Abdelkader BENHARI

Lecture notes on probability

Basic concepts, random functions, Gaussian random functions,
Markov processes, linear theory of random functions, brownian
motion, Donsker invariance principe, stochastic integration.

CONTENTS

Contents
4

1 Preliminaries

4
18
24

1.1 Basi on epts from probability theory . . . . . . . . . . . . . . .

1.2 Independen e . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.3 Conditional probability and onditional expe tation . . . . . . . .

2 Random fun tions and random mappings

35

3 Gaussian random fun tions

38

4 Pro esses with independent in rements

47

5 Markov pro esses

57

6 Weakly orrelated random fun tions

62

7 Linear theory of random fun tions

66

7.1 Correlation fun tions . . . . . . . . . . . . . . . . . . . . . . . . .

7.2 Spe tral representation of orrelation fun tions . . . . . . . . . . .
8 Brownian motion

8.1
8.2
8.3
8.4
8.5
8.6
8.7

Generalities on sto hasti pro esses . . . . . . . . . .

Denition of Brownian motion . . . . . . . . . . . .
Gaussian random variables and pro esses . . . . . .
Existen e of Brownian motion and Wiener measure .
Basi path properties of Brownian motion . . . . . .
Higher dimensional Brownian motion . . . . . . . . .
Geometri Brownian motion . . . . . . . . . . . . . .

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9 The strong Markov property of Brownian motion

9.1
9.2
9.3
9.4

Conditional expe tations . . . . . . . . . . . . . . . . . .

The weak Markov property and Blumenthal's 01-Law .
Stopping times and the strong Markov property . . . . .
The re e tion prin iple . . . . . . . . . . . . . . . . . . .

10 Martingales

10.1
10.2
10.3
10.4
10.5
10.6

A.BENHARI

Martingales: Denition and Examples . . . . . . . . . .

Doob's Optional Stopping Theorem . . . . . . . . . . . .
Appli ation to Brownian Motion: Exit from an interval
Doob's Martingale Convergen e Theorem . . . . . . . .
Uniformly integrable martingales . . . . . . . . . . . . .
Kolmogorov's strong law of large numbers . . . . . . . .

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66
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81

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96

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.109.

110

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.113.
.115.
.117.
.120.
.126.

11 The Donsker Invarian e Prin iple

11.1
11.2
11.3
11.4

Convergen e of distributions on metri spa es . . . . . . . . . .

The Donsker Invarian e Prin iple: Statement and Appli ations
The Skorokhod Embedding Theorem . . . . . . . . . . . . . . .
The Donsker Invarian e Prin iple: Proof . . . . . . . . . . . . .

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128

128
132
136
139

12 An outlook to sto hasti integration

141

13 Exer ises

146

BNibliography

156

A.BENHARI

1 Preliminaries
1.1

Basi on epts from probability theory

Denition 1.1 The tupel f

; A; Pg is alled probability spa e with

: the set of elementary events

A: a olle tion of subsets of
forming a -algebra
P: a probability measure on A
(P(
) = 1):
The sets A 2 A are alled random events, P(A) its probability.

Theorem 1.1 properties of probability measures

A; Ai 2 A; i = 1; 2; : : :
1. P(;) = 0
1
S

2. P(

i=1

Ai ) =

1
P

i=1

3. P(A2 n A1 ) = P(A2 )
4. P(A) = 1
P(A)
1
S

5. P(

i=1
1
T

P(Ai ); if Ai Aj = ; 8 i; j with i 6= j
P(A1 ), if A1  A2

Ai ) = ilim
P(Ai ); if Ai  Ai+1
!1

8i

Ai ) = ilim
P(Ai ); if Ai  Ai+1 8 i
!1
Denition 1.2 A random variable (r.v.)  on a probability spa e f
; A; Pg
is a A-measurable real fun tion of the elementary events ! :  (! ).
6. P(

i=1

Remark 1.1
1. Let A be a  -algebra of
; E 2 A.
A real valued fun tion f : E ! R is alled measurable on E if and only if
f 1 (G) 2 A 8 open subsets G  R:
2. f : E ! R is measurable on E if and only if 8 a 2 R : f 1 (( 1; a)) 2 A:

Denition 1.3 The random variables  and  are alled P - equivalent, if

P( 6=  ) = P(! :  (! ) 6=  (! )) = 0:
Notation:  =  (mod P),  =  almost sure (a.s.),  =  with probability 1.
The on ept "`almost sure"' is used also in more general situations:
e.g. n = fn (! ) onverges a.s. to  = f (! ) if:
lim  (! ) =  (! ) 8 ! 2
n N where P(N ) = 0
n!1 n
) notation: nlim
 =  mod P or nlim
 =  a.s.
!1 n
!1 n

Theorem 1.2 Appli ation of properties of measurable fun tions

1. Let h(t1 ; : : : ; tn ) be arbitrary Borel - fun tions of n variables t1 ; : : : ; tn ; and
let 1 ; : : : ; n be r.v. ) h(1 ; : : : ; n) is also a random variable.
A.BENHARI

2. Let (n)n1 be a sequen e of r.v.

) sup n; inf n; nlim
!1 n ;

lim 
n!1 n

are also r.v.

3. Let n = n a.s., n = 1; 2; : : : ; and h(t1 ; : : : ; tn ) be a Borel - fun tion

) h(1; : : : ; n) = h(1 ; : : : ; n) a.s.
) sup n = sup n a.s., inf n = inf n a.s.
n

 = lim
 a.s.,
lim
n n
n n

4. Let (n)n1 be a sequen e of r.v.

) A = f! 2
: lim n(!)
n

see A =

 = lim
 a.s.
lim
n n
n n

9g is A-measurable

1
1 S
T

f! : jm

k=1 n=1 m1 ;m2 >n

m

j < k1 g

Remark 1.2 h(t1 ; : : : ; tn) is alled Borel - fun tion, if it is measurable with
respe t to the  -algebra of Rn , whi h is generated by the open subsets of R n .
Denition 1.4 A r.v. is alled dis rete, if there are at most ountable many

values:
P
 = k IAk (! ) Ak 2 A;
k

S
k

Ak =
; Ai \ Aj = ;

8 i 6= j

Theorem 1.3 Let  be an arbitrary r.v., then there exists a sequen e of dis rete
r.v. (n )n1 with nite number of values, su h that
lim  (! ) =  (! ) 8 ! 2
:
n!1 n
Proof:

n =

n
nP1 P

(i + k n 1 )IAik with Aik = f! : i + k n 1

i= n k=1

for

j (!)j < n let ! 2 Aik

  < i + nk g
) j nj = j (i + k n 1 )j < n1
n

-1

i  i+1

n-1 n
assertion

Theorem 1.4 Let  be a nonneagtive r.v.. Then there exists a monotone in reasing sequen e of dis rete r.v.'s (with ountable many values), whi h onverges
n=2
uniformly to  .

Proof:
n :=

0
1
P
i
2n IAin
i=0

1 2

= 252

with Ain := f! :

i
2n

<

i+1
2n

) j nj < 21n 8 !

Denition 1.5 A random element(r.e.)  with values in a measurable spa e

(R; B) is a measurable mapping of f
; A; Pg into fR; Bg, i.e.
 1 (B ) = f! :  (! ) 2 B g 2 A 8 B B
A.BENHARI

 If R is a metri spa e, then B denotes the -algebra of Borel sets (if not
denoted otherwise).

 If R is a ve tor spa e, then  is alled random ve tor .

Let fk ; k = 1; : : : ; ng be r.e.'s on f
; A; Pg, with values of k in fRk ; Bk g
then fk ; k = 1; : : : ; ng an be onsidered as a r.e.  with values in a measurable
spa e fS ; Cg
with S =

n
Q

k=1
n
Q

Rk

(produ t of spa es) R1 ; : : : ; Rn )

and C = Bk
(produ t of  -algebras B1 ; : : : ; Bn ).
k=1
The r.e.  is alled dire t produ t of the r.e.'s 1 ; : : : ; n :

Remark 1.3
1.

n
Q

k=1

Rk := fy : y = (x1 ; : : : ; xn ); xi 2 Ri 8 ig

2. proje tion: i :
3.

n
Q
k=1

n
Q
k=1

Rk ! Ri : i (y) = xi

Bk := ( Q Bk ; Bk 2 Bk )
k=1

 -algebra, whi h is generated by the sets

Q
2

Bk with Bk 2 Bk .

R = fy = y( ) : !  ;  2 R ; 2 g

is the spa e of fun tions dened on

k=1

f ; 2 g family of r.e.'s with  in fR ; B g

Generalization:

 S=

n
Q

with values in R for 2 ;

ylinder sets in S : n 2 N arbitrary;

C = fy 2 S : y ( k ) 2 B k ; B k 2 B k ; k = 1; 2; : : : ; ng;
C = C ::: n (B 


 B n )
is ylinder set with basis B 


 B n and oordinates 1 ; : : : ; n;
1

 B = Q B
2

:= minimal  -algebra generated by the ylinder sets;

is alled produ t of  -algebras B ; 2

) g : ! ! g(!) is dened by g(!) = g(!; ) =  (!);

is a measurable mapping f
; Ag ! fS ; Bg
Spe ial ase: R = R 8 2
) notation: S = R
S : spa e of all fun tions with values in R dened on
g (! ) :
! R ; i.e. every ! is mapped into a fun tion of R
) random fun tions
i.e. the family of r.v.'s f ; 2 g is a random fun tion
A.BENHARI

Example 1.1


sto k pri e

 JJ
 bb""


LL
!!




Let  (! ) be a r.e. on

time
daily values )  N [ f0g
(time series, random sequen e)

R = (0; 1)

) v = (vx; vy ; vz )T
)  R3  [0; 1); R  R3
)  [0; 1);

velo ity of wind v :

v = v (x; y; z; t)
v = v (t); (xed point (x; x; z ))
random surfa e


  



time
= [0; 1);

6 
)  R2 ; R  R

(
(( ""ll(
 (((XXX  
!
"  !X
"
(
(
X
(
(  XXXX(%%(((HH%%3 (2) ((
 H((





 




(1)






f
; A; Pg

with values in

fS ; Bg

Denition 1.6 The  -algebra onsisiting of the sets f 1(B ); B 2 Bg is alled

the  -algebra whi h is generated by the r.e.  and denoted by A ( A):
Remark 1.4 C = f 1 (B ); B 2 Bg is a  -Algebra, sin e
1. A 2 C ) A =  1 (B ) ) A =  1 (B ) ) A 2 C
S
S
2. Ai 2 C ) Ai =  1(Bi ) )
Ai =  1 ( Bi ) )
i

S
i

Ai 2 C

Theorem 1.5 Let  be a r.e. on f

; A; Pg with values in (S ; B) and let  be a
A - measurable r.v.. Then there exists a measurable real fun tion g(x) dened
on S su h that  = g ( ).
A.BENHARI

Proof: see basi ourse Theorem 3.5

(
; A)
S

(
; A )

 (!)

! (S ; B)

#g
.

! (R; C )
1

1.Let  be a dis rete r.v. with values an ; n = 1; 2; : : :

An = f! :  = an g )  1 (an ) = An 2 f 1 (B ); B 2 Bg
i.e. 9 Bn 2 B with  1 (Bn ) = An
nS1
Bn0 := Bn n Bi ) Bn0 \ Bm0 = ; for n 6= m
i=1

 1 (Bn0 ) = An n


nS1

Ai = An

i=1
1
1
1( S B0 ) = S A
n
n
i=1
i=1

g (x) := an for x 2 Bn0

)  (
)  S Bn0

i=1

)  = g( )

2. general ase: let  be an arbitrary r.v.

Theorem 1.3 ) 9 sequen e of dis rete  -measurable r.v. n
with nlim
 = 8!2

!1 n
due to 1. 9 gn with n = gn( ) and gn (x) B - measurable
Theorem 1.2 4. ) S := fx : nlim
g (x) 9g 2 B ( onsidered more general)
!1 n
it holds nlim
 (! ) = nlim
g ( (! )) =  (! ) )  (
)  S
!1 n
!1 n
(see nlim
 =  8 ! 2
)
!1 n
) for x 2  (
) : nlim
g (x) = nlim
g ( (! )) = nlim
 (! ) =  (! )
!1 n
!1 n
!1 n
hen e
(
lim gn (x) for x 2 S
g (x) := n!1
)  = g( )
0
for x 62 S
(see g ( (! )) = nlim
g ( (! )) =  (! ))
) assertion
!1 n

Denition 1.7 The expe tation (or mean value) of the r.v.  (! ) is the integral
of  (! ) with respe t to the probability measure P :
R
R
E  =  (! )P(d! ) = dP:

espe ially it holds for

R1
abs. ontinuous  : E  = xf (x)dx

(Lebesgue-integral,
f -probability density)
P
E  = xk P( = xk ) (see measure theory, se tion 2)
1

dis rete  :

We have introdu ed onvergen e with probability 1 (a.s. onvergen e) for sequen es of r.v.'s (see Def. 1.3).
Denition 1.8 The sequen e of r.v.'s (n )n1 onverges in probability to the
r.v.  , if
lim P(jn  j > ") = 0 for every " > 0:
n!1
A.BENHARI

notation:

 = Pn!1lim n

interpretation: For every " > 0 the distribution of the "probability mass" of n 
for in reasing n on entrates in a "-ball around zero.

Theorem 1.6 (relations between several kinds of onvergen e)

(see basi ourse, se tion 5.2)
1. The onvergen e with probability 1 implies the onvergen e in probability.
(In general, the onverse statement is not true, but it holds:)
If a sequen e is onvergent in probability then it ontains a subsequen e that
is onvergent with probability 1.
2. A sequen e (n )n1 of r.v. is onvergent in probability if and only if
8 " > 0; > 0 9 n0 = n0("; ), su h that 8 n; n0 > n0 it holds:
P(jn0 n j > ") < :
(fundamental or Cau hy ondition)
3. If  = P lim n;  = P lim n

then

 =  mod P.

( =  a.s.)

