. η) = X(t. x)|2m ≤ C1 (T. η) − X(s. η) − X(t.24).1 it follows that Proposition 7. ·). s1 .1 holds.10). 7. x)|2m < +∞. X(·.35) . s. x) belongs to a suitable Sobolev space. s.3 and the Sobolev embedding theorem E. s1 . s. Then there is a constant C(T ) > 0 such that E |X(t. Let x ∈ Rd . x) belongs to C −1/(2m) (7. x) − X(t.100 Proof. Lemma 7. |x|) such that E |X(t. Then we have E |X(·. η)|2 ) ≤ CT E (|X(s1 . s. Finally. η)|2 ) .14 we have Lemma 7. The conclusion follows now from (7. X(s1 . x) − X(t1 . By (7.34) ([s. First. s. s. Taking into account the co-cycle law (7. y)|2m ≤ C(T )|x − y|2m .2m Moreover. 0 ≤ s ≤ t ≤ T . s. which can be proved as Proposition 7. s. s. η) − X(t. whose definition is recalled in Appendix E below. T ]) almost surely. (7. m ∈ N and ∈ (0. s. x) is H¨lder o continuous almost surely. y ∈ Rd . η).13 using (6. η) − η|2 ) 2 = CT E (|X(s1 .18 Assume that Hypothesis 7. we can write Chapter 7 X(t.1 holds.31) there exists CT > 0 such that 2 E (|X(t.

T ]) =: CB ([s. x) = bx (t. 7. s. T ]. s. . x). (1) Recall the notations given at the beginning of Chapter 6. dB(t))      h η (s. Dx σ and Dx σ are continuous on [0. x → X(·. let 0 ≤ s < t ≤ T and x.4 Differentiability of X(t. x)) · η h (t.39) +σx (t. Dx b. . s. s.2m Moreover.Stochastic evolution equations Now from Proposition E.36) ([0. x). s. L2 (Ω. X(t.3 2 2 (i) Dx b. s.1 and 7. s. x)dt     (7. ·) belongs to C −d/(2m) (7.38) where η h (t. s. s. s. Rd )). 7. 1]d .4.20 Assume that Hypotheses 7. ·)]2 + [σ(t. is continuously Gateaux differentiable and its Gateaux derivative is given by Xx (t. 1) we have E |X(t. s. s. T ] × Rd . x) Theorem 7. ·)]2 ) < ∞.3 hold. 1]d ) almost surely.T ] (7.37) We set CB = CB ([s. Then for any s ∈ [0. x). that Hypothesis 7. y ∈ [0. T ] the mapping Rd → CB . x. t∈[0. h ∈ Rd . X(t.3 it follows that 101 Proposition 7. x) · h = η h (t. s. ·)|2m < +∞. (ii) We have (1) sup ([b(t. x) with respect to x In this section we assume.  h  dη (t. x) is the solution to the stochastic differential equation with random coefficients. Then for any m > 1 and ∈ (0. X(t.1 Existence of Xx (t.19 Assume that Hypothesis 7. besides Hypothesis 7. s. (7.1.1 holds. x))(η h (t. x) = h.

It is not difficult to check that F is Gateaux continuously differentiable. x. x) of (7. To prove the theorem we use Theorem D. T1 ]. the conclusion follows from Theorem D. T1 ]. x ∈ Rd . x ∈ Rd . s. (7.42) . Then the mapping Rd → CB . X.39) fulfill Hypothesis 7.40) where T1 > s is chosen such that F (x. setting t t [F (x. X(x)) = X(x). is twice differentiable with respect to x in any couple of directions (h. Y ∈ CB we have Fx (x. Theorem 7.6 from Appendix D (with Λ = Rd and E = CB ). 7.1 so that it possesses a unique fixed point X(x) ∈ CB .21 Assume that Hypotheses 7. s.6. X) = I. x) We now prove the existence of the second derivative of X(t. X(x) coincides with the solution X(·. X2 ) CB ≤ (7. k) = ζ h. (the straightforward proof is left to the reader) and that for each x ∈ Rd .3. 1 X1 − X2 2 CB for all X1 . which depends continuously on x. X1 ) − F (x. k) in Rd .10. s.1 and 7. s. X(r))dr + s σ(r. x) with respect to x. Note that the coefficients of equation (7. X)](t) : = x + s b(r. setting Xxx (t. so it possesses a unique solution by Theorem 7. We set CB = CB ([s. x)(h. s. X(r))Y (r)dr+ s σx (r. t ∈ [s.4. X(r))dB(r). Moreover. x → X(·. X2 ∈ CB .2 Existence of Xxx (t. h ∈ Rd . (7. x). that is F (x. T1 ]) and define a mapping F : Rd × CB → CB .102 Chapter 7 Proof. t t [FX (x. s.3 hold. So. x).41) Then F fulfills Hypothesis D. X)·Y ](t) = s bx (r. X(r))Y (r)dB(r).k (t. t ∈ [s.2).

