This tag is used for questions about stochastic integrals - especially for calculations . For questions related to more theoretic aspects of stochastic integrals such as its construction. Stochastic-analysis may be a more appropriate tag.

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15
votes
2answers
833 views

Brownian bridge expression for a Brownian motion

Let $B_t$ be a standard Brownian motion in $\mathbb R$, then the Brownian bridge on $[0,1]$ is defined as $$ Y_t = a(1-t)+bt+(1-t)\int\limits_0^t\frac{\mathrm dB_s}{1-s} $$ for $0\leq t<1$. Here ...
11
votes
1answer
609 views

Probability density function of the integral of a continuous stochastic process

I am interested in whether there is a general method to calculate the pdf of the integral of a stochastic process that is continuous in time. My specific example: I am studying a stochastic given ...
11
votes
3answers
352 views

Limit of a Wiener integral

How to show that $$ \lim _{\alpha \rightarrow \infty } \sup_{t \in \left [0,T \right]} \left | e^{-\alpha t} \int _ 0 ^t e^{\alpha s} ~ dB_s \right | =0, \ \ \text{a.e.} $$ where $\left (B_s ...
10
votes
1answer
367 views

Why do people simulate with Brownian motion instead of “Intuitive Brownian Motion”?

I have just recently begun studying Brownian motion and stochastic calculus at the level of an undergraduate or beginning graduate student of applied mathematics. (Textbooks I've looked at are by ...
10
votes
2answers
287 views

Area enclosed by 2-dimensional random curve

Consider a 2-dimensional Wiener process $(W_t)_{t \in [0,1]}$. Color every area which is enclosed by the line parametrised by $W_t$ (this means that, when the Wiener process makes a loop and ...
7
votes
2answers
793 views

Is this local martingale a true martingale?

Using the Ito's formula I have shown that $X_t$ is a local martingale, because $dX_t=\dots dB_t$, where $$X_t = (B_t+t)\exp\left(-B_t-\frac{t}{2}\right),$$ $B_t$ - is a standard Brownian motion I ...
7
votes
1answer
485 views

Ito's Lemma and Brownian Motion

Show by using Ito's Lemma, for $k \geq 2$ the following result hold. $$E[W(t)^k] = \frac{1}{2} k(k-1)\int_0^t E[W(s)^{k-2}]ds$$ where $W(t) = N(0,t)$ is standard Brownian motion. I think ...
7
votes
1answer
110 views

Trying to integrate a stochastic RV, $\int_0^t sZ_s \, ds$

I'm not taking an official class (actuarial exams), some fellow "students" created a question (forum discussion), considering the integral in title. This is my attempt at a solution with no real ...
6
votes
1answer
724 views

Is this a martingale?

Let $W_t$ be a standard Brownian motion with $W_0 = 0$ and let $Z_t$ solve the stochastic differential equation $dZ_t = 2 Z_t W_t \mathrm{d}W_t$. This has solution $$ ...
6
votes
1answer
2k views

Expected value of the stochastic integral $\int_0^t e^{as} dW_s$

I am trying to calculate a stochastic integral $\mathbb{E}[\int_0^t e^{as} dW_s]$. I tried breaking it up into a Riemann sum $\mathbb{E}[\sum e^{as_{t_i}}(W_{t_i}-W_{t_{i-1}})]$, but I get expected ...
6
votes
1answer
194 views

Very basic doubt about Itô's lemma

While trying obtain the dynamics of $X_t = \exp( \int_t ^T \phi_s ds)$, where $\phi$ is an Ito process following $$ d\phi_t = \mu dt+ \sigma dW_t \ ,$$ I had some doubt concerning the application of ...
6
votes
1answer
324 views

Does Itō isometry have different versions?

Itō isometry from Wikipedia: Let $W : [0, T] \times \Omega \to \mathbb{R}$ denote the canonical real-valued Wiener process defined up to time $T > 0$, and let $X : [0, T] \times \Omega \to ...
6
votes
1answer
683 views

Expectation of an integral w.r.t. Brownian Motion

I know the following statement: if $f$ is a deterministic function and continuous, i.e. $f\in C^0([0,T],\mathbb{R})$, then $\int f(s)dW_s$ is normally distributed with mean zero and variance $\int ...
5
votes
3answers
3k views

Expectation of geometric brownian motion

I was deriving the solution to the stochastic differential equation $$dX_t = \mu X_tdt + \sigma X_tdB_t$$ where $B_t$ is a brownian motion. After finding $$X_t = x_0\exp((\mu - \frac{\sigma^2}{2})t + ...
5
votes
1answer
200 views

Holder continuity of Ito integral

Let $\sigma(t,\omega)$ be a progressively measurable function and $\mathbb{E}[\int_0^T \sigma_t^2\mathrm dt] < \infty$. Can we say that the Ito process $\int_0^t \sigma_s \mathrm dW_s$ is Hölder ...
5
votes
1answer
129 views

existence/uniqueness of solution and Ito's formula

Given the Ito SDE $$ dX_t=a(X_t,t)dt + b(X_t,t) dB_t $$ where $a(X_t,t)$ and $ b(X_t,t)$ satisfy the Lipschitz condition for existence and uniqueness of solutions. Given a function $f(X_t,t) ∈ C^2$ ...
5
votes
1answer
294 views

$\int_0^tB_s^2\ dB_s$ - Gaussian Process and independent increments?