4. Let k = Pn!1lim kn for k = 1; 2; : : : ; m and '(t1 ; : : : ; tm ) a ontinuous

fun tion on Rm possibly with the ex eption of points of a Borel set D (D 
Rm ) with P((1 ; : : : ; m ) 2 D) = 0.
Then it holds
'(1 ; : : : ; m ) = Pn!1lim '(1n ; : : : ; mn)
spe ial ases:

P lim (1n + 2n ) = P

P lim (1n
2n ) = P

P
P lim 1n =
2n
P

lim 1n + P lim 2n

lim 1n
P lim 2n
lim 1n
; if P lim 2n 6= 0 a.s.:
lim 2n

Theorem 1.7

( riterion for a.s. onvergen e)

1. The sequen e of r.v.'s (n)n1 is onvergent with probability 1 if there exist
1
P
a sequen e ("n )n1 with "n > 0;
"n < 1 su h that
n=1

1
X
n=1

P(jn+1 n j > "n ) < 1:

2. The sequen e of r.v.'s (n)n1 onverges with probability 1 to a r.v.  if

there exists an " > 0 su h that
1
X
n=1

P(j n j > ") < 1:

Proof: see basi ourse (Corollary 5.2 - 5.4)

A.BENHARI

Denition 1.9

Let for p  1

Lp = Lp(
; A; P) = f r.v. on f
; A; Pg : E j jp < 1g
A sequen e (n)n1 is alled Lp- onvergent (or onvergent in mean of order
p), if
lim E j njp = 0:
n!1
Remark 1.5 For p  1 Lp is a omplete spa e (i.e. Cau hy sequen es are onvergent) and it an be equipped with the norm : k k = (E j jp) p : ) Lp is a
1

omplete normed spa e (Bana h spa e).

Theorem 1.8 The Lp - onvergen e implies the onvergene in probability.

Proof: Markov (or generalized Cheby hev) inequality implies

P(jn  j > ") 

E j njp
for
"p

p  1:

Consider the spa e L2 = L2 (

; A; P) of omplex valued r.v.
(above results also hold omplex valued r.v.)

L2 is a Hilbert spa e with s alar produ t [;  = E  ; k k2 = [; 

)  und  are alled orthogonal if E   = 0
for E  = E  = 0 :
;  orthogonal ) ;  un orrelated
)(n)n1 is L2- onvergent to  if
lim k  k2 = nlim
E jn  j2 = 0
n!1 n
!1
notation: onvergen e in mean square

l.i.m.
 =  (limit in mean)
n!1 n

Denition 1.10 Let ft ; t 2 T g be a family of r.v. with t 2 L2 and T an

arbitrary set. Then

B (t1 ; t2 ) := E t t
1

t1 ; t2 2 T

is alled ovarian e.

Denition 1.11 Let (t) be a nonegative real fun tion with D( ) = T whi h
may have arbitrarily small values. For a family ft ; t 2 T g with t 2 L2 the
r.v.  2 L2 is alled L2 -limit or mean-square limit for (t) ! 0 if for all
" > 0 there exists a > 0 su h that
E jt  j2  " 8 t with 0  (t) < .
Example 1.2 T = R 1 ; (t) = jt t0 j;
 is the mean-square limit of t for t ! t0
Theorem 1.9 There exists the mean-square limit  of the family ft ; t 2 T g
for (t) ! 0 if and only if there exists the limit of the ovarian e B (t1 ; t2 ) =
E t t for
(t1 )+ (t2 ) ! 0. In this ase it holds E j j2 = lim B (t; t):
1

(t)!0

A.BENHARI

Proof:
ne essity: to prove:

9 -l.i.m.
t =  ) 9
lim
B (t; t2 ) (= [;  )
(t)!0
(t )+ (t )!0
k t k
k t k  j[ t ;  t j
(Cau hy-inequality)
jj
jj
= j[;  [; t [t ;  + [t ; t j
jj
jj
= j [;  [; t  [t ;  + [t ; t j
j
j
j
j
(t1 ) ! 0
(t2 ) ! 0
(t2 ) ! 0
(t1 ) ! 0
#
#
#
#
1

0
0
0
(t )+ (t )!0
[t ; t = E t  t = B (t1 ; t2 )
! [; 
(follows from ontinuity of s alar produ t)
1

su ien y: it

E jt

lim

(t1 )+ (t2 )!0

t2 2 = E (t1

B (t1 ; t2 ) = B0  0 sin e B0 = lim B (t; t)  0

2

= B (t1 ; t1 ) 2Re B (t1 ; t2 ) + B (t2 ; t2 )

9  2 L2 with  = l.i.m. t

!
(t)!0

 

2
2
) kk ktk  = kk ktk(kk + ktk)
 k tk kk + k t kktk
) kk2

(t)!0

t )(t t )
= E t t E t t E t t + E t t
1

L2 omplete

= E j j2 =

(t1 )+ (t2 )!0

(t)!0

! 0
(see jkf k kg kj  kf g k)
lim B (t; t) (see kt k = [t ; t = E t t = B (t; t))
(t)!0
) assertion

extension: Lm2 = Lm2 (

; A; P)

denotes the Hilbert spa e of random ve tors with values in the omplex
spa e Cm
m
P
 2 Lm2 if
 = ( 1 (! ); : : : ;  m (! )) 2 Cm and E j i j2 < 1

;  2 Lm2

s alar produ t [;  = E (;  )

and norm k k2 = [;  = E
where (;  ) =

B (t1 ; t2 ) := [t ; t = E
1

m
P
ti1 ti2
i=1

m
P
ii;
i=1

i=1

m
P
i=1

j ij2

(ti - i-th omponent of t )

is the s alar produ t of Cm ;

Theorem 1.9 an be extended to spa es Lm

2
Denition 1.12 Let  be a r.e. with values in a measurable spa e fS ; Bg. The
measure  on B with
(B ) = P(! :  2 B ); B 2 B;
A.BENHARI

10

is alled the distribution of the r.e.  .

Theorem 1.10 For an arbitrary B-measurable fun tion f (x) it holds

E f ( ) =

f ( (! ))P(d! )) =

f (x)(dx)

if the above integrals exist.

Proof: basi ourse Theorem 3.25.

Remark 1.6 The above theorem states that arbitrary sto hasti hara teristi s
E f ( ) an be omputed as integrals over S using the distribution of  .
restri tion to distributions in Rm ( an be generalized to general metri spa es)
Bm : -algeba of Borel sets of Rm
a = (a1 ; a2 ; : : : ; am ) 2 Rm ;
b = (b1 ; b2 ; : : : ; bm ) 2 Rm
a < b (resp a  b)
! ai < bi (resp. ai  bi); i = 1; 2; : : : ; m
Ia = fx : x  ag;
I (a; b = fx : a < x  bg

Denition 1.13 Let  be a random ve tor in fRm ; Bm g: The fun tion

F (x) = (Ix ) = P(  x) with x 2 Rm
is alled the distribution fun tion of  .

omputation of P( 2 I (a; b) = (I (a; b) using the distribution fun tion:
let G be an arbitrary fun tion on Rm , ;  2 R 6
 (b1 ; b2 )
(k)
1
k
1
k
+1
m

(; G(x) := G(x ; : : : ; x ; ; x ; : : : ; x )
(a1 ; a2 ) 
G(x1 ; : : : ; xk 1 ; ; xk+1; : : : ; xm )
(k)
)
(; F (x) =
P( 1  x1 ; : : : ;  k 1  xk 1 ;  <  k  ;  k+1  xk+1 ; : : : ;  m  xm )

) (I (a; b) =
1(a ;b
2(a ;b : : :

m
()
(am ;bm F (x)
Using the subsequent properties of distribution fun tions it is also possible to
onsider open intervals I (a; b) and losed intervals I [a; b:
1

Theorem 1.11 (ne essary and su ient onditions for distribution fun tions)
1. A distribution fun tion F (x) = (Ix) = P(  x) posseses the following
properties

1. 0  F (x)  1
2. F (x)  F (y ) for x  y

3.  (a; b = (I (a; b) is given by ()

4. F (x + 0) = F (x), i.e. F (x) ontinuous on the right
A.BENHARI

11

5. F (x) ! 0, if xk !
6.

1 for at least one k

F (+1; +1; : : : ; +1) = 1

2. For an arbitrary fun tiuon F (x) on Rm satisfying onditions 1.-6. there exists
a unique measure  on Bm with a distribution fun tion whi h oin ides with F (x).
Proof: see basi ourse Theorem 2.6 and 2.7

Denition 1.14 A sequen e of nite measures (n)n1 on Bm is alled weakly

onvergent to a measure  on Bm if for all bounded and ontinuous fun tions
f (x) it holds
R
R
f (x)n (dx) n!1
!
f (x)(dx):
Rm

Rm

Denition 1.15 A family of measures is alled weakly ompa t, if every se-

quen e of measures from that family ontains a weakly onvergent subsequen e.

Theorem 1.12 A family of measures (n )n1 on fRm ; Bm g is weakly ompa t if

and only if

1: n (Rm )  C
2: 8 " > 0 9 an interval I (a; b with sup n(Rm n I (a; b) < ":
n

Chara teristi fun tions

Denition 1.16 Let  be a random ve tor with values in Rm and  be its distri-

bution. The fun tion

J (u) =

E ei(u;)

ei(u;x) (dx);

u = (u1 ; : : : ; um )

Rm

is alled hara teristi fun tion of  (or of ).

(see s alar produ t in Rm : (u; x) =

m
P
uj xj )
j =1

Theorem 1.13 Chara teristi fun tions possess the following properties:
1. J (0) = 1; jJ (u)j  1,
2. J (u) is uniformly ontinous 8 u 2 Rm ,
3. J (u) is positive semi-denite, i.e. 8 n 2 N; 8 zk 2 C; 8 uk 2 Rm it holds
n
P
J (uk ul )zk zl  0.
k;l=1

Every fun tion satisfying properties 1.-3. is a hara teristi fun tion of a ertain
distribution.
Proof: see basi ourse Theorem 6.2, 6.6
Question: Is the distribution uniquely determined by its hara teristi fun tion ?
A.BENHARI

12

Theorem 1.14 Let 1 ; 2 be measures on fRm ; Bm g. Then

R i(u;x)
R i(u;x)
e 1 (dx) =
e 2 (dx) 8 u 2 Rm
implies
Rm

1 = 2 :

Rm

Proof: basi ourse, Theorem 6.3.

Relation between weak onvergen e of distributions and onvergen e of hara teristi fun tions:

Theorem 1.15 Let (n )n1 be sequen e of distributions on Rm ; m 2 N and

let (Jn )n1 be the orresponding sequen e of hara teristi fun tions.
If lim Jn (u) exists 8 u 2 Rm and K (u) = lim Jn (u) is ontinuous at u = 0
n!1
n!1
then K (u) is the hara tersti fun tion of a distribution  on Rm and (n )n1 is
weakly onvergent to .
Proof: m = 1: see basi ourse Theorem 8.4, m > 1 using Theorem 1.12

Theorem 1.16 Further properties of hara teristi fun tions

1. Let 1 ; 2 be independent random ve tors with values in R m , 3 := 1 + 2
and let Ji (u) denote the hara teristi fun tions of i ; i = 1; 2; 3
) J3(u) = J1(u)
J2(u)
2. Let 1 ; 2 be random v. with values in R m ; Rm ; 3 := (1 ; 2 ) 2 Rm +m .
1 ; 2 are independent if and only if
J3 (u; v ) = J1 (u)
J2 (v )
(u 2 Rm ; v 2 Rm )
where J3 (u; v ) = E ei((u; )+(v; )) ; J1 (u) = J3 (u; 0); J2 (v ) = J3 (0; v ).
1

Proof:
1. 1 ; 2 independent ) E ei(u; + ) = E ei(u; ) E ei(u; )
2. ne essitiy: follows from 1.
su ien y: follows form the unique relation between the hara teristi
fun tion and the distribution (see Theorem 1.14).
1

Denition 1.17 Let  = ( 1; : : : ;  s) be a s-dimensional random ve tor, s 2 N.

Then the quantitiy

mj j


js = E ( 1 )j ( 2 )j
: : :
( s)js ; j1 ; : : : ; js 2 N [ f0g

1 2

is alled moment of order q = j1 +


+ js of  if the expe tation does exist.