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

s.21. x) is differentiable with respect to x and that its derivative η(·.46) Notice that. s. we find that t E|η(t.44). s.41) it follows that T (x) L(CB ) (7. s.49) From this identity it is easy to show the existence of ηx (·. x)dr (7. X(r. T1 ]. s. x)|4 ≤ C2 (1 + s E|η(r. T1 ]) as before. x))Z(r)η(·. (7. For any x ∈ R we define a linear bounded operator T (x) from CB into CB setting for all t ∈ [s. s. Proof of Theorem 7. s. s. where C2 is another constant. L (Ω)). Now we write equation (7. X(r. T (x)Z is differentiable with respect to x for any Z ∈ CB ([s. x).104 Chapter 7 Now.50) . r.41) and CB = CB ([s. x) belongs to CB and fulfills equation (7. We have in fact.44) as η(·. since η(·. x ∈ R. x) = Xx (·. x) = (1 − T (x))−1 (1).8. x) By (7. T ]. x)|4 dr). s. x))Z(r)η(·. (7. ∀ x ∈ R. T ]. x) = (1 − T (x))−1 (T (x)η(·. x))Z(r)dr − s 4 σx (r. 0 ≤ s ≤ t ≤ T.47) − s σxx (r. x) = 1 + T (x)η(·. s. x)). by a straightforward computation ηx (·. x))Z(r)dB(r). L4 (Ω)) and it results t (T (x)Z)(t) = − s t bxx (r.20 we know that X(t. (7.48) ≤ 1/2.48) is given by η(·. s. r. s. X(r. We choose T1 as in (7. x)dB(r). x) := ζ(·. s. Thus the solution of (7. s. s. t t (T (x)Z)(t) = − s bx (r. By Theorem 7. taking expectation on both sides of this inequality and using Corollary 6. x) ∈ CB ([s. s. s. The conclusion follows from the Gronwall lemma. X(r.

s. r. s.52). x)(t) = s bxx (r. s. x) = X(t.Stochastic evolution equations where t 105 T (x)η(·.3 with σ = 0. s. t ≥ r ≥ s. x)(t) = s bxx (r. s. s. x) with reo spect to s. x)dr (7. Let us compute Xs (t. x) (it is well known that X(t. x).1 The deterministic case t ∈ [s. s. x)b(s. x)dr t + s σxx (r. r.  X(s) = x. 7. X(t)). s. s. X(r. (7. X(r. 7. s.5. (7. s. s. x) = −Xx (t. s. X(r. x))η 2 (·.51) t + s σxx (r. X(r.5 Itˆ Differentiability of X(t. r. . x)) + Xx (t. x)). X(r.53) with respect to r yields 0 = Xs (t. x) the solution of (7.1 and 7. Write X(t. s. Now by (7.52) Let us consider the problem   X (t) = b(t. X(r. s.50) it follows that t ηx (t. x))η 2 (·. s. x)) · Xt (r. under Hypotheses 7. T ]. and the conclusion follows. s. x))η 2 (·. x) − T (x)ηx (·. It is useful to recall first some results in the deterministic case. x)dB(r). s. Setting r = s we find Xs (t. x))η 2 (·. x) is C 1 in all variables). X(r. x).53) Differentiating (7. x)dB(r). s. s. s. s. Denote by X(t.

s. We have in fact t t X1 (t. 0 ≤ s ≤ s1 < . Then X1 (t. x) is not adapted.2 The stochastic case Here we want to study the differentiability of X(t. x)du + s σ(u. T ]. s. s.106 which is equivalent to t Chapter 7 X(t. < sn ≤ T and A ∈ B(Rn ). N ∈ N. and let ϕ ∈ L2 (Ω. x)dB(u). 0 ≤ s ≤ t ≤ T.3. s. Proposition 7. B(sn (ω)) − B(s(ω))) ∈ A} . where n ∈ N. s ∈ [0. The family (Fs+ )s∈[0. x)b(r..1 holds. Fs+ . s. Then X(t. x) of (7.2). x)dr. X(t.. x) is Fs+ -measurable. s. We end the proof by recurrence. Lemma 7. r. Since s t n σ(u. .. Let x ∈ Rd .5. Let XN (t. x) be defined by (7. k=1 where η = {s = t0 < t1 < · · · < tn = t}. x) is not Fs -measurable. T ]. It happens.. ..23 Assume that Hypotheses 7. 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)). however. x)(B(tk ) − B(tk−1 )). Proof. s.11).T ] is called the future filtration of B. A difficulty arises since the process s → X(t. For this we need the following result which can be proved as Lemma 4. (7. P). Then B(t2 )−B(t1 ) and ϕ are independent. x)dB(u) = lim |η|→0 σ(tk−1 . Now we introduce the backward Itˆ integral for a process wich is adapted o to the future filtration. x) is Fs+ -measurable. x) = x + s b(u. s. then X1 (t. x) = x + s Xx (t. s. 7. x) is Fs+ –measurable.54) In the next subsection we are going to generalize this formula for the solution X(t. x) with respect to s in a sense to be precised. s. s. because X(t. that for any s ∈ [0.24 Let t1 < t2 ≤ s.

