Planar diffusions with rank-based characteristics and perturbed Tanaka equations

DOI10.1007/S00440-012-0430-7zbMATH Open1274.60247arXiv1108.3992OpenAlexW2015003671MaRDI QIDQ1955831FDOQ1955831

Ioannis Karatzas, Vilmos Prokaj, E. Robert Fernholz, Tomoyuki Ichiba

Publication date: 19 June 2013

Published in: Zeitschrift für Wahrscheinlichkeitstheorie und Verwandte Gebiete (Search for Journal in Brave)

Abstract: We construct a planar diffusion process whose infinitesimal generator depends only on the order of the components of the process. Speaking informally and a bit imprecisely for the moment, imagine you run two Brownian-like particles on the real line. At any given time, you assign positive drift g and diffusion {sigma} to the laggard; and you assign negative drift -h and diffusion { ho} to the leader. We compute the transition probabilities of this process, discuss its realization in terms of appropriate systems of stochastic differential equations, study its dynamics under a time reversal, and note that these involve singularly continuous components governed by local time. Crucial in our analysis are properties of Brownian and semimartingale local time; properties of the generalized perturbed Tanaka equation which we study here in detail; and those of a one-dimensional diffusion with bang-bang drift. We also show that our planar diffusion can be represented in terms of a process with bang-bang drift, its local time at the origin, and an independent standard Brownian motion, in a form which can be construed as a two-dimensional analogue of the stochastic equation satisfied by the so-called skew Brownian motion.

Full work available at URL: https://arxiv.org/abs/1108.3992

zbMATH Keywords

diffusion processlocal timeskew Brownian motionTanaka formula

Mathematics Subject Classification ID

Diffusion processes (60J60) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Martingales with continuous parameter (60G44)

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• Planar diffusions with rank-based characteristics and perturbed Tanaka equations
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