Remark 1.7 The existen e of E j k jp < 1 for k = 1; : : : ; s; implies the existen e

of all moments of order q  p.
Proof: see basi ourse, material between Theorem 6.7 (Polya) and Denition 6.2

A.BENHARI

13

Theorem 1.17 If E j k jp < 1 for some p  1 then for nonnegative integer

numbers jk it holds
mj :::js = (
1

i)q

 q J (u) 
where q = j1 + : : : + js for q  p:
uj1 : : : ujss u=0
1

Conversely, if for an even p 2 N the hara teristi fun tion J (u1 ; : : : ; us) is ptimes dierentiable at u = 0 then there exist all moments of order q  p and it
holds the above relation.
Proof:
part 1: follows from J (u) = E ei(u;) and the inter hangeability of dierentation
and expe tation (integation w.r.t.P)
part 2: see basi ourse, Theorem 6.2, property 6

Stopping times
Example 1.3 sto k pri e
(t ; t 2 [0; T )

t

a reasonable question:
when does the pri e rea h a ertain
level for the rst time
no reasonable question:
when does the pri e rea h
its maximum value in [0; T
( an not be answered before T )



JJ


bb""

a reasonable question:
at whi h time a ertain set B has
been rossed for the rst time
no reasonable question:
at whi h time a ertain set B has
been rossed for the last time

t

Example 1.4 Brownian motion

(t ; t 2 R+ )




!!
LL

#
"!

B
AA

BB

AA



A


JJ
B

J 



B

Denition 1.18 Let f

; A; Pg be a probability spa e and fFt ; t 2 T g be a family of  -algebras with Ft  A 8 t 2 T; T  R.
fFt; t 2 T g is alled a ltration, if Ft  Ft for t1 < t2.
1

A.BENHARI

14

Remark 1.8 interpretation:

 Ft ontains all those random events of A whose o uren e or non-o uren e

an be de ided up to time t

ltration $ information stru ture:

at time t,

Ft represents the information available

ltration is non-de reasing: more and more information is known as time

goes forward, past information is not forgotten

Denition 1.19 A random variable  (! ) :

 
! T is alled a stopping
time with respe t to the ltration fFt ; t 2 T g if

f! :   tg 2 Ft 8 t 2 T:
Remark 1.9
1. f! :   tg 2 Ft ,

the o uren e of the event

using events of Ft

"stopping time 

 t"

an be de ided

2.
 : domain of denition of the stopping time  with values in T

 = f! :  2 T g; i.e.  is in the "observation period" T

 if there is a maximum value tmax in T )
 = f  tmaxg 2 Ftmax
 if there is no maximum value in T , let tk " supft :1t 2 T g
)
 = S f  tk g 2 A
k=1

3. f  tg 2 Ft
T ountable:

() f > tg 2 Ft
f  tg 2 Ft () f = tg 2 Ft 8 t 2 T
F := fB 2 A : B \ f  tg 2 Ft 8 t 2 T g ) F is a -algebra
F is the -algebra whi h is generated by the stopping time  .
The stopping time  is F -measurable (B =
).
Example 1.5  = t0 ; t0 2 T is a stopping time


;
for
t
<
t
0
) f  tg =
for t  t0
) B \ f  tg = ;B tt < tt00
) F = Ft see
t=t
1. B 2 F ; i.e. 8 t B \ f  tg 2 Ft =
) B \ f  t0g = B 2 Ft
i.e. F  Ft
2. B 2 Ft : t < t0 ) B \ f  tg = ; 2 Ft ;
t  t0 ) B \f  tg = B 2 Ft  Ft , i.e. B 2 F ) F  Ft
0

Theorem 1.18 (Properties of stopping times)

Let  be a stopping time with respe t to the ltration fFt ; t 2 T g.
A.BENHARI

15

1. Let K be a Borel set of R with sup x  t then f

2.

2 K g is Ft-measurable.
Let (t) : T ! T be a Borel fun tion with (t)  t 8 t 2 T then ( ) is a
x2K

stopping time.
3. Let 1 ; 2 be stopping times then min(1 ; 2 ); max(1 ; 2 ) are stopping times
espe ially: if  is a stopping time then it is min(; t0 ); t0 2 T:
4. Let 1 ; 2 be stopping times then 1  2 implies F  F .
1

Proof:
1. f

2 K g  f  tg : ft1    t2 g; ft1 <  < t2g; ft1 <   t2 g; t1 ; t2  t

Ft -measuable;
pl
1 T
S
K=
Alk : pl 2 N ; Alk open (resp. losed intervals)
l=1 k=1

sup x  t;

x2Alk

pl
1 T

f 2 K g = S

f 2 Alk g Ft-measurable

l=1 k=1

2. K = fs : (s)  tg is a Borel set sin e  is a Borel fun tion;

sup x  t; sin e t  (t)
(see x 2 K ) x  (x)  t)
x2K
1. =) f 2 K g Ft -measurable; f 2 K g = f! : ( )  tg 2 Ft
3. fmax(1 ; 2 )  tg = |f1  tg \ f2  tg 2 Ft
{z }

2Ft

4.

| {z }

2Ft

fmin(1 ; 2)  tg = f1  tg [ f2  tg 2 Ft

let A 2 F ; be ause of f1  tg  f2  tg it follows
A \ f2  tg = [A \ f1  tg \ f2  tg = B \ f2  tg 2 Ft ) A 2 F
(see. B = A \ f1  tg 2 Ft ; f2  tg 2 Ft )
1

Let T be a nite or ountable set, fFt ; t 2 T g be a ltration,

 stopping time with respe t to fFt ; t 2 T g,
 =
;
ft; t 2 T g family of r.v.'s su h that t is Ft-measurable 8 t 2 T ,
 := t for  = t i.e.  is dened 8 ! 2

=) the r.v.  is F - measurable.

see: k ; k = 1; 2; : : : are the possible values of 
f! :  < xg \ f! :   tg = S (f! :  < xg \ f! :  = k g)
=

k t
S

(f! :  k < xg \ f! :  = k g)

k t |

) f! :  < xg 2 F

A.BENHARI

16

{z

2F k

{z

2F k

2 Ft

assertion

1.2

Independen e

Denition 1.20 Let f

; A; P g be a probability spa e.
The random events A; B 2 A are alled independent if
P(A \ B ) = P(A)P(B ):

Theorem 1.19 Properties of independent events

Let A; Bi ; i = 1; 2; : : : 2 A
1.
; A are independent
2. N; A (P(N ) = 0) are independent
3. Let A; Bi be independent for i = 1; 2; B1  B2
) A; B1 n B2 are independent (espe ially: A; B2 are independent )
4. Let A; Bi be independent for i = 1; 2; : : : ; n;
B1 ; : : : ; Bn pairwise disjoint
n
S
) A; Bi independent
i=1

(without "`paarwise disjoint"' the statement is not true)

5. A is independent of A if and only if P(A) = 0 or P(A) = 1
Proof:
1. P(
\ A) = P(A) = P(
)P(A)
2. P(N \ A) = 0 = P(N )P(A)
3. P(A \ (B1 n B2 )) = P((A \ B1 ) n (A \ B2 ))
= P(A \ B1 ) P(A \ B2 ) = P(A)(P(B1 ) P(B2 ))
= P(A)P(B1 n B2 )
espe ially: let B1 =
, A;
and A; B2 are independent,
 B2
) A;
n B2 = B2 are independent

4. P(A \

n
S

i=1

n
S

n
P

i=1

i=1

Bi ) = P( (A \ Bi )) =
= P(A)P(

n
S

i=1

Bi )

P(A \ Bi ) =

n
P

i=1

P(A)P(Bi )

(see (A \ Bk ) \ (A \ Bh ) = ; for k 6= h)

) P(A \ A) = P(A)P(A) ) P(A) = P(A)2

) P(A) = 0 or P(A) = 1
) assertion
Let I be an index set and fMi ; i 2 I g be lasses of events
5. A; A are independent

Denition 1.21 (independen e of n events)

For n = 2; 3; : : : the random events A1 ; : : : ; An 2 A are alled (jointly) independent if for k = 1; : : : ; n and 1  i1 < i2 : : : < ik  n it holds

P(Ai \ : : : \ Aik ) = P(Ai )
: : :
P(Aik ):

1

Denition 1.22 (independen e of lasses of events)

The lasses of events fMi ; i 2 I g are alled independent if for any n =
2; 3; : : : and arbitrary pairwise dierent indi es i1 ; i2 ; : : : ; in 2 I arbitrary events
Aik 2 Mik ; k = 1; 2; : : : ; n; are independent.
A.BENHARI

17

Remark 1.10
1. Note, that the pairwise independen e of events A1 ; : : : ; An does not imply
their jointly independen e.
2. In the above denition the set I may have an innite number of elements.

notation:  fMg minimal  -algebra ontaining the events of M

Denition 1.23 (independen e of random variables)

Random variables fi ; i 2 I g are alled (jointly) independent if

the lasses of events fMi ; i 2 I g are independent where

Mi = ff! : i  ag; a 2 Rg:

m (equivalen e)

for any n = 2; 3; : : : ; and pairwise dierent i1 ; : : : ; in 2 I; the joint distribution fun tion of i ; : : : ; in is equal to the produ t of the distribution
fun tions of ik :
1

P(i  a1 ; i  a2 ; : : : ; in  an ) =
1

n
Y

k=1

P(ik  ak ); a1 ; : : : ; an 2 R:

Denition 1.24 (independen e of lasses of r.v.'s)

Let J be an index set. Classes of r.v.'s fi; i 2 I g;  2 J are alled (mutually)
independent, if the lasses of events fM ;  2 J g with

M = ff! : i  a1 ; : : : ; in  ang : n = 1; 2; : : : ; ik 2 I; ak 2 Rg;

1

are independent.

Denition 1.25 The  -algebra of events  fi ; i 2 I g; generated by the events

of the form

f! : i  a1 ; : : : ; in  an g; n = 1; 2; : : : ; ik 2 I ; ak 2 R
is alled the  -algebra generated by the lass of r.v.'s fi ; i 2 I g.
Remark 1.11  fi ; i 2 I g is the minimal  -algebra with respe t to whi h all
1

the i are random variables, i.e. all the fun tions i (! ) are measurable.
Spe ial ase: a single r.v.  (I ontains one element only)
) f g = f f! :   ag; a 2 Rg

Theorem 1.20 If lasses of r.v.'s fi ; i 2 I g;  2 J are independent, then

the olle tion of  -algebras  fi ; i 2 I g;  2 J and their losures ~ fi ; i 2
I g;  2 J are independent.
Proof: not given

A.BENHARI

18

Remark 1.12 on ept of losure: see measure theory, Theorem 1.6 shows that
the losures ~ f: : :g are  -algebras
Theorem 1.21 Let g (t1 ; : : : ; ts);  2 J; be a set of Borel fun tions of s real
variables (g : Rs ! R). If the lasses of r.v.'s f1; : : : ; s g;  2 J; are independent, then the r.v.'s  := g (1 ; : : : ; s );  2 J; are also independent.
Proof: Denition 1.24 ) the lasses of events

M

f f! : 1  a1 ; : : : ; s  asg; a1 ; : : : ; as 2 Rg  2 J

are independent. Sin e the g are Borel fun tions it follows

N

f f! :  = g (1; : : : ; s)  ag; a 2 Rg

f f! : (1; : : : ; s) 2 g 1( 1; ag; a 2 Rg  fMg;
Theorem 1.20 ) fN ;  2 J g are independent
Denition 1.23 ) assertion
=
=

Denition 1.26 (independen e of random elements)

The random elements fi; i 2 I g with i (! ) : f
; Ag ! fSi ; Bi g; i 2 I; are
alled (jointly) independent if for any n = 2; 3; : : : ; any pairwise dierent
i1 ; : : : ; in 2 I; and arbitrary Bik 2 Bik 2 I it holds
P

n
\
k=1

fik 2 Bik g

n
Y
k=1

P (ik 2 Bik ) :

It is possible to generalize the above denitions and statements on erning lasses

of r.v.'s to r.e.'s.
Let k (! ) be r.e.'s with values in fSk ; Bk g ; k = 1; 2; : : : ; n

 n
Q
(
n
)
Finite sequen es of r.e.'s an be onsidered as a r.e. with values in
Sk ; B ;

where B(n) denotes the produ t of  -algebras B1 ; : : : ; Bn

onsider ylinder sets C = B1  B2  : : :  Bn ; Bi 2 Bi

k=1

) f! : (1(!); : : : ; n(!)) 2 C g = T f! : i(!) 2 Big

i=1
i.e. the preimage of C is A-measurable
) the preimage of any set of B(n) is A-measurable (sin e B(n)
 -algebra ontaining all sets C )

is the minimal

m12:::n (B ) := P((1 ; : : : ; n) 2 B ); B 2 B(n)

denotes the measure on

 n
Q

k=1

Sk ; B

(n)

; indu ed by the sequen e (1 ; : : : ; n)

Let 1 ; : : : ; n be independent r.e.'s. Denition 1.26 )

m12:::n (B1  B2  : : :  Bn ) = m1 (B1 )m2 (B2 )
: : :
mn (Bn )

A.BENHARI

19

where mk (Bk ) = P(k 2 Bk ).

Hahn's Theorem on the extension of measures (see measure theory Theorem 1.5)
) uniqueness of the ontinuation of m12:::n onto the  - Algebra B(n)

) m12:::n is the produ t measure on

 n
Q

k=1

Sk ; B

(n)

Conversely, if m12:::n oin ides with the produ t of the measures m1 ; : : : ; mn then
the r.e.'s 1 ; : : : ; n are independent. )
Theorem 1.22 The r.e.'s 1 ; : : : ; n are independent if and only if the measure
m1:::n indu ed by the sequen e (1 ; : : : ; n) on the  -algebra B(n) is the produ t of
the measures mk ; k = 1; 2; : : : ; n; indu ed by the elements k on Bk .
Theorem 1.23 Let g (x1 ; x2 ) be a B(2) -measurable nite real fun tion and 1 ; 2
be independent r.e.'s with values in fSi ; Bi g; i = 1; 2; and let, moreover,
E jg (1; 2 )j < 1: Then (x1 ) = E g (x1 ; 2 ) is a B1 -measurable fun tion and

E g (1 ; 2) = E (1)

or

E g (1 ; 2) =

S1

m1 (dx1 )

S2

Proof:
g (x1 ; x2 ) is a B(2) -measurable fun tion, i.e. g 1 (G) 2 B(2)

E g (1; 2 )

=
independen e

Fubini

S2

S1 S
Z 2
SZ1 S2
S1

g (x1 ; x2 )m2 (dx2 ):

8 open subsets G  R

g (x1 ; x2 )m12 (d(x1 ; x2 ))

g (x1 ; x2 )m1 (dx1 )m2 (dx2 )

m1 (dx1 )

S2

g (x1 ; x2 )m2 (dx2 )

g (x1 ; x2 )m2 (dx2 ) = E g (x1 ; 2) = (x1 ) is B1 - measurable (Fubini's Theorem).

Corollary 1.1 If 1 and 2 are independent r.v.'s with nite expe tations, then
E 1 2 = E 1 E 2
(see g (x1 ; x2 ) = x1 x2 ):
0-1-laws
Theorem 1.24 Let (An )n1 be a sequen e of events.
1
P
If
P(An ) < 1; then the event lim
An is of probability 0.
n
n=1

Proof: it holds

An = f! 2
: ! 2 An for innite many ng =
lim
n

1 S
1
T

1
S

1
P

1 S
1
T
m=1 n=m

An :

An ) = mlim
P( A )  mlim
P(An ) = 0
!1 n=m n
!1 n=m
m=1 n=m
(see Theroem 1.1, 6. and subadditivity of P)
The following stronger result is valid in ase of independent events.