σ(r. x). o Exercise 7. x) − x = s Xx (t. Rd ))) by a straightforward generalization of the space CB ([0. T ]. x)dr t 1 + 2 t TR [Xxx (t. L2 (Ω. Rd ))). T ]. . r. T ]. Moreover we have T E 0 F (s)dB(s) = 0. 2 7. Prove that t B(r)dB(r) = s 1 (B(t)2 − B(s)2 + (t − s)).1 and 7. L2 (Ω. Rd ))) there exists the limit T |σ|→0 lim Iσ (F ) =: 0 F (s)dB(s).58) + s Xx (t. x)(σ(r.10). s. The elements of CB + ([0. L(Rr .25 For any F ∈ CB + ([0.Stochastic evolution equations 107 We define CB + ([0. L2 (Ω. 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. Then we have X(t. r. L(Rr . x) · b(r. L2 (Ω. Let F ∈ CB + ([0. T ].26 Let t > s. r. (7. L2 (Ω. x).3 Backward Itˆ’s formula o t Theorem 7. 2 T (7.5. (7.3 hold. T ]. L(Rr . dB(r)) .27 Assume that Hypotheses 7.57) F (s)dB(s) is called the backward Itˆ integral of the function F in [0. T ].55) in L2 (Ω). L(Rr . Rd )) are called stochastic processes adapted to the future filtration (Ft+ ) and continuous in quadratic mean. x))]dr s (7. Rd ))) defined in Chapter 5. Theorem 7.56) and T E 0 T 0 F (s)dB(s) = 0 E F (s) 2 HS ds. L(Rr . x)(σ(r.

that |η|→0 lim o(|η|) = 0. x))2 + o(|η|). x)(x − X(sk . X(r. x) − X(t. x))] (7. sk . t) we have n X(t. x)ek ) and (ek ) is any orthonormal basis in Rd .n If η ∈ Σ(s. sk−1 .. x)(B(sk ) − B(sk−1 )) + o(sk − sk−1 ). x))dr (7. r. . x)ek . sk . sk−1 . sk−1 .. sk−1 . X(r. k=1.108 where d Chapter 7 TR [Xxx (t. X(sk . σ(r.59) =− k=1 n Xx (t. sk−1 . Proof. x) − x = sk−1 sk b(r.. We take d = r = 1 for simplicity.. after some tedious but o straighforward computations. x). x))] = k=1 Xxx (t. x) − x = − k=1 n [X(t. P-a. sk . x))dB(r) = b(sk . t) we set |η| = max (tk − tk−1 ).60) + sk−1 σ(r. sk−1 . x)) − 1 2 Xxx (t. sk . σ(r. x)] =− k=1 n [X(t. sk−1 . x)(σ(r. On the other hand we have sk X(sk . For any η ∈ Σ(s. sk . x)(σ(r. s. r. x) − X(t.s. k=1 Arguing as in the proof of Itˆ’s formula one can show. x)(sk − sk−1 ) + σ(sk .. x)(x − X(sk .

σ(r.23. x))]σ(r. x)b(sk . x)dr. x)) − ϕ(x) = s Dx [ϕ(X(t.28 Let ϕ ∈ Cb (Rd ). s.Stochastic evolution equations 109 (Notice that. x) where ξk is any point in [sk−1 . one can replace in (7.59) we find that n X(t. we note that it is an integral sum corresponding to the backward Itˆ integral since Xx (t. The other terms I3 (η) and o1 (|η|) can be handled as in the proof of Itˆ’s o formula. x)(sk − sk−1 ) + k=1 Xx (t. x) with b(ξk . x)σ 2 (sk . sk . In a similar way one can prove the following backward Itˆ formula. x) − x = k=1 n Xx (t. x)b(r. Obviously t |η|→0 lim I1 (η) = s Xx (r. sk ]. since b is deterministic. Concerning I2 (η). sk . x))]. Therefore we have t |η|→0 lim I2 (η) = s Xx (r. x) dr 1 + 2 t t 2 Tr [Dx [ϕ(X(t.60) b(sk . x))]. r.62) + s Dx [ϕ(X(t. x)σ ∗ (r.61) n 1 + 2 Xxx (t. x) is Fs+ measurable by Proposition o k 7. x)dB(r). r. o 2 Theorem 7. x)σ(sk . s. x)(B(sk ) − B(sk−1 ))2 k=1 +I1 (η) + I2 (η) + I3 (η) + o1 (|η|). Then for any 0 ≤ s < t ≤ T. x)σ(r. sk . b(r.) Substituting (7. . sk .60) in (7. x)dB(r). x)(B(sk ) − B(sk−1 )) (7. x)]dr s (7. we have t ϕ(X(t. r.

