Generalized covariation for Banach space valued processes, Itō formula and applications

Authors Cristina Di Girolami, Francesco Russo

Publication date 11 November 2014

Published in Osaka Journal of Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1012.2484, https://projecteuclid.org/euclid.ojm/1414090802

covariation stochastic integration \(\chi\)-statistics Banach space valued stochastic processes window processes Itō's formula

Mathematics Subject Classification ID

Fractional processes, including fractional Brownian motion (60G22) Stochastic integrals (60H05) Stochastic analysis (60H99) General theory of stochastic processes (60G07) Foundations of stochastic processes (60G05)

Abstract: This paper discusses a new notion of quadratic variation and covariation for Banach space valued processes (not necessarily semimartingales) and related It^o formula. If

X

and

Y

take respectively values in Banach spaces

B_{1}

and

B_{2}

and

c h i

is a suitable subspace of the dual of the projective tensor product of

B_{1}

and

B_{2}

(denoted by

(B_{1} h a t {o t i m e s}_{p i} B_{2})^{a s t}

), we define the so-called

c h i

-covariation of

X

and

Y

. If

X = Y

, the

c h i

-covariation is called

c h i

-quadratic variation. The notion of

c h i

-quadratic variation is a natural generalization of the one introduced by M'etivier-Pellaumail and Dinculeanu which is too restrictive for many applications. In particular, if

c h i

is the whole space

(B_{1} h a t {o t i m e s}_{p i} B_{1})^{a s t}

then the

c h i

-quadratic variation coincides with the quadratic variation of a

B_{1}

-valued semimartingale. We evaluate the

c h i

-covariation of various processes for several examples of

c h i

with a particular attention to the case

B_{1} = B_{2} = C ([- a u, 0])

for some

a u > 0

and

X

and

Y

being extit{window processes}. If

X

is a real valued process, we call window process associated with

X

the

C ([- a u, 0])

-valued process

X := X (c d o t)

defined by

X_{t} (y) = X_{t + y}

, where

y i n [- a u, 0]

. The It^o formula introduced here is an important instrument to establish a representation result of Clark-Ocone type for a class of path dependent random variables of type

h = H (X_{T} (c d o t))

,

H : C ([- T, 0]) l o n g r i g h t a r r o w R

for not-necessarily semimartingales

X

with finite quadratic variation. This representation will be linked to a function

u : [0, T] i m e s C ([- T, 0]) l o n g r i g h t a r r o w m a t h b b R

solving an infinite dimensional partial differential equation.

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