P(lim
An ) = P(
n

A.BENHARI

20

Theorem 1.25 Borel-Cantelli's Lemma

Let (An )n1 be a sequen e of independent events, then it holds:

(i) P(lim
An ) = 0;
n

for

(ii) P(lim
An ) = 1; for
n

1
P

k=1
1
P
k=1

P(Ak ) < 1

P(Ak ) = 1:

Proof: Theorem 1.24 ) (i), for (ii) see basi ourse Theorem 5.7.

Let (Dn)n1 be a sequen e of independent  -algebras.

Borel-Cantelli
let A = lim
A
;
A
2
D
=)
P(A) = 0 or P(A) = 1
n
n
n
n
generalization:
let (Ck )k1 := ( fDk ; Dk+1; : : : g)k1 be a monoton de reasing sequen e of  algebras
1
T

Ck =: lim
Dn is also a -algebra (tail or terminal -algebra)
n
Dn remains un hanged if a nite number of -algebras Dk is hanged.
lim
n
C=

k=1

Theorem 1.26 Kolmogorov's general 0-1-law

If Dn ; n = 1; 2; : : : are mutually independent  -algebras, then any event in lim

Dn
n
has probability either 0 or 1.
Proof: let A 2 lim
Dn =
n

1
T

Ck where Ck = fDk ; Dk+1; : : : g ) A 2 Ck 8 k

) A; fD1; : : : ; D g independent 8k
) A; fD1 ; D2; : : :g = C1 independent
sin e A 2  fD1 ; D2 ; : : :g ) A; A independent
Theorem 1.19,6.) either P(A) = 0 or P(A) = 1 ) assertion
k=1
k 1

Theorem 1.26 implies

Theorem 1.27 Let (n)n1 be a sequen e of independent random elements in a

xed metri spa e fS ; Bg: Further, let Dn =  fng be the  -algebra generated by
n and Ck =  fDk ; Dk+1 ; : : :g. Then it holds
1. the limit of the sequen e (n)n1 exists either with probability 0 or 1,
2. if S is seperable and omplete, then the a.s. limit of the sequen e (n)n1 is
onstant (mod P ) provided the limit exists,
3. if z = f (x1 ; x2 ; : : :) is a real fun tion of innitely many arguments xn 2
S ; n = 1; 2; : : : and f (1; 2; : : : ; n; : : :) is Cn-measurable 8 n, then the
fun tion f is onstant with probability 1.
Proof: not given

A.BENHARI

21

Remark 1.13 Examples for fun tions f (1; 2 ; : : :) in 3. are fun tions whi h do
not depend on a nite number of variables:
 = I 1

1
 ; lim  ; I P
lim
P
n n n n
n <1
n <1
n
n=k

=1

not:

1
I P

n=1

A.BENHARI

;

n <

22

If = =:::=0g
1

1.3

Conditional probability and onditional expe tation

1.3.1 Conditional expe tation

elementary ase: onditional probability of an event A given B with P(B ) 6= 0)

P(AjB ) =

P(A \ B )
P(B )

for xed B is P(:jB ) a measure on the  algebra

probability P(:))
let  (! ) be a random variable then E f jB g :=
tional expe tation of  given B
R
) P(B )E f jB g = dP
see 

dis rete:

Ak = f! :  = xk g

E f jB g =

 P(d! jB ) =

(as the "un onditional"

 (! )P(d! jB ) is alled ondi-

xk P(Ak jB )

1 X
1
xk P(Ak \ B ) =
=
P(B ) k
P(B )
espe ially for  = IA (! )

(+)

X
k

 P(d! )

1
E fIAjB g =
P(B )

IA dP =

P(A \ B )
= P(AjB )
P(B )

i.e. onditional probability is a spe ial ase of the onditional expe tation
How an the above denitions be extended to the ase P(B ) = 0 ?
1
S
Let M = fBi 2 A :
Bi =
; Bi \ Bj = ;; i 6= j g be a ountable lass of
i=1
disjoint events
) E f jMg(!) := E f jBig for ! 2 Bi is a random variable

E f jMg is alled onditional expe tation of the r.v.  given M

 E f jMg is dened with probability 1 (a.e. on

), sin e:
{ for Bi 2 M; P(Bi ) =
6 0 it holds E f jMg = E f jBig = onst
{ E f jMg is not dened only for Bi with P(Bi ) = 0
R
R
 dP = E f jMgdP 8 Bi 2 M
()
Bi
Bi
R
see (+) and E f jMgdP = P(Bi )E f jBig (E f jMg is onstant on Bi )
Bi
R
R
) it also holds: dP = E f jMgdP 8 B 2 fMg; P(B ) =6 0 ()
B

A.BENHARI

23

see:

8 B 2 fMg 9 a representation B =
Z

1 Z
X

E f jMgdP =

k=1Bj
k
|

1 zZ
X

dP =

k=1Bj

1
S
k=1

Bjk ; Bjk 2 M

E f jMgdP
{z
}
= (o)
}|
{

dP

the r.v.  = E f jMg is measurable with respe t to  fMg

see  (! ) = E f jMg = E f jBk g for ! 2 Bk ; Bk 2 M
) f! :   ag = S Bk 2 fMg ) measurability
E f jBk ga

( is a r.v. with only ountable many values E f jBk g)

the r.v.  = E f jMg is uniquely dened (mod P )

see: let 1 ; 2 be measurable w.r.t. some  -algebra F then
R
R
1 dP = 2 dP 8 B 2 F ) 1 = 2 (mod P )
B

sin e: if P(! : 1

2 > 0) > 0

ontradi ition
analogously P(! : 1

f!: 1 2 >0g

(1

2 )dP > 0

2 < 0) > 0

Denition 1.27 Let B be a arbitrary  -algebra of events ontained in A and  an

arbitrary random variable for whi h the expe tation E  exists. The onditional
expe tation of  given the  -algebra B is the random variable E f jBg whi h
is




measurable with respe t to B

satisfying the equality

E f jBgdP =

R
B

dP

8 B 2 B.

Remark 1.14

1. In general,  is not measurable with respe t to B (but only w.r.t.

A)

2. Existen e
and uniqueness follows dire tly from the Radon-Nikodym theorem:
R
dP is a  -nite, ountable-additive set fun tion on B whi h is absolutely
B
ontinuous w.r.t. P
R
R
) 9 B-measurable fun tion (!) su h that dP =  dP and

 (! )

is unique (mod P)

3. Let B~ the ompletion of B w.r.t. P, then it holds

~ (mod P):
E f jBg = E f jBg
A.BENHARI

24

)  = E f jBg

Denition 1.28 For a xed event A 2 A the onditional probability PfAjBg

is a B-measurable random variable satisfying
Z

PfAjBg dP = P(A \ B ) 8 B 2 B:

see Denition 1.27 with  = IA (! ) :

E fIA jBg = PfAjBg

Example 1.6 random experiment: throwing of two di e

= f!1 ; : : : ; !36 g; !l = (i; j );

1  i; j  6; (l = 6(i 1) + j )

A = P (
); ard(A) = 236
M = fB2; : : : ; B12 g
with Bk = f! = (i; j ) : i + j = kg

(sum of the two numbers = k)

B = fMg = P (M)  A
 : number of the rst die; E  = 3:5
E f jBg is a r.v. with values E f jBk g =
see

8B 2 B :

B = Bk :
2k7:

f jBgdP
E f jBk g P
(B )
| {z k}
BE

E f jBk g k361

a1 =a2
1
2
3
4
5
6

1
B2
B3
B4
B5
B6
B7

2
B3
B4
B5
B6
B7
B8

3
B4
B5
B6
B7
B8
B9

1 R dP = k
P(Bk )
2
R Bk
= B dP
R
= Bk dP
6
P
=
i P(Ai{z Bk})
i=1 |
1
or 0
36

4
5
6
B5 B6 B7
B6 B7 B8
B7 B8 B9
B8 B9 B10
B9 B10 B11
B10 B11 B12

on Bk

kP1
i 361
i=1

k(k 1) 1
2 36

Ai = f! :  (! ) = ig = f(i; j ) : 1  j  6g
Ai \ Bk = f(i; j ) : 1  i; j  6; i + j = kg
) E f jBk g = k2
8  k  12 :
analogously
E f jBg is
B-measurable (it is onstant on Bk ; k = 2; : : : ; 12)

is not B-measurable (it is not onstant on Bk ; k = 2; : : : ; 12)

Example 1.7 random experiment: observation of midday temperature

 midday temperature;

= f!1 ; : : : ; !365 g observations of one year

A = P (
),
M = fB1; : : : ; B12g

) E f jBg

A.BENHARI

!2Bk

with B1 = f!1 ; : : : ; !31 g

january
B2 = f!32 ; : : : ; !59 g
february
..
.
B12 = f!335 ; : : : ; !365 g dezember

R
1
P(Bk ) B

dP

P (M)

=
^ monthly average

25

6


%
%

e

(
h
(
h
h(
e
""

XX(((
%
! !%

!!B1

B2

E f jBg

ee
Z

B3

ZZPP

Jb bb

B12

Example 1.8 US presidential ele tions

(in memoriam to the 2000-ele tions between of G.W. Bush and A. Gore)

persons are entitled to vote (n  200 millions)

andidates, assume m = 2
states (groups of persons, r=50)
f!1; : : : ; !ng; A = P (
); P(!i) = n1 ; i = 1 : : : ; n
f!: person ! votes in favour of andidate 1 g
f!: person ! votes in favour of andidate 2 g
1
n ard A = p; P(A) = 1 p
IA ; E  = P(A)
if p > 0:5 then 1 is not ne essarily the winner !
Bk = f! : person ! lives in state k g; P(Bk ) = n1 ard Bk ; k = 1 : : : ; r
M = fB1 ; : : : ; Br g; B = P (M)
E f jBg = PfAjBg is a r.v. with values
Z
1
1
P(A \ Bk ) = P(AjBk ) =: pk
E f jBk g =
 dP =
P(Bk )
P(Bk )

n
m
r

=
A=
A=
P(A) =
=

Bk

if pk > 0:5 then 1 gets

ele tors, k 2 N; k  P(Bk )
 k 
r
P

assume P(Bk ) = k
k
k=1
per entage of ele tors voting in favour of 1 is
r
X
k=1

IfE fjBk g>0:5g P(Bk ) = E IfE fjBk g>0:5g

in general it holds

P(A) = E  = E E f jBg 6= E IfE fjBk g>0:5g

) if 1 has the majority of votes then 1 gets not ne essarily the majority of ele tors
Theorem 1.28 (properties of onditional expe tation)

(see basi ourse, Theorem 4.2)

Let  be a r.v. on f
; A; P g with E j j < 1 and B a  -algebra ontained in A
Then it holds with probability 1:
A.BENHARI

26

1.   0
2.
3.
4.
5.

) E f jBg  0;  = 0 ) E f jBg = 0;
 is B-measurable ) E f jBg =  ;
espe ially: B 2 B ) PfB jBg = IB ;
E E f jBg = E  ;
E j1 j; E j2 j < 1; a; b 2 R ) E fa1 + b2 jBg = aE f1 jBg + bE f2 jBg;
espe ially: C1 \ C2 = ; ) PfC1 [ C2 jBg = PfC1 jBg + PfC2 jBg;
(n)n1 ; n  0 monotoni ally in reasing sequen e of r.v.'s
) nlim
E fnjBg = E fnlim
 jBg;
!1
!1 n
espe ially:
(a): (Bn )n1
(b): (Cn)n1

monotoni ally in reasing sequen e of events

1
) lim PfBnjBg = Pf S BnjBg;
n!1

n=1

sequen e of events Ci \ Cj = ;; i 6= j
1
1
) P PfCnjBg = Pf S CnjBg;
n=1

6.
7.
8.
9.

) E f jBg = E  ;
) PfAjBg = P(A);
 is B - measurable ) E f jBg =  E f jBg;
B1  B2 ) E fE f jB1gjB2g = E f jB1g;
B2  B1 ) E fE f jB1gjB2g = E f jB2g;
 (! ) : f
; Ag ! fS ; Cg-measurable,  (! ) : f
; Ag ! fZ ; Dg-measurable;
g (x; z ) fun tion on S  Z ; measurable w.r.t.  fC  Dg; E jg (;  )j < 1;

)if  is B-measurable (B  A), then E fg(; )jBg = E fg(; z)jBgz= :
;
espe ially: A;

B
B

n=1

independent
independent

1.3.2 Conditional expe tation with respe t to random elements

starting point:
 dis rete r.v. with values y1 ; y2; : : : ; Bn = f! :  = yng; P(Bn ) > 0
Pn (A) := P(AjBn ) = PP(A(B\Bn )n ) onditional probability of A 2 A given  = yn
R
R
E f j = yng = dPn = P(B1 n ) dP
(see subse tion 1.3.1)

) E f jg is

Bn

a r.v. depending on the out ome of the random experiment

des ribed by  : values E f j = yng for  = yn

Denition 1.29 Let  be a random variable with E j j < 1,  : f

; Ag ! fS ; Cg
be a random element and F := fA : A =  1 (C ); C 2 Cg (F  A).
The random variable E f jF g is alled the onditional expe tation of the
random variable  given the random element  and is denoted by E f j g.
R
R
)
E f j gdP =
dP
8C2C
(see Denition 1.27)
 1 (C )

 1 (C )

onditional probability given  :

A.BENHARI

PfAj g = PfAjF g
27

Theorem 1.29 The onditional expe tation given the random element  is a
C -measurable fun tion, i.e. there exists a C -measurable fun tion s(y) su h that
E f j g = s( ):

fS ; C ; P g

Proof:


R

f
; A; P g  f
; F ; P g

 (! )

fR; Bg

s( )

E f j  g

Borel sets

without loss of generality let   0

R
) q(C ) :=
dP =
 1 (C )

R
 1 (C )

E f j gdP

is a  -nite measure on C (moreover, it is nite)

R
R
see q (S ) =
dP = dP = E  < 1
 1 (S )
1 (C ))

it holds q (C ) = 0 for P(

= 0;
i.e. q is absolutely ontinuous with respe t to P where P (C ) := P( 1 (C ))
Radon-Nikodym
=)
9 a C -measurable
nonnegative fun tion s(y ) su h that
R
R
s( (! ))dP
q (C ) = s(y )dP =
C

 1 (C )

(see rule of hange of variables for integrals, basi ourse, Theorem 3.25 )
R
R
=)
E f j gdP =
s( )dP
8 C2C
 1 (C )

 1 (C )

=) E f j g = s( )
s( (! )) is F - measurable sin e s it is C -measurable
uniqueness

assertion

Corollary 1.2 E f j g = s( ) an be onsidered as a fun tion s = s(y ) of the

variable y on the spa e fS ; C ; P g.

s
see s( ) : f
; Ag !
fS ; Cg !
fR; Bg
and
R
R
R
R
dP =
E f j gdP =
s( )dP = s(y )P (dy ) 8 C 2 C
 1 (C )

 1 (C )

 1 (C )

Theorem 1.30 properties of E fj g

Let  be a r.v. with E j j < 1 and  be a random element in fS ; Cg )
1. Let ;  be independent then E f j g = E  ;
2. Let  be F -measurable then E f j g =  ;
A.BENHARI

28

3. Let i (! ) be measurable mappings f

; Ag ! fSi ; Ci g; i = 1; 2 then

E fE f j(1; 2 )gj1 g = E f j1g;

where (1 ; 2 ) : f
; Ag ! fS1  S2 ;  fC1  C2 gg

Proof:
1. if ;  independent, i.e. ;  f g = F independent
)
E f j g = E f jF g = E 

(produ t spa e)

(see Theorem 1.28 6.)