110 Chapter 7 .

y)| ≤ M |x − y|. X(u. t ∈ [0. x ∈ Rn .t ϕ(x) = ϕ(X(t. (ii) There exists M > 0 such that |b(t. T ]. (8. defined on the space Cb (Rn ) by Ps. where s ∈ [0.1) We consider here the problem   X (t) = b(t. differentiating (8. t ∈ [0. t ∈ [0. T ] × Rn .1 The deterministic case t ∈ [s. x) ∈ C 1 ([s. T ]. y ∈ Rn . s.2) with respect to u and setting u = s we find Xs (t. x.1 problem (8. As well known. x ∈ Rn . x) + Xx (t. Rn ).4) . (8.Chapter 8 Kolmogorov equations 8. x) − b(t. s. s. x) = 0. T ] × Rn → Rn fulfills the following hypothesis. 0 ≤ s ≤ u ≤ t ≤ T. T ]. s. (8. X(t)). s. (8. s.1 (i) b is continuous on [0. T ] × Rn . T ) and b : [0. 111 x ∈ Rn . T ]. (iii) b is differentiable with respect to x and bx is continuous on [0. u. x) = X(t.  X(s) = x ∈ Rn .t . 0 ≤ s ≤ t ≤ T. x) · b(s. s. T ]. and it holds X(t. under Hypothesis 8.3) Of great interest for the applications is the transition evolution operator Ps. Hypothesis 8. x)). x)).2) Morever.1) has a unique solution X(·) = X(·. s.

t ϕ(x) = ϕ(X(t. u ∈ [0. . t.6) follows. s.t .7) (8. Let us prove (8. T ] × [0. x) · b(s.t is a linear bounded operator on Cb (Rn ). s. s. 1 where ϕ ∈ Cb (Rn ) and T > 0 is fixed. is continuous.t L(t)ϕ(x) = b(t.3). Proof. T ]. taking into acccount (8. X(t.t L(t)ϕ. ϕx (X(t. s.t ϕ(x) = ϕ(X(t. x).t ϕ = Ps.t ϕ(x). x)) dt dt and Ps. x ∈ Rn . X(t. From (8. x) + b(s. We have t≥s (8. ϕx (X(t. x)) . (8. x).u Pu. Moreover for any ϕ ∈ Cb (Rn ) the mapping [0. d d Ps. so that (8. t. s. Xx (t. s. We have.t ϕ = −L(s)Ps. x) ds ds = −L(s)Ps.112 Kolmogorov equations As easily checked. s. x)) = − ϕx (X(t. x) = 0. zx (s. x) → Ps.6) t ≥ s.7). dt and d Ps. x)).5) 1 Proposition 8.t ϕ. (8. d d Ps. x) = ϕ(x). x)). s. ds L(t)ϕ(x) = b(t. (s. T ] (8.t ϕ(x). s. x)) = b(t.2) it follows immediately the cocycle property Ps. T ] × Rn → Rn . Ps.9)  z(T.1 For any ϕ ∈ Cb (Rn ) we have d Ps. x)). s ∈ [0. Let us now consider the following partial differential equation called transport equation   zs (s. ϕx (x) .t = Ps.8) where 1 ϕ ∈ Cb (Rn ).

z is given by z(s.13) Pt is called the transition semigroup associated with (8. Define Pt ϕ(x) = ϕ(X(t. x). u. u.9) by (8.14) (8. x)). x) = ϕ(X(T. (8.15) 1 ϕ ∈ Cb (Rn ). where Lϕ(x) = b(x). u.11) whose solution we denote by X(·. u. x ∈ Rn . s. t. x) = Ps. X(s. given by (8.1 The autonomous case We assume here that b(t. x)) = 0.t−s . (8. X(u. x)) which implies z(u. x)) + zx (s. X(T. (8. X(s. T ]. s.t = P0.1.5) it follows the semigroup law Pt+s = Pt Ps . X(s. u.10). Then problem (8. t≥0 (8. x)) + zx (s. It is enough to notice that z. . Xt (s. x ∈ Rn .  X(0) = x ∈ R . we have Ps. Setting s = T and s = u we find that z(T. T ] × Rn → Rn fulfills Hypothesis 8.3 For any ϕ ∈ Cb (Rn ) we have Dt Pt ϕ = Pt Lϕ = LPt ϕ. Therefore z(s. X(s.1 and 1 let ϕ ∈ Cb (Rn ). x) = zt (s. x ∈ Rn . x)) as required. u.1 we deduce 1 Proposition 8. b(s.2 Assume that b : [0. x)). u. s ∈ [0. ϕx (x) . s ≥ 0. In this case it is easy to check that for any t > s ≥ 0.11). X(s. x)) ds = zt (s. ϕ ∈ Cb (Rn ). x) = b(x) and consider the problem   X (t) = b(X(t)).6). u.Chapter 8 113 Theorem 8. x)).10) Proof Existence.9) has a unique solution z. X(s.9) we have d z(s. u. x)) = z(u. is a solution of (8. t ≥ 0. Uniqueness. x)). If z is a solution of problem (8. X(s. x)) is constant in s. t ≥ 0.T ϕ(x) = ϕ(X(T. By Proposition 8. 8. u. n (8.12) so that by (8.

