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511 views

Stochastic integral: Interchanging the order of expectation and integration

Let $B$ be a standard Brownian motion and $$ X_t=\int_0^t f_s ds+\int_0^t g_s dB_s, $$ where, $|f|$ and $|g|$ are both bounded, almost surely, by some positive constant $M$. Is it true that $$ ...
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0answers
75 views

Local martingale iff each component is a local martingale?

This is probably an easy question: A local martingale is an adapted, cadlag process for which there is an increasing sequence of stopping times (going to $\infty$) such that the stopped process is a ...
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1answer
64 views

Condition for existence of a stochastic differential equation

With $B$ a standard Brownian motion, write $$ dX_t=f_tdt+g_tdB_t. $$ What are the conditions on $\left(f\right)_{t\ge 0}$ and $\left(g\right)_{t\ge 0}$ for $X_t$ to exists? I think ...
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1answer
257 views

Integration of Wiener process: $\int_{t_1}^{t_2} dB(s)$

We all know that $\int_0^t dB(s) = B(t)$, where $B(t)$ is a standard Brownian Motion. However, is the following identity true? Also, why or why not? $\boxed{ \displaystyle \ \ \int_{t_1}^{t_2} ...
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0answers
39 views

Finite p-th variation implies zero-valued q-th variation.

The Question: Let $X$ be a continuous process, and suppose $0 < p < q$. Prove the case $V_t^p(X) < \infty \implies V_t^q(X) = 0$. Definitions: The standard setup. $\Pi := ...
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1answer
139 views

Demonstrate that every martingale is a local martingale.

The Original Question: Demonstrate that every martingale is a local martingale. Attempt at a Solution: Consider the standard setup of this problem: $\mathscr{F}_t$ is the filtration that satisfies ...
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0answers
190 views

What kind of process is a locally bounded process?

Definition of locally bounded process is on http://planetmath.org/encyclopedia/LocallyBoundedProcess.html On that website, it says any discrete-time predictable process is locally bounded. How can I ...
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2answers
96 views

Second order linear partial differential equation: $\partial_t u(t,x)+\frac12 \partial_{x,x} u(t,x)+u(t,x)v(x)=0$

Is there a way to solve $$ \partial_t u(t,x)+\frac12 \partial_{x,x}u(t,x)+u(t,x)v(x)=0? $$ This appeared as a condition for $$ X_t=u(t,B_t)e^{\int_0^tv(B_s)ds} $$ to be a martingale. With $B$ a ...
0
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1answer
737 views

Applying Ito formula to the Brownian bridge

Let $B$ be a standard Brownian motion and $$ W_t=(1-t)\int_0^t \frac{1}{1-s}dB_s $$ be a Brownian bridge. Calculate $dW_t$. To apply Ito formula define $$ f(t,B_t)=(1-t) \int_0^t\frac{1}{1-s}dB_s $$ ...
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1answer
78 views

another version of doob inequality

please consider the following problem: Let $(M_t)_{t\geq 0}$ be a continuous and positive submartingale and $S_t=\sup_{0\leq s\leq t}M_s$. Please prove that for any $\lambda>0$ we have $$\lambda ...
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1answer
94 views

How to show Wiener measure induces basic properties of Brownian motion?

page 19 of http://www.math.tifr.res.in/~publ/ln/tifr64.pdf gives a defintion of Wiener measure Ft1,t2,..,tk. But how can we show it is a probability measure and it satisfies the consistency condition ...
0
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1answer
49 views

Rewriting SDEs - “Multiplication on both sides”

I have a question concerning a calculus "trick" sometimes used in stochastic calculus (e.g. in the Book on Arbitrage Theory in Cont. Time of Bjoerk). There they do the following in the proof of Prop. ...
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0answers
101 views

Martingale Decomposition

Is it possible to decompose a discrete-time martingale $(M_n)$ uniquely into two processes $$M_n=M_n^I+A_n$$ where $(M^I_n)$ is a martingale with independent increments and $(A_n)$ is a martingale? If ...
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1answer
94 views

invertible, measurable and measure preserving

$T: [0,1)^{2}\rightarrow[0,1)^{2}$ by $T(x,y) = (2x,\frac{y}{2})$, with $0 \leq x < \frac{1}{2}$ and $T(x,y) = (2x-1, \frac{y+1}{2})$, with $\frac{1}{2} \leq x < 1$ In class we said this $T$ ...
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0answers
219 views

Can infinitesimal generator be defined by the time-inhomogeneous stochastic process?