2. follows from Theorem 1.28 2.

3. E fE f j(1; 2 )gj1 g = E fE f jF( ; ) gjF g
Theorem 1.28 8.
=
E f jF g; sin e F  F( ; )
see F( ; ) =  fA1 \ A2 : A1 = 1 1 (C1 ); A2 = 2 1 (C2 ); C1 2 C1 ; C2 2 C2 g
F = fA1 : A1 = 1 1(C1); C1 2 C1 g ) A 2 F ) A 2 F( ; )
1

1.3.3 Regular probabilites

Let f
; A; P g be a probability spa e and B  A a  -algebra;
h(!; A) := PfAjBg is a fun tion of ! 2
and A 2 A dened for ea h xed A

only up to an event of probability 0;

Denition 1.30 If for h(!; A) = PfAjBg there exists a fun tion p(!; A) su h
that
 for xed ! the fun tion p(!; A) is a probability measure on A

 h(!; A) = p(!; A)

almost surely for an arbitrary xed A 2 A

then the family of onditional probablites PfAjBg is alled regular.
In this ase PfAjBg is identied with p(!; A).

Theorem 1.31 If PfAjBg is a regular onditional probability and  (! ) a random variable then it holds R
E f jBg =  (! )Pfd! jBg (mod P)

()

( onditional expe tation an be expressed by means of integrals w.r.t. onditional

probability measure).
Proof: Let A 2 A;  = IA :
E fIAjBg = PfAjBg;

IA (! )P(d! jB) = P(d! jB) = PfAjBg

A
) () is valid for the indi ator of random events IA;
) linearity of E and integral implies () is valid for dis rete r.v.
let   0, Theorem 1.4 ) 9 monotoni ally in reasing sequen e (n)n1 of
dis rete r.v.'s with ountable many values su h that nlim
 =  uniformly 8 ! 2

!1 n
Theorem 1.28, 5, and Lebesgue's Theorem on monotone onvergen e imply

E f jBg = nlim
E fn jBg = nlim
!1
!1
A.BENHARI

n(! )P(d! jB) =

29

 P(d! jB);

i.e. () is valid for all   0

 =  +  ; linearity ) () is valid 8 r.v. 

assertion

Remark 1.15 It is possiblie to emphasize that PfAjBg is a fun tion of elementary events ! by:
PfAjBg = PB (!; A)
or = P(!; A); if B is xed.
analogously:
PfAj g = P (!; A)
Denition 1.31 Let fS ; Cg be a measurable spa e,  : f
; A; Pg ! fS ; Cg
be a random element and B be a  -algebra with B  A.
The fun tion Q(!; C ) dened on
 C is alled the regular onditional distribution of the r.e.  given a  -algebra B, if
1. for a xed C 2 C Q(!; C ) is B - measurable
2. for a xed ! Q(!; C ) is a probability measure on C with probability 1
3. for ea h C 2 C it holds Q(!; C ) = Pf 2 C gjBg (mod P)

Remark 1.16 Condition

3 is equivalent to
R
Q(!; C )dP = P(f 2 C g \ B ) 8 B 2 B.
see:

R
B

Q(!; C )dP = P(f 2 C gjB)dP = If2C g dP = P(f 2 C g \ B )

Theorem 1.32 Let

S:
C:

be a omplete, separable, metri spa e; Then there exists a regular

the  -algebra of Borel sets of S ;
 : f
; A; P g ! fS ; Cg a random element
B  A: an arbitrary  - algebra.
onditional distribution of the random element  given the  -algebra B:
Proof: not given

1.3.4 Conditional densites

Denition 1.32 Let fS ; C ; mg be a measure spa e and  (! ) be a random element
in fS ; Cg i.e.  : f
; Ag ! fS ; Cg;
 possesses a distribution density (x) w.r.t. the measure m if it holds
P( 2 C ) =

Z
C

A.BENHARI

(x)dm =

(x)m(dx);

30

8 C 2 C:

Corollary 1.3 Let f : fS ; Cg ! fR; Bg be a measurable mapping, then

E f ( ) =

f ( (! )dP =

f (x)(x)dm

Theorem 1.33 The random element  possesses a distribution density if and

only if the measure P dened by P (C ) = P( 1 (C )) is absolutely ontinuous
w.r.t. the measure m.
Remark 1.17  is absolutely ontinuous w.r.t. m if
m(C ) = 0 implies (C ) = 0; C 2 C
or if 8 " > 0 9 > 0 su h that m(C )  ) j(C )j  "
Proof: apply Radon-Nikodym Theorem for (C ) = P (C ) and m(C )
1. let  = P be absolutely ontinuous w:r:t: m :   0; (S ) = 1 ( is
nite)

) 9 (x)  0

with P (C ) = (x)dm
C

2. let  possess a distribution density, i.e. P( 2 C ) = (x)dm :

) m(C ) = 0 implies P (C ) = 0 ) P

w.r.t. m

is absolutely ontinuous

) assertion

onsider the random elements i ; i = 1; 2

i : f
; A; P g measurable
! fSi; Ci; mig;
) (1 ; 2) : f
; A; P g measurable
! fS1  S2 ; fC1  C2 g; m1  m2 g
assume (1 ; 2 ) possesses a distribution density (x1 ; x2 ) w.r.t. m1  m2 ; i.e.
R R
P(1 2 C1 ; 2 2 C2 ) =
(x1 ; x2 )m1 (dx1 )m2 (dx2 );
C1 C2

 is alled the joint distribution density fun tion

Theorem 1.34 The existen e of the joint distribution density fun tion (x1 ; x2 )
of (1 ; 2 ) implies the existen e of the distribution densities of the r.e.'s 1 and
2 : It holds
R
R
 (x1 ) = (x1 ; x2 )m2 (dx2 );
 (x2 ) = (x1 ; x2 )m1 (dx1 ):
1

S2

Proof: P(1 2 C1 ) = P(1 2 C1 ; 2 2 S2 ) =

R
C1

 (x1 )m1 (dx1 )

S1

R R

(x1 ; x2 )m2 (dx2 )m1 (dx1 )

C1 S2

assertion

Theorem 1.35 Let f : fS2 ; C2 g ! fR ; Bg (B: Borel sets) be a measurable

fun tion. If (1 ; 2 ) possesses a joint distribution density (x1 ; x2 ), then it holds
R
E ff (2 )j1 g = f (x2 ) ( (;x )) m2 (dx2 )
1

Here, (x2 x1 ) := (x11(;xx12)) is alled the

random element 2 given 1 = x1 .
A.BENHARI

S2

onditional distribution density of the

31

Proof:
Z

8 C1 2 C1

it holds:
Z

E ff (2 )j1 gdP =

1 1 (C1 )

f (2 )dP

E (f (2 )IC (1 ))

1 1 (C1 )

Z Z

(see 1 1 (C1 ) = f! : 1 (! ) 2 C1 g)

f (x2 )IC (x1 )(x1 ; x2 ) m1 (dx1 )m2 (dx2 )

1

S1 S2

Z Z

S2

C1

(x ; x )
f (x2 ) 1 2 m2 (dx2 )  (x1 )m1 (dx1 )
 (x1 )

{z
f(x1 )

Remark 1.18

f(x1 ) (x1 )m1 (dx1 ) =

1

C1

) E ff (2)j1g

= f(1 ) =

f(1 )dP

1 1 (C1 )

f (x2 )

S2

(1 ; x2 )
m (dx )
 (1 ) 2 2

assertion

E ff (2 )j1 g is a r.v. with values

E ff (2 )j1 = x1 g =

S2

f (x2 )

(x1 ; x2 )
m (dx ):
 (x1 ) 2 2
1

(see beginning of subse tion 1.3.1)

Example 1.9 Let (1 ; 2 ) be a random ve tor whi h is uniformly distributed on

the triangle D with verti es (0,0), (1,0), (0,2))
S1 = [0; 1; S2 = [0; 2; m1; m2 { Lebesgue measure
) x := (x1 ; x2); x 2 D : (x) = 1; x 62 D : (x) = 0;
f (y ) = y : x1 2 [0; 1 )
E f2 j1 = x1 g =
=

Z2

x2

0
2Z 2x1

(x1 ; x2 )
dx
 (x1 ) 2

x2

2 R2x1
0

x22
=
2(1 x1 ) 2
1

A.BENHARI

1dx2

dx2 =

2 2x1



0
32

2Z 2x1

x2

=1

x1

2(1

x1 )

dx2

 6
E (2 j1 = x1 ) = 1

2 



HH D 
HH 
1
HHH 
HHH
HHH
H
x1

A.BENHARI

33

x1

2 Random fun tions and random mappings

Let f
; A; Pg be a given probability spa e and let the realization of a random
experiment be des ribed by a fun tion  (x); x 2 X
) we say: on f
; A; Pg is given a random fun tion
i.e. random fun tion is a mapping
! !  (x) =  (x; ! ); ! 2

require:  (x; ! ) is a random variable (or element) for any xed x 2 X

Denition 2.1 Let X be some set and fS ; Cg be a measurable spa e. A random mapping  (x; ! ) of the set X into a measurable spa e fS ; Cg is alled the
mapping X 
! S ; whi h is for arbitrary xed x a measurable mapping of
f
; Ag into fS ; Cg, i.e. f! :  (x; !) 2 C g 2 A 8 C 2 C .
"random mapping"
! "random fun tion with values in S "
x 2 X : argument of the random fun tion
 X = ( 1; 1) or X = (T1; T2)  R ) x is interpreted as time
random fun tion is alled random pro ess

(instead of x we use t)

 X = f0; 1; 2; : : :g

or X = f: : : ; n; : : : ; 1; 0; 1; : : : ; n; : : :g
random fun tion is alled dis rete time random pro ess or time series

 X = G  Rm : random fun tion is alled random eld

Denition 2.2 Let  (x); x 2 X be a random fun tion with values in fS ; Cg,
i.e.  (x; :) : f
; A; Pg measurable
! fS ; Cg. Further, let n 2 N and x1 ; : : : ; xn 2 X .
Consider the random elements ( (x1 ); : : : ;  (xn)) : f
; A; Pg ! fS n ; C n g
whi h indu e measures on C n dened by
Px ;:::;xn (C n) := P(! : ( (x1 ; ! ); : : : ;  (xn; ! )) 2 C n );
C n 2 Cn:
1

The above meaures are alled nite dimensional distributions (f.d.d.'s) or

marginal distributions of the random fun tion  (x).

Theorem 2.1 The family of nite dimensional distributions of a random fun tion  (x) possesses the following onditions of ompatibility or onsisten e:
1. Px :::xn xn :::xn m (C n  S m ) = Px :::xn (C n ) 8 C n 2 C n
2. let  : permutation of (1; 2; : : : ; n),
 (x1 ; : : : ; xn ) := (x(1) ; : : : ; x(n) );
 : orresponding permutation of sets in S n ; i.e.
for any any subset C n of points (z1 ; : : : ; zn ) 2 S n with C n 2 C n
it holds (C n ) = f(z(1) ; : : : z(n) ) 2 S n : (z1 ; : : : ; zn ) 2 C n )g
1

+1

then P(x ;:::;xn ) (C n ) = Px ;:::;xn (C n )

1

8 C n 2 C n; 8 n 2 N

Proof: obvious
From the pra ti al point of view two random fun tions are dierent only if the
orresponding f.d.d`s are dierent.
A.BENHARI

34

 (x) and  0 (x); x 2 X with values in

S dened on possibly dierent proabability spa es, i.e.
 (x) : f
; A; Pg ! fS ; Cg
 0 (x) : f
0 ; A0 ; P0 g ! fS ; Cg
are alled sto hasti ally equivalent in the wide sense, if 8 n 2 N; 8 xk 2
X ; k = 1; : : : ; n and 8 C n 2 C n their f.d.d's oin ide:
P(! : ( (x1 ); : : : ;  (xn )) 2 C n ) = P0 (! 0 : ( 0 (x1 ); : : : ;  0 (xn )) 2 C n):

Denition 2.3 Two random fun tions

Denition 2.4 Two random fun tions 1 (x) and 2 (x); x 2 X dened on the
same probability spa e f
; A; Pg are alled sto hasti ally equivalent, if
P(! : 1 (x; ! ) 6= 2 (x; ! )) = 0
8 x2X
and are said to be modi ations or versions of ea h other.
They are alled indistinguishable if
P(! : 1 (x; ! ) = 2 (x; ! ); 8 x 2 X ) = 1:
Theorem 2.2 If 1 (x) and 2 (x) are sto hasti ally equivalent, then they are
sto hasti ally equivalent in the wide sense.