x)−σ(t.19) As easily checked. is called the transition evolution operator associated with (8. T ] × Rn → Rn and σ : [0. Then problem   ut (t. (iii) b and σ have first and second partial derivatives with respect to x continuous and bounded in [0. t ≥ 0. x)). x ∈ Rn (8. Ps. t.t is a linear bounded operator on Cb (Rn ).2 (i) b : [0. X(t))dt + σ(t. ux (t. y)|+ σ(t. x)−b(t. x ∈ Rn . x) = ϕ(x). Rn ) are continuous. T ] × Rn . X(t))dB(t)  X(s) = x ∈ Rd (8. 0 ≤ s ≤ t ≤ T.t ϕ(x) = E[ϕ(X(t.18) and assume that the following hypothesis holds. We denote as before by X(·.2 Stochastic case We consider the stochastic evolution equation   dX(t) = b(t. x) → Ps. y ∈ Rn . x.17) 8.18). t ≥ 0. x))]. x ∈ Rn . Ps. s. By Chapter 6 we know that the mapping (s. t ∈ [0. T ].2 we have Kolmogorov equations 1 1 Theorem 8. (ii) There exists M > 0 such that |b(t. s. (8.4 Assume that b ∈ Cb (Rn ) and let ϕ ∈ Cb (R).114 Finally. 0 < s ≤ t ≤ T. x) = Pt ϕ(x) = ϕ(X(t. s with 0 ≤ s ≤ t ≤ T and for all function ϕ ∈ Cb (Rn ) we set Ps. y) HS ≤ M |x−y|. x) . x) = b(x). has a unique solution given by u(t. . is continuous for all ϕ ∈ Cb (Rn ). Hypothesis 8.18) corresponding to η = x ∈ Rn . T ] × Rn → L(Rr . For all t. by Theorem 8.t . x ∈ Rn . x) the solution of (8. (8.16)  u(0.t ϕ(x).

t ϕ = −L(s)Ps. Then Ps. Then Ps. x))] = ϕ(x) + s E[(L(r)ϕ)(X(r. which yields (8.2 holds and let ϕ ∈ Cb (Rn ).t ϕ = Ps. yields t E[ϕ(X(t. The second basic identity is the following.3 Basic properties of transition operators 1 Tr [ϕxx (x)σ(s. s. (8.Chapter 8 115 8. 2 Let us introduce the Kolmogorov operator (L(s)ϕ)(x) = 2 ϕ ∈ Cb (Rn ).t L(t)ϕ. s. By the Itˆ formula we have that o t ≥ 0. ϕx (x) . ds t ≥ 0. s.2 holds and let ϕ ∈ Cb (Rn ). 2 Proposition 8.t (L(r)ϕ)(x)dr. s.62) we find o t Ps. x)) + ϕx (X(t. x)) = (L(t)ϕ)(X(t.21). X(t. (8. dt Proof. 2 Proposition 8. (8. s.t ϕ(x) − ϕ(x) = s L(r)Ps.t ϕ. x))]dr. Taking expectation in the backward Itˆ formula (7.20) The first basic identity is the following. Integrating with respect to t and taking expectation.22).t ϕ(x) = ϕ(x) + s t Pr.t ϕ is differentiable in t and we have d Ps.22) Proof. s.t ϕ is differentiable in s and we have d Ps. x)] + b(s.r ϕ(x)dr. σ(t. . x))dB(t) . x)σ ∗ (s.6 Assume that Hypothesis 8. that is Ps. which coincides with (8. x).5 Assume that Hypothesis 8. x)).21) dt ϕ(X(t.

x))dB(s) .23). u. (8. X(s. x)). X(s. u.  z(T.4 Parabolic equations 0 ≤ s < T. x) = E[ϕ(X(t. x) + (L(s)(z(s. x)) = zs (s.t = Ps. x)). x))].23) We consider here the parabolic equation   zs (s. X(u. u. 2 0 < s ≤ T. X(s.T ϕ(x). X(s. 2 Theorem 8. x))ds + (L(s)z(s.23) if z is continuous and bounded together with its partial derivatives zt . By (8.23). u. X(T. x) = E[ϕ(X(T. x))dB(s). x)) − z(u. u. (8. X(s. x)). σ(s.22) it follows that z(s.23). Now.r Pr. u. Let us compute the Itˆ differential of z(s.116 Kolmogorov equations 8. T ]. u. zxx .t for 0 ≤ s ≤ t ≤ t ≤ T. n We say that a function z : [0. X(s. u. u. ·)))(x) + zx (s.23). x)) = ϕ(X(t. and let 0 ≤ u ≤ s ≤ T.25) . ϕ ∈ Cb (Rn ). x) = Ps. and fulfills (8.23). T ] × Rn → R is a solution to (8.7 Assume that Hypothesis 8. X(s. u. x) = ϕ(x). Let z be a solution to (8. z is given by z(s. taking expectation we find z(u. s. X(s. x ∈ Rn . Exercise 8. x)) − z(u. u. u. Existence. (8.2 holds and let ϕ ∈ Cb (Rn ). ·)))(x) = 0. x))dB(s) = zx (s. X(s. fulfills (8. zx . We have o ds z(s. x))σ(s. X(s. u. u. Integrating in s between u and T yields z(T. x))].24) Proof.8 Prove the cocycle law Ps. x) t s ∈ [0. since z fulfills (8. Then there exists a unique solution z of problem (8. x ∈ R . σ(s. Uniqueness. = u zx (s.

