A change of variable formula with Itô correction term
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Abstract: We consider the solution to a stochastic heat equation. For fixed , the process has a nontrivial quartic variation. It follows that is not a semimartingale, so a stochastic integral with respect to cannot be defined in the classical It^{o} sense. We show that for sufficiently differentiable functions , a stochastic integral exists as a limit of discrete, midpoint-style Riemann sums, where the limit is taken in distribution in the Skorokhod space of cadlag functions. Moreover, we show that this integral satisfies a change of variable formula with a correction term that is an ordinary It^{o} integral with respect to a Brownian motion that is independent of .
The authors consider the stochastic heat equation involving a space-time white noise. Its solution, considered as a function of time, is a continuous centered Gaussian process and has a non-trivial quartic variation. It follows that it is not a semimartingale, so a stochastic integral with respect to it can not be defined in the classical Itô sense. In this connection, the new construction of a stochastic integral is proposed, where the integral is a limit of midpoint-style discrete Riemann sums, and the limit is taken in distribution in the Skorokhod space of cadlag functions. The Itô-type correction term in the change of variable formula is an ordinary Itô integral with respect to a Brownian motion that is independent of initial process that is integrated.
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