The following is the definition of infinitesimal generator from Oksendal. Let $\{X_t,t\in[0,T]\}$ be a time-homogeneous It\^o diffusion in $\mathbb{R}^d$. The $\textit{infinitesimal generator}$ ...
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0answers
84 views

How Wiener Measure on $F(C([0,T]))$ is a Gaussian Measure

I'm looking for some simple proofs for the fact that on $(C[0,T],F(C([0,T])),P_{*})$ where $F$ represents Borel Sigma algebra , $P_{*}$ the Wiener Measure , then how to proove that $P_{*}$ measure is ...
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1answer
122 views

Conditional expectation of a finite variation process

A simple question: Let $H$ be a cadlag, adapted process and $A$ a process of finite variation. Then also $\int_t^T HdA_t$ is a finite variation process (see "Limit Theorems... "Jacod&Shiryaev ...
6
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1answer
401 views

Covariance of Gaussian stochastic process

Could someone help me to figure out solutions of following problems?: Let $X = (X_t)_{t \geq 0}$ be a Gaussian, zero-mean stochastic process starting from $0$, i.e. $X_0 = 0$. Moreover, assume that ...
0
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1answer
138 views

Confusion regarding Stochastic integral

I've a stupid doubt in the construction of stochastic integral of real scalar valued maps. Many times I've seen in books after the stochastic integral is defined in [$0,T$] for the integrand in $L^2$ ...
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0answers
150 views

Ito's formula for irregular functions

Let's say we have \begin{align} Y_t=h(t,X_t) \end{align} and for simplicity \begin{align} dX_t=e\,dt+f\,dW_t \end{align} then by Ito's formula we have \begin{align} dY_t=\left(\frac{\partial ...
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0answers
103 views

How to check if a process is a semimartingale?

Consider the process $X_t = \sum_{i=1}^{N_t} Y_i$. This is a Lévy process, hence Markov and so on ($N_t$ is a Poisson counting process). Now add some diffusion $D$ for each jump $Y_i$ that starts at ...
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0answers
72 views

Applicability of Itô's Lemma for $g\in \mathcal{C}^2((0,1)^2)\cap \mathcal{C}_0([0,1]^2)$

Let the domain be $[0,1]^2$. And let $W^x_t$ be the standard Brownian Motion started in $x\in [0,1]^2$ with absorbption on $\partial [0,1]^2$ and choose some $g\in \mathcal{C}^2((0,1)^2)\cap ...
1
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0answers
166 views

existence of a strong solution for a sde

Suppose we want to study a SDE of the form $$ dX_t = a(t,X_t)dt + b(t,X_t)dW_t$$ and $X_0=Y$, on a filtered probability space $(\Omega,\mathcal{F}, \mathbb{F},P)$ and where $W$ is a $(P,\mathbb{F})$ ...
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0answers
163 views

stochastic exponential

I was able to show the following: $X$ a semimartingale, $X_0=0$ then the SDE $$ dZ_t=Z_tdX_t$$ with $ Z_0=1$ has the unique solution $Z_t:=\exp{(X_t-\frac{1}{2}\langle X\rangle_t)}$. I was able ...
2
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1answer
156 views

Is the expectation $E[\xi U'(\xi)]$ finite?