t − s.1 Autonomous case b(t. 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 ∈ Rn .4. x). t ≥ 0.t . x). 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). x). s+a.26) but with the Brownian motion B(t) replaced by B1 (t). ϕ ∈ Cb (Rn ). Proof. s. t]. Setting v(s. t ≥ 0 is a semgroup of linear operators in Cb (Rd ). x ∈ R (8. problem (8. By the proposition and the cocycle law (8. x ∈ Rn . s. s+a. P0 = 1. x ∈ Rn . t. x))dB(r). x) be the solution of the stochastic evolution equation   dX(t) = b(X(t))dt + σ(X(t))dB(t) (8. Thus Pt .9 Let X(t. x) = ϕ(x). x))dr + s+a σ(X(r. s ≥ 0.26)  X(s) = x ∈ Rn . t]. The we have t+a t+a X(t+a. 2 Proposition 8.Chapter 8 117 8. Set Y (t) = X(t + a. Lϕ(x) = Then for any and a > 0 the laws of X(t. s ∈ [0.27) Then by Theorem 8.25)it follows that. Now the conclusion follows. x) = σ(x). Setting B1 (t) = B(t + a) − B(a) we see that Y (t) fulfills equation (8. setting Pt = P0. t ≥ 0. x) = x+ s+a b(X(r.7 we find the result .  v(0. s + a. s + a. x) = Lv(s. x) = b(x). we have Pt+s = Pt Ps . s+a. x) = u(t. s ∈ [0. ϕx (x) . x) and X(t + a. σ(t. x) coincide.23) becomes   vs (s.

Then. x) = e x + 0 tA e(t−s)A QdB(s). t]. the transition semigroup Pt looks like Pt ϕ(x) = Rn ϕ(y)NetA x. x) = Pt ϕ(x). problem (8. (8.  X(0) = x. x) is given by X(t. (8. x) = Pt−s.33) where A∗ is the adjoint of A. (8.34) So. x ≥ 0 for all x ∈ Rn .27) has a unique solution given by v(s. Q is symmetric and Qx.Qt (dy). s ∈ [0. ∗ t ≥ 0. x)] + Ax + ux (t. P) taking values in Rn . (8. t ≥ 0.Qt .29) is given by u(t. The solution of (8.5 Examples Example 8. for any ϕ ∈ Cb (R).30) is given by the variation of constants formula t X(t. The corresponding stochastic differential equation is  √  dX(t) = AX(t)dt + Q dB(t).10 Assume that b. x)# P = NetA x. G . where Qt = 0 t (8.11 Consider the parabolic equation in Rn  1  ut (t. x) = 2 Tr [Quxx (t. x ∈ R.118 Kolmogorov equations Theorem 8. σ : R → R are Lipschitz continuous and of 2 class C 2 . x)  u(0.29) where A. the solution of (8. (8. Consequently.32) esA QesA ds. x) = ϕ(x). (8.31) Therefore the law of X(t.t ϕ(x) = Pt ϕ(x). .30) where B is a standard Brownian motion in a probability space (Ω. Q ∈ L(Rn ).28) 8.

P). (8. x) = 1 qx2 uxx (t. x) = ϕ(x).36) where q > 0 and a ∈ R.Chapter 8 If. x) 2  u(0. (8. x) = (2π)−n/2 [det Qt ]−1/2 Rn 119 e− 2 1 Q−1 (y−etA x).37) is given by X(t. The solution of (8.  X(0) = x. x) = e(a−q/2)t+ Therefore 1 Pt ϕ(x) = √ 2πt +∞ −∞ √ q B(t) x.37) where B is a real Brownian motion in is a real Brownian motion in some probability space (Ω.(y−etA x) t ϕ(y)dy. (8.12 Consider the parabolic equation in R   ut (t. x) + axux (t. (8.39) .35) Example 8. in particular. The corresponding stochastic differential equation is  √  dX(t) = aX(t)dt + q X(t)dB(t). F . det Qt > 0 we have u(t.38) e− 2t ϕ(e(a−q/2)t+ y2 √ qy x)dy. (8.

