Quadratic covariation and Itô's formula for smooth nondegenerate martingales (Q5918054)

Given an adapted smooth (in the sense of the Malliavin calculus) process \(u\) with \(|u_t|\geq\rho>0\), \(t\in[0,T]\), and any locally square integrable function \(f:R\to R\), the authors prove that the Brownian martingale \(X_t=\int^t_0u_sdW_s\) admits the quadratic covariation \[ \bigl[f(X), X\bigr]_t=\text{P-}\lim_n \sum_{t_i\in D_n,t<t_i} \bigl(f(X_{t_{i+1}}) -f(X_{t_i})\bigr) (X_{t_{i+1}} -X_{t_i}), \] where \((D_n)\) is a sequence of partitions satisfying the usual conditions. The existence of this limit allows the authors to extend Itô's formula to \(F(X_t)\) with \(F(x)=\int^x_0 f(y)dy\), \(x\in R\). The main result is based on some uniform estimate for the Riemann sums appearing in the definition of \([f(X),X]_t\); these estimates are established by means of the Malliavin calculus, the main ingredient is some integration by parts formula. The present paper generalizes earlier works by \textit{N. Bouleau} and \textit{M. Yor} [C. R. Acad. Sci., Paris, Sér. I 292, 491-494 (1981; Zbl 0476.60046); \(f\) locally bounded], \textit{F. Russo} and \textit{P. Vallois} [Probab. Theory Relat. Fields 104, No. 1, 27-41 (1996; Zbl 0838.60045); \(f\in C^1\)] and \textit{H. Föllmer}, \textit{P. Protter} and \textit{A. N. Shiryayev} [Bernoulli 1, No. 1/2, 149-169 (1995; Zbl 0851.60048); \(X=W\)]. The interested reader is also referred to other generalizations in this subject by Föllmer/Protter (1997) and \textit{X. Bardina} and \textit{M. Jolis} [Stochastic Processes Appl. 69, No. 1, 83-109 (1997; Zbl 0911.60035)].