For $(B_t)_{t\ge0}$ a standard Brownian motion (Wiener process) define the stochastic process $X_t:=\int_0^tB_s^2\ dB_s$. I am currently trying to assess if $(X_t)_{t\ge0}$ is a Gaussian process and ...
5
votes
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 ...
5
votes
3answers
1k views

Itō Integral has expectation zero

I have a question about the following property, which I didn't know so far: Why does the Itō integral have zero expectation? Is this true for every integrator and integrand? Or is this restricted ...
5
votes
1answer
181 views

Stochastic Integral which is almost surely zero at fixed time

This is an exercise from Karatzas and Shreve. Find a $(Y_s)_{s \in [0,1]}$ progressively measurable such that $ 0 < \int_0^1 Y_s ^2 ds < \infty$ almost surely, and $\int _0^1 Y_s dW_s = 0$ ...
5
votes
3answers
285 views

Stochastic integral and Stieltjes integral

My question is on the convergence of the Riemann sum, when the value spaces are square-integrable random variables. The convergence does depend on the evaluation point we choose, why is the case. Here ...
5
votes
1answer
89 views

Expectation of a stochastic integral

Let $M$ be a right-continuous local martingale, $s,t$ two times (stopping times, if you like). Under what conditions does the following hold: $$E\left(\int_s^t X \, dM\mid\mathcal{F}_s\right)\le 0$$ ...
5
votes
3answers
474 views

Why isn't the Ito integral just the Riemann-Stieltjes integral?

Why isn't the Ito integral just the Riemann-Stieltjes integral? What I mean is, given a continuous function $f$, some path of standard brownian motion $B$, and the integral: $$\int_0^Tf(t)\;dB(t).$$ ...
5
votes
0answers
95 views

Representation theorem for continuous process of finite variation

There is a martingale representation theorem If $M$ is a continuous $L^2$-martingale, there is a Brownian motion $B$ and a cadlag adapted function $\sigma$ such that $$ M_t = M_0 + \int_0^t ...
5
votes
0answers
480 views

Ito's lemma and application

Can someone help me apply Ito's lemma to the function $f(t,x,k)$ where t is the time and x,k dimensions where x and k refer to dynamics $dX(t)=\mu(t)dt+\sigma(t)dB(t)$ ...
4
votes
1answer
119 views

Computation of basic stochastic integral.

I am trying to compute the covariance of a 1 dimensional Ornstein-Uhlenbeck process $dx_t=-\theta x_t dt+ \sigma dW_t$, $\theta>0$ and I am at the stage, $$\text{Cov }(x_s,x_t)=\sigma^2 ...
4
votes
1answer
1k views

How to derive the Ornstein-Uhlenbeck Stochastic Integral Equation?

I have a question regarding the Ornstein -Uhlenbeck process. We have a simplified version with Stochastic Integral Equation: $X_t=-a\int^t_0 X_s\,ds +B_t$. B is the Brownian motion. And its analytic ...
4
votes
1answer
150 views

“Continuity” of stochastic integral wrt Brownian motion

I'd like to prove a nice property of a stochastic integral with respect to Brownian motion. Let $(H_t)_{t\geq0}$ be a progressive and bounded process that is continuous at $0$ and $B$ a standard ...
4
votes
1answer
179 views

Exponentials of stochastic processes and Brownian motions

This is my first time looking at problems in stochastic calculus, so please bare with the simplicity of the question. As always, any help is greatly appreciated. 1) Given $X_t=\int_0^ur_sds$ for a ...
4
votes
1answer
859 views

Expectation value of a product of an Ito integral and a function of a Brownian motion

this problem has come up in my research and is confusing me immensely, any light you can shed would be deeply appreciated. Let $B(t)$ denote a standard Brownian motion (Wiener process), such that the ...
4
votes
1answer
164 views

Simple stochastic integral

Let $(B_1,B_2)$ be a two-dimensional Brownian motion. Let $$ X_t = \int\limits_0^t B_1(s)\mathrm \; dB_2(s). $$ Is there a closed form for $X$ or the integral above is all one can get?
4
votes
1answer
263 views

Solution to the stochastic differential equation

Let $X_o=x$, $dX_t=\frac{1}{X_t}dt+X_tdW_t$, $W_t$ is a brownian motion i am thinking of trying $Y_t=\frac{X_t^2}{2}$ and apply ito's lemma on $Y_t$
4
votes
2answers
190 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 ...
4
votes
1answer
518 views

Martingale problem

If $X_t$ is an $\mathbb{R}$- valued stochastic process with continuous paths, show that the following two conditions are equivalent: (i) for all $f\in C^2(\mathbb{R})$ the process $$f(X_t) − f(X_0) ...
4
votes
1answer
182 views

Show that $M_t$ is a Standard Brownian Motion

Let $M=(M_t)_{t\geq0}$ with $$M_t=\int_0^{\log\sqrt{1+2t}}e^s\text{d}B_s$$ where $(B_t)_{t\geq0}$ is a Standard Brownian Motion. Show that $M$ is also a Standard Brownian Motion and compute ...
4
votes
1answer
176 views

Existence of solutions to stochastic differential equations by the Banach contraction principle?