120 Kolmogorov equations .

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

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

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

F . (B. (B. (B. F . we have E(X|G ) = X. Proposition B. Then we have XdP = A A (B. Y ∈ L1 (Ω.s. Assume that X is G -measurable.2 Basic properties Let X. Let A ∈ H .5) (B. Then 1 A and X are independent so that l XdP = A Ω (B. comparing (B.4 Let X. E(αX + βY |G ) = αE(X|G ) + βE(Y |G ). β ∈ R and all X. It is obvious that if X is G -measurable. P).9) we see that E(X|H )dP = A A XdP = A E E(X|G ) H dP. Then we have E(X|H ) = E E(X|G ) H . Proof.124 Conditional expectation B. P-a.7) E(X|H )dP (B.3 Let H be a σ-algebra included in G .8) and XdP = A A E(X|G )dP = A E E(X|G ) H dP. From this one deduces the inequality |E(X|G )| ≤ E(|X| |G ).3) Moreover. P) and let G be σ-algebra included in F . one can check easily the linearity of conditional expectation. one has E(X|G ) ≥ 0. Let A ∈ G . Then we have E(X|G ) = E(X). F .9) So. P).2) yields E[E(X|G )] = E(X). Then we have E(XY |G ) = XE(Y |G ).4) for all α.s. Y. Setting G = Ω in (B.2 Assume that X is independent of G . Also if X ≥ 0. Proposition B. P-a. (B. Proposition B.10) . Y ∈ L1 (Ω..8) and (B.6) 1 A XdP = P(A)E(X) = l A E(X|G )dP. Proof. XY ∈ L1 (Ω.

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

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

∀ 0 ≤ s < t ≤ T. T ]. ∀ 0 ≤ s < t ≤ T.Appendix C Martingales C. a supermartingale if E[M (t)|Fs ] ≤ M (s). A ∈ Fs . (Ft )t≥0 an increasing family of σalgebras included in F and (M (t))t∈[0. a submartingale if E[M (t)|Fs ] ≥ M (s). A ∈ Fs . and a supermartingale if and only if M (s)dP ≤ A A M (t)dP. ∀ 0 ≤ s < t ≤ T.1 Definitions Let (Ω. P). 127 . P) be a probability space. Ft . a stochastic process. 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). ∀ 0 ≤ s < t ≤ T. F . (M (t))t∈[0.T ] with M (t) ∈ L1 (Ω. ∀ 0 ≤ s < t ≤ T. 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. ∀ 0 ≤ s < t ≤ T. t ∈ [0. A ∈ Fs .

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

. < tn ≤ T and set as before S = sup |M (ti )|. . Ak k = 1. . We have. T ]. Let 0 < t1 < t2 < . · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·· An = {|M (t1 )| < λ. . A2 = {|M (t1 )| < λ...2) Summing up on k from 1 to n the conclusion follows. An−1 |X(tn )|dP. F .. (C. An−1 Proceeding in a similar way we obtain |M (tn )|dP ≥ λP(Ak ). |M (tn )| ≥ λ}. .. i = 1. 1≤i≤n We are going to estimate of E[S 2 ] in terms of E[M 2 (tn )]..Appendix C Proof. n. An are mutually disjoint. . . sets A1 .. Set A1 = {|M (t1 )| ≥ λ}..3 Square integrable martingales In this section we are given a martingale M (t) such that M (t) ∈ L2 (Ω.. We have obviously |M (tn )|dP ≥ λP(An ). Therefore |M (tn )|dP ≥ λP(An−1 ). Moreover Ai ∈ Fti . n.. recalling that |M (t)| is a sub– λP(An−1 ) ≤ An−1 |M (tn−1 )|dP ≤ An−1 |M (tn )|dP. . An Now we estimate martingale.. P) for all t ∈ [0. and we have n {S ≥ λ} = i=1 Ai . C. 129 Clearly. |M (t2 )| ≥ λ}. Let us estimate {S≥λ} |M (tn )|dP. .

Then for any T > 0 we have sup |M (t)|2 ≤ 4E[M 2 (T )].T ] E (C. So. Now the conclusion follows easily.+∞)×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.3) t ≥ 0.1) and the Fubini Theorem we have ∞ E(S ) ≤ 0 2 1 √ t √ {S≥ t} |M (tn )|dP dt = [0.130 Proposition C. 1 t |M (tn )|dP. Corollary C.4) E(S 2 ) = 0 P(S 2 > t)dt = 0 P(S > √ t)dt. (C. {S≥t} (C. t∈[0.6 Let M be a square integrable continuous martingale.5 We have E Proof.1) we have F (t) ≤ Consequently ∞ ∞ Martingales sup |M (ti )|2 1≤i≤n ≤ 4E(|M (tn )|2 ). By (C. Set F (t) = P(S > t).5) .

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

132 Martingales .

y ∈ E. x(λ)). x. x(λ))x (λ). Let Λ. a 133 . x) which are only continuously Gˆteaux differentiable. We are given a continuous mapping The following result (contraction principle) is classical. Theorem D. x) and assume that Hypothesis D. If in addition F is of class C 1 . x) → F (λ.1 (i). ∀ λ ∈ Λ. x(λ)) + Fx (λ. We want to generalize the second part of this result to mappings F (λ. such that x(λ) = F (λ. y)| ≤ κ|x − y|. (D. ∀ λ ∈ Λ.Appendix D Fixed points depending on parameters D. (λ.1) (ii). 1) such that |F (λ. x) − F (λ. E be Banach spaces (norms | · |). (D.1 There exists κ ∈ [0.2) λ → x(λ). then x is of class C 1 and x (λ) = Fλ (λ.1 Introduction F : Λ × E → E. There exists a unique continuous mapping x : Λ → E.

