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On Itô's formula for multidimensional Brownian motion

Author

Listed:
  • Föllmer, Hans
  • Protter, Philip E.

Abstract

Consider a d-dimensional Brownian motion X (Xl, ... ,Xd ) and a function F which belongs locally to the Sobolev space W 1,2. We prove an extension of Ito's formula where the usual second order terms are replaced by the quadratic covariations [fk(X), Xkj involving the weak first partial derivatives fk of F. In particular we show that for any locally square-integrable function f the quadratic covariations [f(X), Xkj exist as limits in probability for any starting point, except for some polar set. The proof is based on new approximation results for forward and backward stochastic integrals.

Suggested Citation

  • Föllmer, Hans & Protter, Philip E., 2001. "On Itô's formula for multidimensional Brownian motion," SFB 373 Discussion Papers 2001,90, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200190
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