I've read a proof for existence of solutions to stochastic differential equation from a book of Ikeda and Watanabe and have a question. Is it possible to prove existence (and uniquness) by means of ...
4
votes
1answer
380 views

How to make this heuristic extension of Itô-Tanaka's formula valid

Here is my story, I have the following function : $$ g(x)=(1+x)\cdot\exp\left(-\frac{(\log(x+a)+c)^2}{2\sigma^2}\right)1[x\ge y]=f(x)\cdot1[x\ge y] $$ with $a,c,\sigma$ being "good" reals so that ...
4
votes
1answer
556 views

Brownian hitting time of a _very_ simple linear boundary

I realize that general results on the hitting times of a curve are practically nonexistant, but I am hoping that someone can string together a sequence of tricks to tell me what $$ \Pr\left( ...
4
votes
0answers
125 views

An exercise from Revuz, Yor; equality in distribution of 2 integrals.

Here is the exercise I have been struggling to solve. It is taken from this book by Revuz and Yor: link. Here is the full text of the problem ( Exercise 3.32, chapter 4). Exercise (3.32). Let $B$ and ...
4
votes
0answers
91 views

Determine if this is a Martingale

I am trying to check if the process $S_t$ is a martingale, where $\mathrm dS_t = \frac{I_{S_t > 0}}{S_t} \mathrm dW_t$, $S_0 = 1$. We know that $S_t$ is a local martingale because if we stop it ...
4
votes
0answers
47 views

2-D exponential functional brownian motion

I'm looking for the distribution of $X = \int_0^T e^{-W_t} dt \int_0^T e^{W_t}dt$ and $Y = \frac{\int_0^T e^{-W_t} dt}{ \int_0^T e^{W_t}dt}$ (where $W_t$ is a standard brownian motion) On most ...
4
votes
1answer
255 views

Stochastic integrals and new probability measures

Let $B$ be a standard Brownian motion on $(\Omega, \mathcal{F}, P, ({\mathcal{F}_t})_{t\ge0})$, where the filtration is the one generated by $B$. Fix a time interval $[0,T]$. Define the process $X$ as ...
4
votes
0answers
146 views

Integrating the inverse of a squared bessel process - integrability

Let $X_t$ be a 4-dimension Squared Bessel Process (BESQ-4). Let $M_t$ be a continuous true martingale. Question: Does $\int_0^t \frac{1}{X_s}dH_s$ exist? If so, is it only a local or a true ...
4
votes
0answers
144 views

Calculating $\mathbb{E}[\int_0^T N_{t-} dS_t]$ - an expectation of a simple stochastic integral.

I came across some nasty stochastic integral of which I'd like to calculate the expected value" $\mathbb{E}[\int_0^T N_{t-} dS_t]$ where $N_t$ is a Poisson process and $S_t$ is, say, a geometric ...
4
votes
2answers
297 views

Distribution of Maximum of Sum of Sum of Gaussians

Let $X_i$ be a sequence of i.i.d. standard normal random variables. Let $Y_i=\sum_{k=1}^iX_k$ and $Z_i=\sum_{k=1}^iY_k$. I am interested in upper and lower bounds for $P(\sup_{1\leq i\leq m}|X_i|\leq ...
4
votes
1answer
307 views

Stochastic integral inequality

Let $W_t$ be a Brownian motion with $m$ independent components on $(\Omega,F,P)$. Let $G(\omega,t)=[g_{ij}(\omega,t)]_{1\leq i\leq n,1\leq j\leq m}$ in $V^{n\times m}[S,T]$ such that ...
4
votes
0answers
163 views

Observable and unobservable parameters of stochastic processes

Consider the following diffusion process $$ dX_t = \mu\,dt+\sigma(t,X_t)\,dW_t $$ where $X,W$ are 1-dimensional and. Is it true that given a history $(X_s,s\leq t)$ for each $s< t$ one can find ...
4
votes
0answers
192 views

stochastic differential equation

Xt is a weak solution to the SDE with dXt = ( −αXt + γ )dt + β dBt , ∀t ≥ 0 X0 = x0. α, β , and γ constants, and Bt is a brownina motion. need to find the PDE for the transition density of X at ...
4
votes
0answers
296 views

Ito's Lemma application

$Z(t) = \int_0^t g(s)\,dW(s)$, where $g$ is an adapted stochastic process. Find $dZ$ ?
3
votes
2answers
133 views

Simple stochastic differential equation

Solve the following stochastic differential equation: $$ dX_t=X_t\,dt+dW_t. $$ Thank you very much for help! I even don't know where to start...