Proof: For any set N

with

N = f! : (1 (x1 ); : : : ; 1 (xn )) 6= (2 (x1 ); : : : ; 2 (xn ))g =

it holds P(N ) = 0 (n is nite) )

n
[

f! : 1(xi) 6= 2(xi )g

i=1

P(! : (1 (x1 ); : : : ; 1 (xn )) 2 C n ) = P(! : (2 (x1 ); : : : ; 2 (xn )) 2 C n )

Example 2.1
= [0; 1; A : Borel sets of [0; 1; P : Lebesgue measure;
S = R;
C : Borel sets of R; X = [0; 1;
1 (x; ! ) = 0 8 (x; ! ) 2 X 
= [0; 12

1 (x; ! ) 2 D = f(x; ! ) : x = ! g (D diagonal)
2 (x; ! ) =
0 (x; ! ) 2 [0; 12 n D
paths of 1 are ontinuous while the paths of 2 are not ontinuous
8 x 2 X : P(! : 1(x; !) 6= 2(x; !)) = P(! : ! = x) = 0

(Lebesgue measure of a single point is 0)

) 1; 2 are sto hasti ally equivalent
above theorem ) 1 ; 2 are sto hasti ally equivalent in the wide sense
but:
 paths do not oin ide
 onsider: Ai = f! : i(x; !)  21 ; 8 x 2 Xg; i = 1; 2
P(A1 ) = P(
) = 1 but P(A2 ) = P(;) = 0
in this spe ial ase it holds A1 ; A2 2 A;
in the general ase A = f! :  (x; ! )  ; 8 x 2 Xg needs not to be
ontained in A, sin e
T
A = f! :  (x; ! )  g ( no ountable interse tion!)
x2X

A.BENHARI

35

Denition 2.5 Let fS ; Cg be a measurable spa e. A family of nite dimensional

distributions

fPx :::xn (C n); n = 1; 2; : : : ; xk 2 X ; C n 2 C n g

1

satisfying the onditions of ompatibility is alled a random fun tion in the

wide sense with values in fS ; Cg.

usually random fun tions are only given in the wide sense, sin e
1. in many pra ti al problems random fun tions are hara terized by their
f.d.d.'s while the underlying probability spa e is not given
2. it is simpler to dene the f.d.d's than the orresponding probability spa e
and the mapping  (x; ! );
3. for solving many pra ti al problems it is su ient to know only the f.d.d's

Constru tion of a random fun tion by its f.d.d.'s

Given the f.d.d's of two random fun tions it is possible to de ide whether they
are sto hasti ally equivalent in the wide sense or not.
It is possible to hange f
; A; Pg and  (x; ! ) (arbitrarily) as long the f.d.d's
remain un hanged.
Problem : Does there exist a random fun tion with a family of f.d.d's whi h
oin ides with a given family

fPx ::: xn (C n); n 2 N; xk 2 X ; C n 2 C ng?

(1)

(the answer will be: yes)

Denition 2.6 If there exists a probability spa e f

; A; Pg and a random fun tion  (x; ! ) with values in S ; C su h that the f.d.d.'s of  oin ide with the family
(1), i.e.
P(! : ( (x1 ; ! ); : : : ;  (xn ; ! )) 2 C n) = Px

::: xn (C

n );

8C n 2 C n

then f
; A; Pg and  (x; ! ) are alled representation of the family of the
distributions (1).

Theorem 2.3

Kolmogorov

Let S be a omplete, metri and separable spa e. The family of distributions

fPx :::xn (C n); n = 1; 2; : : : ; xk 2 X ; C n 2 C ng,
satisfying the onditions of ompatibility (see Theorem 2.1) possesses a representation.
1

Proof: not given

A.BENHARI

36

3 Gaussian random fun tions

Denition 3.1 A real-valued random fun tion  (x); x 2 X , i.e.
 (x) : f
; A; P g measurable
! fR; Bg; 8 x 2 X , is alled Gaussian, if for any n 2 N
and any xk 2 X ; k = 1; 2; : : : ; n; the random ve tor ( (x1 ); : : : ;  (xn)) has a

joint normal distribution, i.e. for its hara teristi fun tion it holds


1 

J (x1 ; : : : ; xn ; u1 ; : : : ; un) = exp iu a
u Bu ;
2
where u = (u1 ; : : : ; un )
a = (a(x1 ); : : : ; a(xn )) with a(x) = E  (x);
B = (b(xi ; xj ))1i;j n with b(x; y ) = E ( (x)

a(x))( (y ) a(y )):

The fun tion a(x) is alled mean value fun tion and b(x; y ) orrelation fun tion.

Theorem 3.1 The orrelation fun tion b(x; y ) possesses the following properties
1. b(x; y ) = b(y; x);
2. b(x; y ) is a positive semi-denite fun tion:
n
P
b(xi ; xj )ui uj  0 8 n 2 N; 8 ui 2 R; 8 xi 2 X ;
i;j =1

i.e. the matrix B = (b(xi ; xj ))1i;j n is symmetri and positive semi-denite.
Proof:
1. obvious n
n


P
P
( (xi ) a(xi ))ui 2 =
E ( (xi ) a(xi ))( (xj ) a(xj ))ui uj
2. 0  E

i=1
n
P

i;j =1

i;j =1

b(xi ; xj )ui uj

assertion

Theorem 3.2 Let  (x) be a Gaussian random fun tion with a (stri tly) positve
denite orrelation fun tion b, then for the distribution of ( (x1 ); : : : ;  (xn)) it
holds for C n 2 Bn
P(( (x1 ); : : : ;  (xn )) 2

C n)

f (y)dy;
Cn

with the distribution density


1
1
f (y ) = p n
exp
(y
2
(2 ) det B

a) B 1 (y

a))

with a and B from Dention 3.1.

Proof: b is stri tly positive denite ) B is symmetri and positive denite
) 9 diagonal matrix  = diag(1; : : : ; n) with i > 0 (eigenvalues)
and an orthogonal matrix Q su h that B = QQ = Q
  Q
| {z } | {z }
1
2

(Q
A.BENHARI

Q ;

1
2

L

det Q = 1; eigenve tors of B are the olumns of Q) )

37

 B 1 = (LL ) 1 = (L ) 1L 1 = L  L 1
 det B = det Q
det 
det Q = det  = 1
: : :
n
p
p
p
p
det

 det L = det
Q
=



:
:
:



=
det

=
det B
1
n
| {z }

()

1
2

=1

evaluation of the distribution density:

J is absolutely integrable ) it exists a distribution density (see basi ourse,
Theorem 6.4) whi h is given by
Z
1
f (y ) =
exp ( iu y ) J (x1 ; : : : ; xn ; u1; : : : ; un)du
n
(2 ) n
1
=
(2 )n

R
Z

exp

iu (y

Rn

(2 )n

p1

a)

1
dv;
det B

u = L  v; du = det L  dv = p
u Bu

1 
u Bu du
2

det B

v L 1

B L
|{z}
LL

exp  iv  L 1 (y

{z

Rn

v

()
= v v

1  A
v v dv
2

a})

(+)

Set := L 1 (y

a), then for the exponent it follows

1 
1 
 + i  v  +  )
iv 
vv =
(v v + iv
| {z
} | {z }
2
2
=2iv
=0
1
=
((v + i ) (v + i ) +  )
2
it holds  = (y a) L  L 1 (y a) = (y a) B 1 (y
is independent of v
set w = v + i ) (v + i ) (v + i ) = w w; dw = dv

(+); (++) ) f (y ) =
=

(2 )n det B

(2 )n det B
exp

1
(y
2

exp

Rn

a) B 1 (y

A.BENHARI

1
(y
2

Z

a)

exp

Rn

a) B 1 (y

38

a)

1
((v + i ) (v + i ) +  ) dv
2

n
Q

1
= p
exp
(2 )n det B

(++)

a)

k=1

1
R
e
1

1 
w w dw
2

{z

2
wk
2

dwk = 2 n

assertion

Remark 3.1 Without the assumption of a stri tly positive denite orrelation
fun tion b the matrix B an be singular, i.e. the density f (y ) is not well dened.
This ase orresponds to a degenerated random ve tor. Let rank B = m < n
then the distribution of ( (x1 ; : : : ;  (xn )) is on entrated on a m-dimensional

submanifold of Rn . A well dened density exists only for proje tions on this
submanifold.
In ase of n = 1 the matrix B orresponds to the varian e of  (x1 ). If B = 0 then
P( (x1 ) = a(x1 )) = 1.

Theorem 3.3 Let

X:

be an arbitrary set,
a(x) a real fun tion on X ,
b(x; y ) : a positive semi-denite, symmetri , real fun tion on X 2 .
Then there exists a Gaussian random fun tion  (x) for whi h a(x) is its mean
value and b(x; y ) its orrelation fun tion.
Proof: onsider the family of distributions from Denition 3.1;
it satises the onditions of ompatibility;
Theorem of Kolmogoro (Theorem 2.3)

assertion

Denition 3.2 The random ve tor fun tion  (x) = (1 (x); : : : ; m (x)) 2
Rm ; m 2 N; x 2 X is alled Gaussian, if 8 n 2 N and x1 ; : : : ; xn 2 X the joint

distributions of all omponents of the sequen es

( (x1 ); : : : ;  (xn)) = (1 (x1 ); : : : ; m (x1 ); : : : ; 1 (xn ); : : : ; m (xn ))

are normal distributions, i.e. the hara teristi fun tion of ( (x1 ); : : : ;  (xn )) has
the form


J (x1 ; : : : ; xn ; u1 ; : : : ; un ) = exp i

n
X

uk a(xk )

k=1
Rm ;

n
1X
uj b(xj ; xk )uk
2 j;k=1

where uk = (uk1 ; : : : ; ukm 2

a(x) = E  (x) = (a1 (x); : : : ; am (x))


b(x; y ) = E ( (x) a(x))( (y ) a(y )) = (bpq (x; y ))1p;qm

)

and

uk a(x) =

m
P
p=1

ukpap (x); uj b(x; y )uk =

m
P
p;q=1

bpq (x; y )ujpukq :

Corollary 3.1 a(x) an be an arbitrary ve tor fun tion on X with values in R m

and b(x; y ) is a symmetri and positive semi-denite fun tion on X 2 with values
in Rmm , i.e.
n
P

j;k=1

Proof: evaluate E

A.BENHARI

 0; x: 2 X ; u: 2 Rm; 8 n 2 N:

uj b(xj ; xk )uk

m P
n
P

(p (xk ) ap (xk ))ukp

p=1 k=1

39

2

Theorem 3.4

( ounterpart to Theorem 3.3)

be an arbitrary set,
a(x) : a ve tor fun tion on X ,
b(x; y ) : a positive semi-denite, symmetri matrix fun tion on X 2 .
Then there exists a Gaussian random fun tion  (x) for whi h a(x) is its mean
value and b(x; y ) its orrelation fun tion, i.e.
E p(x) = ap (x)
E (p(x) ap (x))(q (y ) aq (y )) = bpq (x; y ); p; q = 1; : : : ; m:

X:

Let

Computation of moments for s alar Gaussian random fun tions

let a(x) = 0; u = (u1 ; : : : ; un) ; B = (b(xj ; xk ))1j;kn


mj ;:::;jn (x1 ; : : : ; xn ) := E [ (x1 )j
: : :
[ (xn )jn
1

n
P

k=1

jk := order of the moment

Theorem 3.5 For the moments of a s alar Gaussian random fun tion it holds
(

mj ;:::;jn (x1 ; : : : ; xn ) =
1

0

1
 2s
s)
(
(
Bu;
u
)
u1 j1 ::: un jn 2s s!
u=0

order is odd
order is even (= 2s).

