A Dirichlet process characterization of a class of reflected diffusions

diffusion approximations Dirichlet processes extended Skorokhod problem generalized processor sharing reflected Brownian motion reflected diffusions rough paths semimartingales Skorokhod map Skorokhod problem zero energy

Mathematics Subject Classification ID

Sample path properties (60G17) Local time and additive functionals (60J55) Brownian motion (60J65)

Abstract: For a class of stochastic differential equations with reflection for which a certain

{m a t h b b L}^{p}

continuity condition holds with

p > 1

, it is shown that any weak solution that is a strong Markov process can be decomposed into the sum of a local martingale and a continuous, adapted process of zero

p

-variation. When

p = 2

, this implies that the reflected diffusion is a Dirichlet process. Two examples are provided to motivate such a characterization. The first example is a class of multidimensional reflected diffusions in polyhedral conical domains that arise as approximations of certain stochastic networks, and the second example is a family of two-dimensional reflected diffusions in curved domains. In both cases, the reflected diffusions are shown to be Dirichlet processes, but not semimartingales.

Review text

The first main result of this paper (Theorem 3.1) states that multidimensional reflected diffusion that belong to a slight generalization of the family of reflected diffusions, obtained as approximations in [\textit{K. Ramanan} and \textit{M. T. Reiman}, Ann. Appl. Probab. 13, No. 1, 100--139 (2003; Zbl 1016.60083) and Ann. Appl. Probab. 18, No. 1, 22--58 (2008; Zbl 1144.60056)] fail to be semimartingales. It is the generalization to multidimensional case of similar statement known already in two dimensions and for the reflected Brownian motion. The next main result (Th.3.5) states that for reflected diffusion belonging to certain class it is possible to decompose it as the sum of a local martingale and of a process of zero \(p\)-variation for some \(p>1\). This class consists of weak solutions of stochastic differential equations with reflection that are Markov processes, have locally bounded drift and dispersion coefficients and satisfy certain \(L^p\) continuity requirement. Corollary 3.6 states that the nonsemimartingale reflected diffusions, considered in Theorem 3.1., are Dirichlet processes. In Corollary~3.7 Theorem~3.5 is applied to show that even in cupslike domains the associated reflected Brownian motions are Dirichlet processes. The paper is organized as follows. The Introduction contains background and motivation and some notation used throughout the paper. In Section~2, the class of stochastic differential equations with reflaction under study is introduced, the main assumptions are presented and motivating examples are introduced. Section~3 contains rigorous statement of main results. The proof of Theorem 3.1 is presented in Section~4, while the proofs of Theorem 3.5 and Corollary~3.6 are given in Section~5. Some results needed in proofs are proved in the Appendix. The volume of the paper is 44 pages. The list of references contains 32 positions.

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