Homework 12, Random Processes

Nguyen Minh Quan

Instructor: Dr. Pham Hai Ha

September 15, 2023

1 Preliminaries
Let T be a positive real number, and f be a mapping defined on [0, T ]. We attempt to evaluate
the following Ito integral in form of limit:
Z T
I(f, T ) = f (s) dBs .
0

For every n ∈ N, the nth partition of [0, T ] is

 
T 2T (n − 1)T
Πn = 0, , , ..., ,T
n n n
and the corresponding elementary process is


 f (0) 0 ≤ s < T /n
f (T /n) T /n ≤ s < 2T /n

(n)
δf,T (s) = .

 ... ...
f ((n − 1)T /n) (n − 1)T /n ≤ s < T


Hence the nth approximation of I(f, T ) is

Z T n−1  
(n)
X iT

In (f, T ) = δf,T (s) dBs = f · B(i+1)T /n − BiT /n
0 n
i=0

yielding the limit representation of I(f, T ) as

n−1  
X iT

I(f, T ) = lim In (f, T ) = lim f · B(i+1)T /n − BiT /n . (1)
n→∞ n→∞ n
i=0

2 Exercises
In the following exercises, assume that {Bt }t≥0 is a standard Brownian motion process.

Problem 1. Write the following limits in form of Ito integrals:

n−1
2
X
(a) L1 = lim e−(i/n) (B(i+1)/n − Bi/n );
n→∞
i=0

2n−1
X
3 (B
(b) L2 = lim Bi/n (i+1)/n − Bi/n ).
n→∞
i=0

1
Solution. blank

(a) Letting L1 = I(f, T ) in (1) yields

2
 f (iT /n) = e−(i/n)

2
f (s) = e−s

(i + 1)T /n = (i + 1)/n ⇒
T =1
iT /n = i/n


thus the integral representation of L1 is

Z 1
−s2 2
L1 = I(e , 1) = e−s dBs .
0

(b) Letting k = 2n gives

2n−1
X k−1
X
3 3
L2 = lim Bi/n (B(i+1)/n − Bi/n ) = lim B2i/k (B2(i+1)/k − B2i/k )
n→∞ k→∞
i=0 i=0

thus letting L2 = I(f, T ) in (1) yields


 n=k
3
f (s) = Bs3
 
 f (iT /n) = B2i/k
⇒

(i + 1)T /n = 2(i + 1)/k T =2

iT /n = 2i/k

hence the integral representation of L2 is

Z 2
L2 = I(Bs3 , 2) = Bs3 dBs .
0

Problem 2. Write the following Ito integrals in form of limits:

Z 0.5
(a) I1 = sin Bs dBs ;
0
Z T
(b) I2 = sin s dBs .
0

Solution. blank

(a) Let f (s) = sin Bs and T = 0.5, from (1) we obtain the limit representation of I1 as
n−1
X

I1 = I(sin Bs , 0.5) = lim sin Bi/2n · B(i+1)/2n − Bi/2n .
n→∞
i=0

(b) Let f (s) = sin s, from (1) we obtain the limit representation of I2 as
n−1
X iT

I2 = I(sin s, T ) = lim sin · B(i+1)T /n − BiT /n .
n→∞ n
i=0

2
3 Simulation
The link to my Google Colaboratory simulations is available below.
Z T
• I1 = sin s dBs : https://shorturl.at/ijsOV;
0
Z T
• I2 = sin Bs dBs : https://shorturl.at/hFU29.
0