I encounter the following problem today. It seems a simple question. Let $U$ be a real function from $R^+\rightarrow \bar{R}$ satisfying the following conditions: (1) $U$ is concave, continuous, ...
0
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1answer
161 views

a question on Stochastic Calculus

I encounterred a question on Stochastic Calculus as following, but I don't understand the meaning of $\mathcal{N}$ here, can any expert explain me a little bit? Thank you very much in advance! ...
2
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1answer
133 views

The variance of bilateral filtered random variables

I am glad to have found this great site. There is a problem I am trying to solve for a while. I want to analyze the noise attenuation behavior of the bilateral filter. So given the unnormalized ...
3
votes
1answer
228 views

Futures pricing and futures price process under the real world measure

This is something that keeps bothering me about the Benchmark approach of Platen, which (very) shortly is as follows: Compare the development of an economic value with a growth optimal portfolio. ...
1
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1answer
105 views

Why is $ \operatorname{sign} B_t $ a predictable process?

Does anybody know why $ \operatorname{sign} {B_t} $ is a predictable process if $ B_t $ is a Brownian motion and sign denotes the signum function with the convention that $ \operatorname{sign} (0) := ...
3
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0answers
446 views

Variance of a Wiener process

Problem statement: a continuous wiener process $w(t)$ with unit incremental variance and $w(0)=0$ is given, and then we check the wiener process at every $h$ seconds, $h>0$ is a positive number. If ...
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3answers
1k views

On hitting time of Brownian motion and Ito's lemma

I have two possibly related questions. Let $\tau:=\min\{t\geq0:B_t=1\}$, where $B_t$ is a standard Brownian motion. I am supposed to derive the fact that $\mathbf{E}\tau=\infty$ by applying some ...
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1answer
275 views

Convergence of quadratic variation of Ito processes

I need to find an example of an Ito process $X=\{X_t:t\in[0,T]\}$ with non-zero Ito integral part and a sequence of Ito processes $\{X_n\}$ such that $X_n$ converges uniformly to $X$, as ...
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2answers
180 views

Stratonovich SDE coefficient selection

Is it possible to find a strictly positive function $\sigma:\mathbb{R}\to\mathbb{R}$, such that a solution $X_t$ to an SDE $$dX_t=-X_tdt+\sigma(X_t)\circ dB_t,$$ with $X_0$ being arbitrary, is a ...
3
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1answer
117 views

stochastic analysis problem

Suppose $X$ and $Y$ are Ito processes, $X_t=x+\int^t_0Y_sdB_s$ and $Y_t=y-\int^t_0X_sdB_s,\ t\geq 0$, here $B$ is a standard Brownian motion. I need to prove that ...
3
votes
1answer
139 views

Solving SDE's on subsets of $R^n$.

It is well-known (see for instance Oskendal's text) that if $T>0$ and $$b(\cdot,\cdot): [0,T] \times \mathbb{R}^n \rightarrow \mathbb{R}^n~~~~~~\sigma(\cdot,\cdot):[0,T] \times \mathbb{R}^n ...
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0answers
69 views

Langevin equation with uniform noise

Given the Langevin equation written in the form: $$\ddot{x}(t)+\lambda \dot{x}(t)=\mu(t)$$ if $\mu(t)$ is noise with gaussian $pdf$, the solution is well known in therms of the spectrum of the ...
2
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1answer
180 views

Reference request for Optimal Stopping (Stochastic Analysis)

I would like to start and get into the habit of reading some publications in different areas of mathematics, to get used to the writing style / mathematical sophistication etc. that is expected. In ...
1
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2answers
185 views

Random diffusion coefficient in the Fourier equation

I'm stuck on the following simple problem: It's given the Fourier equation: $$\partial_t{u(x,t)}=\partial_x[k(t)\partial_xu(x,t)]$$where the diffusion coefficient $k(t)$ is a random variable with a ...
2
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2answers
457 views

calculate all the equivalent martingale measure

Under the assumption of no arbitrage without vanish risk, in an incomplete market $(\Omega,{\cal F}, P)$, the set of equivalent martingale measure is NOT empty, i.e. ${\cal P} = \{Q: Q \sim P\}\neq ...
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1answer
191 views

basic application of Strong Law of Large Numbers

In $$ \sum_{j=0}^q {q\choose j}{1\over n}\sum_{i=1}^n X_i^j(-\bar X)^{q-j} \quad \overrightarrow{a.s.} \quad \sum_{j=0}^q {q\choose j} \mathbb{E}(X^j) (-\mathbb{E}(X))^{q-j} $$ using the Strong ...