Proof: x = (x1 ; : : : ; xn ) ; u = (u1 ; : : : ; un) ; u Bu = (Bu; u) =

=)

Theorem 3.2

=)

Theorem 1.17

n
X

J (x; u) = exp

1
X
1
1
(Bu; u) =
2
p!
p=0


 q J (x; u) 
mj ::: jn (x) = ( i)q j
u1 : : : un jn u=0
1

jk = 2s +1 : mj

k=1
n
X

1
2

k;l=1

p

(q =

::: jn (x)

n
P

bkl uk ul ;

(Bu; u)p

n
X
k=1

jk )

= 0 (J (:; u) is even, (B ( u); u)) = (Bu; u))



 2s
1 1 s
jk = 2s : mj ::: jn (x) = (
(Bu; u)s
j
j
n
u
:
:
:
u
s
!
2
1
n
k=1


2
s


1
s

=
(
Bu;
u
)

u1 j : : : un jn 2ss!
u=0
) assertion
i)2s

u=0

spe ial ases:

2s = 2:

!

b(xj ; xk )uj uk  = b(x1 ; x2 ) = E  (x1 ) (x2 )

j;k=1
u=0


1 2
(b(x; x)u21 ) = b(x; x) = m11 (x; x) = E  2(x)
2 u1 2
u=0

1 2
m11 (x1 ; x2 ) =
2 u1 u2

m2 (x) =
A.BENHARI

2
X

40

2s = 4:

1
4
(Bu; u)2
m1111 (x1 ; x2 ; x3 ; x4 ) =
2
u1 : : : u4 2
2!
where (Bu; u)2 =

4
X

i;j =1

!2

bij ui uj

4
X

i;j;k;l=1

u=0

bij bkl ui uj uk ul )

m1111 (x1 ; x2 ; x3 ; x4 ) = b(x1 ; x2 )b(x3 ; x4 )+ b(x1 ; x3 )b(x2 ; x4 )+ b(x1 ; x4 )b(x2 ; x3 )

n
P

PQ

it results: mj ::: jn (x1 ; : : : ; xn ) =

b(xp ; xq )
for
jk = 2s
k=1
des ription:
 write down the sequen e: |x1 ; :{z: : ; x}1 ; x| 2 ; :{z: : ; x}2 ; : : : ; |xn; :{z: : ; xn}
1

j1





times

j2

jn

times

times

subdivide the sequen e into pairs

(pairs ounted only on e if they are permutations of one another)
Q
is taken over all pairs of the partition
(s fa tors)
P
is taken over all partitions
((2s 1)!! terms)

example m31 (x1 ; x2 ) : x1 x1 x1 x2

) (x1; x1 ); (x1 ; x2); (x1; x1 ); (x1 ; x2 ); (x1 ; x2); (x1 ; x1 )
) m31 (x1; x2 ) = 3b(x1 ; x1 )b(x1 ; x2 )
m2s (x) = (2s 1)!! (b(x; x))s = (2s 1)!!  2s (x) for  2 (x) = b(x; x)
((2s 1)!! equal terms in the sum)

Complex valued Gaussian random fun tions

Let  (x) 2 C ( omplex numbers);  (x) =  (x) + i (x);  (x);  (x) 2 R; x 2 X
Denition 3.3 A random fun tion  (x); x 2 X with  (x) =  (x) + i (x)
is alled a omplex Gaussian random fun tion if the real ve tor fun tion
( (x);  (x)); x 2 X is Gaussian and

E  (x) a(x))( (y ) a(y ) = 0 8 x; y 2 X where a(x) = E  (x):

The fun tion b(x; y ) := E  (x) a(x))( (y )

tion fun tion of  .

a(y ) ; x; y 2 X is alled orrela-

without loss of generality let a(x) = 0 and let



b11 (x; y ) b12 (x; y )

b21 (x; y ) b22 (x; y )

E  (x) (y ) E  (x) (y ) = E  (x) ( (y );  (y ))

:= E
 (x) (y ) E  (x) (y )
 (x)

E  (x) (y ) = 0 () E  (x) (y )  (x) (y ) = 0 (real part)

E  (x) (y ) +  (x) (y ) = 0 (imaginary part)
() b11 (x; y) = E  (x) (y) = E (x)(y) = b22 (x; y)
b12 (x; y ) = E  (x) (y ) = E  (x) (y ) = b21 (x; y ) (2)
A.BENHARI

41

For the orrelation fun tion then it follows:

b(x; y ) = E  (x) (y ) = E (( (x) + i (x))( (y ) i (y )))

= E ( (x) (y ) +  (x) (y )) + i E ( (y ) (x)  (x) (y ))
= 2(b11 (x; y ) i b12 (x; y ))
(2)

(2) ) b12 (x; x) = E  (x) (x) = 0

)  (x) and (x) are independent

(sin e  (x);  (x) are Gaussian)

Theorem 3.6 Let (x); (x) be real random fun tions on X . If  (x) = (x)ei(x)
is a omplex Gaussian random fun tion then
1. (x); (x) are independent 8x 2 X
2. (x) is Rayleigh-distributed, its density is


r2
r
f (r) = 2 exp
; u > 0;  2 (x) = D2  (x) = b11 (x; x)
2
 (x)
2 (x)
(x) is uniformly distributed on ( ;  ), i.e. its density is
1
g (v ) = ; v 2 ( ;  ):
2
Proof:  (x) =  (x) + i (x) )  (x) = (x) os (x);  (x) = (x) sin (x);
 (x) is Gaussian Denition
=) 3.3 ( (x);  (x)) is a Gaussian ve tor fun tion
) density of ( (x); (x)) is




1
1
1 u2 v 2
p
+
(sin e b12 (x; x) = 0)
f (u; v ) =
exp
2 b11 b22
2 b11 b22


1
u2 + v 2
=
exp
(sin e b11 = b22 )
2b11
2b11
transformation of r.v.'s: density of ((x); (x))


  (u; v ) 


f (r; s) = f (u(r; s); v (r; s)) 
(u = r os s; v = r sin s)
 (r; s) 





1
r2  os s r sin s  1 r
r2
=
=
exp
exp
2b11
2b11  sin s r os s  2 b11
2b11
|

{z
=r

) marginal densities of  and :

f (r) =
f (s) =

) f (r; s)

A.BENHARI

Z


Z1
0

r
f (r; s)ds = 2 exp
 (x)
f (r; s)dr =

= f (r)f (s)

42

r2
; r > 0; b11 (x; x) =  2 (x)
2
2 (x)

1
; s 2 ( ;  )
2
assertion

Theorem 3.7 properties of b11 ; b12 ; b = 2(b11 ib12) :

1. b11 (x; y ) is a positive semi-denite fun tion
2. b12 (x; y ) = b12 (y; x)
(anti-symmetry)
3. b(x; y ) is a positive semi-denite fun tion, i.e.
n
P
b(xk ; xl )zk zl  0
8 n 2 N; 8 x: 2 X ; 8 z: 2 C :
k;l=1

Proof:
1. b11 (x; y ) = E  (x) (y )

=)

Theorem 3.1 2.

assertion

2. follows from (2)

3. 0  E


2
n
P




(
x
)
z
k
k


k=1

=E

n
P
k;l=1

 (xk ) (xl )zk zl =

n
P
k;l=1

b(xk ; xl )zk zl

assertion

Theorem 3.8 Let b(x; y ); x; y 2 X be an arbitrary positive semi-denite fun tion. Then there exists a omplex Gauusian random fun tion  (x) su h that
E  (x) = 0
and
E  (x) (y ) = b(x; y ).
Proof: plan of the proof:
(i): onsider the real 2  2 matrix fun tion



1 Re b(x; y )
b
11 (x; y ) b12 (x; y )
B (x; y ) = b (x; y ) b (x; y ) :=
2 Im b(x; y )
21
22

Im b(x; y )
Re b(x; y )

(ii): to prove: B (x; y ) is

(a) symmetri : B (x; y ) = B (y; x)
(b) positive semi-denite
(iii): Theorem 3.4 ) 9 real Gaussian random ve tor fun tion ( (x);  (x))
su h that B (x; y ) is its orrelation fun tion
(E  (x) = E  (x) = 0)
(iv): onsider  (x) =  (x) + i (x) and prove E  (x) (y ) = 0
Denition 3.3 )  (x) is a omplex Gaussian random fun tion
remains to prove: E  (x) (y ) = b(x; y )
) assertion
(ii): b(x; y ) is positive semi-denite
) 8 n 2 N; 8 xa 2 X ; 8 za 2 C; a = 1; : : : ; n gilt:
(a) 0 

n
P

p;q=1

b(xp ; xq )zp zq =

=

n
P
p;q=1

n
P

p;q=1

b(xp ; xq )zp zq =

n
P

p;q=1

b(xp ; xq )zp zq

b(xq ; xp )zp zq

) b(x; y) = b(y; x)
( oe ients of identi al polynomials)
1
1
) b11 (x; y) = 2 Re b(x; y) = 2 Re b(y; x) = b11 (y; x);
) b12 (x; y) =
A.BENHARI

1
2 Im b(x; y )

1 Im b(y; x)
2

43

b22 (x; y ) = b11 (x; y )

= b21 (y; x)
) B (x; y) = B (y; x)

(b) 0 

n
P

=2

=2

b(xp ; xq )zp zq

p;q=1
n
P

{z
}|
{z }
| {z } |
1
z
p
Re b(xp ;xq )
Im
b
(
x
;x
)
p
q
2
(p) (q)
b11 (xp ; xq )u1 u1 + b11 (xp ; xq ) u(2p) u(2q)
| {z }
=b22 (xp ;xq )


(p) (q)
b12 (xp ; xq ) u1 u2 + b12 (xp ; xq )u(1q) u(2p) +
|
{z
}
=b21 (xp ;xq )

p;q=1

n
P
p;q=1

2 ( b11 (xp ; xq ) i b12 (xp ; xq ) )
(u(1p) + iu(2p) ) (u(1q)

n P
2
P
p;=1 k;l=1

(q)
iu
)
{z 2 }

zq

1
2

bkl (xp ; xq )u(l p) u(kq) = 2

n
P
p;q=1

i
0

(sin e it is real)

B (xp ; xq )zp ; zq

(with the ve tor zp = (u(1p) ; u(2p)) )) B (x; y ) is positive semi-denite

E  (x) (y ) = E ( (x) + i (x))( (y ) + i (y ))

= (b11 (x; y ) + i2 b22 (x; y )) +i (b12 (x; y ) + b21 (x; y )) = 0
|
{z
}
|
{z
}

(iv):

=0

=0

E  (x) (y ) = E ( (x) + i (x))( (y ) i (y ))

= b11 (x; y ) + b22 (x; y ) + i( b12 (x; y ) + b21 (x; y ) )
= Re b(x; y ) + i Im b(x; y ) = b(x; y )

assertion

Why do Gaussian random fun tions play an important role in pra ti al problems ?
The answer gives a multivariate generalization of the entral limit theorem (theorem on normal orrelation).
Under very general onditions the sum of a large number of small (in magnitude)
random fun tions is approximately a Gaussian random fun tion independently of
the probabilisti nature of the summands.
Consider a double sequen e of random fun tions:
nk (x); x 2 X ; k = 1; 2; : : : ; mn ; n = 1; 2; : : : ; nlim
m =1
!1 n

Set n (x) :=
" (x)
nk

m
Pn

k=1

nk (x) and dene the "trun ated" variables

:= I"(nk (x)) nk (x) where for " > 0 I" (z ) = I(

and their moments

" (x) := E  " (x);
ank
nk

";") (x)

1 x 2 ( "; ")
0 else

" (x; y ) := E ( " (x) a " (x))( " (y ) a " (y ))

bnk
nk
nk
nk
nk

Theorem 3.9 Let the random fun tions n1 (x); : : : ; nmn (x) be mutually independent for ea h n and satisfy the onditions
1. for any " > 0 it holds:

lim
n!1

mn
P
k=1

P(jnk (x)j > ") = 0

2. for some " = "0 = "0 (x) > 0 it holds

m
m
Pn "
Pn "
lim
a
(
x
)
=
a
(
x
)
;
lim
bnk (x; y ) = b(x; y );
nk
n!1
n!1
0

k=1

A.BENHARI

k=1

44

Then for n ! 1 the nite dimensional distributions of the random fun tion
n (x) onverge weakly (in the sense of weak onvergen e of measures) to the orresponding distributions of a Gaussian random fun tion with mean value a(x) and
orrelation fun tion b(x; y ).
Proof: not given

Spe ial ase:

let (k (x))k1 be a sequen e of mutually independent random fun tions with
values in [ 1; 1 possessing identi al f.d.d.'s with
a(x) = E (x) = 0 and b(x; y ) = E (x)(y )
n
n
P
P
p p
mn = n; nk := p1n k 2 [ p1n ; p1n and n := nk = p1n k 2 [ n; n
k=1
k=1
) for every n it holdsn E n(x) = 0
P
For n > "1 it holds P(jnk (x)j > ") = 0 ) 1.
|
{z
}
2

For "0 >

p1n

it

k=1
"0
holds nk

=0

 nk )

1
1
b"nk (x; y ) = bnk (x; y ) = E nk (x)nk (y ) = E k (x)k (y ) = b(x; y )
n
n
The orrelation fun tion of k is
0

n
n
1X
1X
E n (x)n (y ) =
E  (x)l (y ) =
b(x; y ) = b(x; y );
n k;l=1 k
n k=1

2.

8n 2 N

) limit distribution of (n)n1 is Gaussain with mean 0 and orrelation fun tion
b(x; y )

A.BENHARI

45

4 Pro esses with independent in rements

 R be a nite or innite interval losed on the left, a = min T > 1.
Denition 4.1 A random pro ess  (t); t 2 T with values in Rm is alled a
pro ess with independent in rements if for any n 2 N; tk 2 T with t1 <
Let T

t2 < : : : < tn , the random ve tors  (a);  (t1 )  (a); : : : ;  (tn)  (tn 1 ) are
mutually independent.
The ve tor  (a) is alled initial state or initial value of the pro ess and its
distribution the initial distribution.
A pro ess with independent in rements is dened in the wide sense if
P0 (B )
the initial distribution and
P (t; h; B ) the distribution of the ve tor  (t + h)  (t)
for h > 0; t  a; B 2 Bm (Borel sets of Rm )
are given.
to prove: the nite dimensional distributions are uniquely dened
(Denition 2.5 ) pro ess is given in the wide sense)
(tn )

(tn 1 )

(t1 )

n

2
1
0

(t2 )

= (t0 )

a = t0

t1

t2

tn

:::

tn

dene:

k :=  (tk )  (tk 1); k = 1; : : : ; n; for n 2 N (in rements)

0 :=  (t0 )
(initial value)
(
n
+1)
(
n
+1)
Qt t :::tn (B
) := P(! : ( (t0 );  (t1); : : : ;  (tn)) 2 B
);
(n+1)
(
n
+1)
m
B
2 (B ) ; (f.d.d.'s of  )
Rt t :::tn (B~ (n+1) ) := P(! : (0 ; 1 ; : : : ; n ) 2 B~ (n+1) ); B~ (n+1) 2 (Bm )(n+1)
(joint distribution of in rements)
0 1

0 1

Q and R are measures on f(Rm )(n+1) ; (Bm )(n+1) g

determine Qt t :::tn (B (n+1) ) to given P0 (B ); P (t; h; B ):
restri t to sets B (n+1) = B0  B1  : : : Bn and B~ (n+1) = B~0  B~1  : : : B~n with
Bk ; B~k 2 Bm (re tangles with Borel sides),
independen e of in rements implies for their joint distribution
Rt t :::tn (B~0  B~1  : : :  B~n ) = P(! : 0 2 B~0 ; : : : n 2 B~n )
0 1

0 1

Z Z

B~0 B~1

A.BENHARI

:::

t0 ; dy1)
: : :
P (tn 1 ; tn

P0 (dy0 )P (t0 ; t1

B~n

46

tn 1 ; dyn)

represent f.d.d.'s Q in terms of R:

Qt t :::tn (B0  B1  : : :  Bn ) = P(! :  (t0 ) 2 B0 ;  (t1 ) 2 B1 ; : : : ;  (tn) 2 Bn )
= P(0 2 B0 ; 0 + 1 2 B1 ; : : : ; 0 + : : : + n 2 Bn )
= P(0 2 B0 ; 0 2 B1 1 ; : : : ; n 2 Bn (0 + : : : + n 1 ))
where B z := fy : y = x z; x 2 B g
Z
Z
0 1

P0 (dy0)

B0

P (t0 ; t1

B1 y0

t0 ; dy1) : : :

:::

P (tn 1 ; tn

()

tn 1 ; dyn)

Bn (y0 +:::yn 1 )

Question: Let P0 (B ); P (t; h; B ) be given.