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

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

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

Define f := [0.2m Let ∈ (0. T ]). (E.T ]2 |t − s|m dt ds = cm |t − s|1+2m 137 .T ]2 |B(t) − B(s)|p dt ds |t − s|1+p Take for simplicity p = 2m. T ] → R such that f +∞. T ) ⊂ C −1/(2m) ([0.Appendix E Fractional Sobolev spaces and regularity of processes E. T ) is by definition the space of all f : [0. 1).p ) = E [0.1) Example E.T ]2 |f (t) − f (s)|2m dt ds |t − s|1+2m .2m (0.2m W . Let us compute E( B p W .2 (The Brownian motion) Let > 0 and let p ≥ 1. then B 2m W . 1] 2m .T ]2 = cm [0. T ) or not.T ]2 |B(t) − B(s)|2m dt ds |t − s|1+2m |t − s|m−1−2m dt ds [0.1 (Sobolev embedding) Assume that > 1/(2m).2m (0.2m E =E [0. Then the following inclusion holds with continuous embedding.p (0. We ask the question whether B(·) belongs to W .1 Fractional Sobolev spaces on [0. < Theorem E. W . m ∈ N.

T ) again for < 2 .2) is fulfilled. T ) for < 2 .3. One situation often encountered is when the following estimate holds for some m > 1. T ) Let (Ω. ≤ cm [0. Remark E. T ]) for almost ω ∈ Ω.3 Assume that there is m > 1. since ∈ (0.2m (0. as the next proposition shows. The last statement follows from the Sobolev embedding theorem. and cm > 0 E[|X(t) − X(s)|2m ] ≤ cm |t − s|m . s ∈ [0.2m Moreover. and cm > 0 (E. Therefore 1 if 1 < < 1 we conclude by the Sobolev embedding that B(·) ∈ C − 4 (0. Then we have E |X|2m < +∞.4 (0. X(·. 1/2) and m − 1 − 2m > −1. P) be probability space and let X(t).2 Processes belonging to W . E. Assume that there is a > 0. T ]. s ∈ [0. 1/2).2m −1/(2m) ∈ (0.4) Then X has α-H¨lder continuous trajectories with α < o . ω) belongs to C Proof.138 Fractional Sobolev spaces The integral is finite if and only if < 1 . 1/2). T ]. 1+b . 4 2 Arguing similarly taking larger m we conclude that B(·) ∈ C α (0. T ). 1/2).3) ([0. F . t ∈ [0.4 Kolomogorov test It is a generalization Proposition E.2 (0. a (E. ∀ t. b > 0 such that E[|X(t) − X(s)|1+a ] ≤ cm |t − s|1+b ∀ t. 1 But if we take m = 2 we have B(·) ∈ W . T ) for any α ∈ (0. We have in fact E X 2m .T ]2 |t − s|m−1−2m dt ds < ∞. ∈ (0. This does not imply that B(·) is continuous. F .2) This estimate (provided m > 1) allows us to conclude that trajectories of X are H¨lder continuous almost surely. (E. . 2 1 For instance taking m = 1 we conclude that B(·) ∈ W . T ]. be a real stochastic process on (Ω. such that (E. P). o Proposition E.

The last statement follows from the Sobolev embedding theorem. d ∈ N. and cm > 0 E[|X(x) − X(y)|2m ] ≤ cm |t − s|2m . . ∈ (0. that (E.2m < +∞. P). T ]) for almost ω ∈ Ω. ≤ cm [0. W . |x − y|d+2m Let ∈ (0.3 Multi dimensional Sobolev spaces and regularity of random fields |f (x) − f (y)|2m dx dy.2m Moreover.5) Let (Ω. We have in fact E( X 2m . and cm > 0 such (E.Appendix F 139 E. Proposition E. T ]d ) ⊂ C −d/(2m) ([0.2m := [0. Assume that there is m > 1.6 Assume that there is m > 1. s ∈ [0. 1). F . T ].2) is fulfilled. T ]d . (E. P) be probability space and let X(x). T ]d ) is by definition the space of all f : [0.2m ) −d/(2m) ∈ (0. 1). Then we have E |X|2m < +∞. 1). be a random field on (Ω. since ∈ (0. x ∈ [0.6) This estimate implies that almost all trajectories of X are H¨lder continuous o almost surely. Define f W f . Then the following inclusion holds with continuous embedding.2m 2m .T ]2 |t − s|m−1−2m dt ds < ∞. ∀ t.T ]2d ([0. X(·.5 (Sobolev embedding) Assume that > d/(2m). T ]d → R such that . T ]d ). Theorem E. ω) belongs to C Proof. (E.7) ([0. F . 1/2) and m − 1 − 2m > −1. m ∈ N. .2m ([0.

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