Does there exist an random pro ess  (t; ! ) with independent
in rements, possessing these distributions ?
Answer: Yes, if the f.d.d.'s satisfy the onditions of ompatibility.
To fulll these onditions P0 (B ) an be hosen arbitrarily and P (t; h; B ) is required to possess the following

Property (+): 8 n; 8 a  t = t0 < t1 < : : : < tn = t + h it holds:

P (t; h; B ) is the distribution of sums of independent random ve tors: 1 + : : : + n
where k :=  (tk )  (tk 1) is distributed a ording to P (tk 1 ; tk tk 1 ; B ).
Remark 4.1 This property of P (t; h; B ) (for xed t; h) possess the so- alled
innitely divisble distributions e.g. normal and Poisson (but not uniform, exponential, lognormal and many other) distribution
see for example m = 1; n = 2; t = t0 < t1 < t2 = t + h:
to prove: (+) ) onditions of ompatibility, e.g.
Qt t t (B0  R  B2 ) = Qt t (B0  B2 )
() )
0 1 2

Qt t t (B0  R  B2 ) =

0 2

P0 (dy0)

0 1 2

B0

P (t0 ; t1

t0 ; dy1)

R y0
|{z}
=R
|

From (+) it follows

P(! : 1 + 2 2 C ) =
=

Z
C
Z

P (t0 ; t2
Z

P (t1 ; t2

t1 ; dy2 )

B2 (y0 +y1 )

{z
=H

t0 ; dz )
t0 ; dy1)
P (t1 ; t2

P (t0 ; t1

t1 ; dy2)

R C y1

set C = B2
Z

B2 y0

A.BENHARI

y0 the following identity for H an derived:

P (t0 ; t2

t0 ; dz ) =

P (t0 ; t1

t0 ; dy1 )

B2 (y0 +y1 )

47

P (t1 ; t2

t1 ; dy2) = H

) Qt t t (B0  R  B2 )

0 1 2

P0 (dy0 )

B0

P (t0 ; t2

t0 ; dz )

B2 y0

= Qt t (B0  B2 )

(+)

0 2

Theorem 2.3 of Kolmogoro implies the existen e of a random pro ess  with
f.d.d.'s given in ()
stru ture of these f.d.d.'s )  possesses independent in rements
It is onvenient to study pro esses with independent in rements using hara teristi fun tions

Denition 4.2

J (t; h; u) :=

Rm

ei(u;x) P (t; h; dx)

is alled hara teristi fun tion of the pro ess with independent in rements.
J (t; h; u) is the hara teristi fun tion of the in rement  (t + h)  (t):

Theorem 4.1 A pro ess with independent in rements is given in the wide sense
if and only if
P0 (B )
the initial distribution and
J (t; h; u) the hara teristi fun tion of  (t + h)  (t)
are given where J (t; h; u) satises the ondition
J (t; h1 + h2 ; u) = J (t; h1 ; u)
J (t + h1 ; h2 ; u):

()

Remark 4.2 The ondition () to J (t; h; u) orresponds to property (+) of

P (t; h; B ):
Proof: Given J (t; h; u) and using the independen e of the in rements the
hara teristi fun tion of the joint distribution of


 (t1 )  (t0 );  (t2 )  (t1 ); : : : ;  (tn )  (tn 1 )
is given by

J (t1 ; : : : ; tn ; u1 ; : : : ; un ) =

n
Q

k=1

J (tk 1 ; tk

tk 1 ; uk )
()

Chara teristi fun tion denes uniquely the distribution ) f.d.d.'s of  are given.
ondition () : onsider t0 = t; t1 = t + h1 ; t2 = t + h1 + h2 ;
1 =  (t1 )  (t0 ); 2 =  (t2 )  (t1 );
r.v. distribution
hara terristi fun tion
1
P (t0 ; h1 ; B )
, J (t0 ; h1; u)
2
P (t1 ; h2 ; B )
, J (t1 ; h2; u)
1 + 2 P (t0 ; h1 + h2 ; B ) , J (t0 ; h1 + h2 ; u)

) J (t0 ; h1 + h2 ; u)

1 ;2

=
E exp(i(u; 1 + 2 ))
independent
=
E exp(i(u; 1 ))E exp(i(u; 2 ))
=
J (t0 ; h1 ; u)J (t1 ; h2 ; u)

)
A.BENHARI

48

ondition ()

Denition 4.3 A random pro ess  (t); t 2 T; is alled sto hasti ally ontinuous in t0 ; if for any " > 0 it holds
lim P( j (t; ! )  (t0 ; ! )j  ") = 0:

t!t0

Denition 4.4 A pro ess with independent in rements is alled homogeneous,

if the dieren es  (t + h)  (t) are distributed independently of t, i.e. it holds
P (t; h; B ) = P (h; B )
and onsequently
J (t; h; B ) = J (h; B )
.

) A homogeneous pro ess with independent in rements is sto hasti ally ontinuous, if
lim P (h; U") = 0

h!0

where

U" = Rm n U" and U" = fx 2 Rm : jxj < "g; " > 0:

see P (h; U") = P(j (t0 + h)

 (t0 )j  ")

Denition 4.5 A sto hasti ally ontinuous and homogeneous pro ess with independent in rements is alled Levy pro ess.
Theorem 4.2
1. Let  (t); t 2 T be a Levy pro ess. Then for h ! 0
(a) the in rement  (t + h)  (t) onverges to zero in probability,
(b) the distribution of  (t + h)  (t) onverges weakly to zero (the measure

on entrated in zero).
2.  (t) is sto hasti ally ontinuous if and only if lim J (h; u) = 1 uniformly in
h!0
any bounded region juj  K:
Proof:
1. (a)  (t) sto hasti ally ontinuous Denition
) 4.3
lim P( j( (t + h)  (t)) 0j  ") = 0
h!0
)  (t + h)  (t) onverges in probability to 0
(b) onvergen e in probability implies weak onvergene (see basi ourse
Theorem 5.8.),
i.e.
for any ontinuous and bounded fun tion f it holds
R
f (x)P (h; dx) h!!0 f (0)
Rm

2. ()): J (h; u) =

R
Rm

ei(u;x) P (h; dx)

1(b).

! 1;

(ei(u;x) bounded for juj  K )

((): let lim J (h; u) = 1, limit fun tion J  (u)  1 is ontinuous at u = 0

h!0
Theorem 1.15 

=) J (u) is a hara teristi fun tion of a distribution P  (B ) in R m

and lim P (h; B ) = P  (B )
h!0

0 2 B (Dira measure)

here P (B ) = 10 for
for 0 62 B
) lim P (h; U") = 0 )  (t) is sto hasti ally ontinuous
h!0

A.BENHARI

49

Theorem 4.3 The hara teristi fun tion of a Levy pro ess possesses the following properties:
1. J (h1 + h2 ; u) = J (h1 ; u)J (h2 ; u); espe ially J (nh; u) = [J (h; u)n 8 n 2 N
2. J (h; u) 6= 0
3. J (h; u) = exp(h g (u)) with a uniquely dened ontinuous fun tion g (u);
() property ompletely hara terizes the dependen e of J (h; u) on h)
Proof:
1. follows from Theorem 4.1 applied to homogeneous pro esses
2. Theorem 4.2 ) lim J (h; u) = 1 8 juj  K
h!0
) 9 h0 > 0 : jJ (h; u)j  21 8 h 2 [0; h0
let h be arbitrary ) h = h0 (n + ) where 0   < 1
1. ) J (h; u) = J (h0 n; u)J (h0 ; u) = [J (h0 ; u)nJ (h0 ; u)
) jJ (h; u)j  ( 12 )n+1
) assertion
3. sin e lim J (h; u) = 1 uniformly 8 juj  K there exists a uniquely dened
h!0
fun tion g1 (h; u) = ln J (h; u) 8 juj  K ; h 2 [0; s where s = s(K )
g1 (h; u) is ontinuous in [0; s  fjuj  K g
be ause of 1. it holds :

g1 (h1 + h2 ; u) = g1 (h1 ; u) + g1 (h2 ; u); 8 juj  K; h1 ; h2 > 0; h1 + h2  s

) g1(h; u) = h
g(u) with an uniquely dened ontinuous fun tion g
) J (h; u) = exp(h
g(u)) holds for any xed u and all h
if J (h; u) = exp(hg (u)) holds only for 0 < h  h0 then for any h > 0 it
follows
J (h; u) =
[J ( nh ; u)n = [exp( nh g (u))n = exp(hg (u)) for n > hh ( nh < h0 )
1:
) assertion
0

g (u) an be an arbitrary ontinuous fun tion provided that exp(hg (u)) is the
hara teristi fun tion of a ertain distribution for ea h h

Theorem 4.4

Levy-Chin hin-representation

Let J (h; u); h > 0; u 2 Rm be a family of hara teristi fun tions su h that the
limit
1 (J (h; u) 1) for juj  K (K > 0 arbitrarily);
g (u) = hlim
!0 h
uniformly exists. Then there exists a nite measure  on fRm ; Bm g with
(f0g) = 0, a non-negative denite matrix B 2 Rmm and a ve tor a 2 Rm ;
su h that

g (u) = i(a; u)

Z 

1
(B u; u) +
2

ei(u;z)

Rm

A.BENHARI

50

i(u; z )
1 + jz j2

1 + jz j2
jzj2 (dz):

Proof: not given

If  is a Levy pro ess then J (h; u) = exp(hg (u)), hen e g (u) = lim h1 (J (h; u) 1),
h!0
onvergen e is uniform in every bounded domain juj  K; 0 < K < 1
see h1 (J (h; u) 1) = g (u) + 2!h g 2 (u) exp(hg (u));  2 [0; 1, (Taylor expansion)
g (u) is ontinuous for juj  K
) jg(u)j  C = C (K )
1

)  h (J (h; u) 1) g(u)  h2 C 2 ehC independent of u
) uniform onvergen e

Theorem 4.5 If  (t); t > 0 is a Levy pro ess with values in Rm , then the hara teristi fun tion J (h; u) of the in rement  (t + h)  (t) is of the form
J (h; u) = exp(h g (u));
where g (u) is given in Theorem 4.4.

Some spe ial ases:

(1) B = 0;   0 ) g (u) = i(a; u); J (h; u) = exp(ih(a; u))
J (h; u) is the hara teristi fun tion of a degenerated distribution on entrated
at the point ha 2 Rm )  (t + h)  (t) = ah a.s. )
 (t) =  (0) + at a.s. moves uniformly with onstant velo ity a
(only the initial value  (0) is random,
in rements are non-random)

6
 (t0 )
t0
1 h(B u; u))
2

(2)   0 ) J (h; u) = exp(ih(a; u)

Theorem 3.2 =) in rements  (t + h)  (t) are normally distributed
with mean value ha and ovarian e matrix hB
let  (0) = 0, then  (t) is a Gaussian pro ess
it an be shown that  (t) is sto hasti ally equivalent to a pro ess with ontinuous

paths whi h is alled Brownian motion

(see motion of a small parti le in a gas or liquid)
for m = 1 the one-dimensional pro ess  (t) is the so- alled Wiener pro ess.

Denition 4.6 A (s alar) sto hasti pro ess W (t); t 2 [0; 1) is alled Wiener
pro ess, if
1. P(W (0) = 0) = 1,
2. for any 0  t0 < t1 < : : : < tn the in rements
W (t1 ) W (t0 ); : : : ; W (tn) W (tn 1 ) are mutually independent,
A.BENHARI

51

3. for all t and h > 0 the in rement

W (t + h) W (t) is normally distributed


with : E W (t + h) W (t)
= 0,
E W (t + h) W (t) 2 =  2 h,
 2 > 0 is the varian e of the Wiener pro ess,
4. W possesses ontinuous paths.
For  2 = 1 the pro ess is alled standard Wiener pro ess.

orrelation fun tion: b(t1 ; t2 ) = E W (t1 )W (t2 ) =  2 min(t1 ; t2 )

proof: let t1 < t2 :

E W (t1 )W (t2 )




= E W (t1 ) W (0) W (t2 ) W (t1 ) + W (t1 ) W (0) (W (0) = 0 a.s.)






= E W (t1 ) W (0) W (t2 ) W (t1 ) + E W (t1 ) W (0) 2






= E W (t1 ) W (0) E W (t2 ) W (t1 ) + E W (t1 ) W (0) 2
|

{z
0

}|

{z
0

{z
2 t1

(independen e of in rements)
=  2 t1

(3) a = 0; B = 0;  : mass q > 0 is on entrated in z0 2 Rm n f0g

f (z )(dz ) = qf (z0 )

Rm
Theorem 4.4 )

(1 + jz0 j2 ) i(u;z )
e
J (h; u) = exp hq
2
j
z
0j
| {z }
0

i(u; z0 )
1 + jz0 j2



=:

=
it an be shown:  (t)



q
i
(
u;z
0)
exp(
h(e{z
1))} exp h 2 i(u; z0 )
|
z0
{z
}
Poisson distribution |
degenerated distribution



j j

 (0) = z0 N (t)
t=h

qt
jz0 j2 ;

where N (t) is a so- alled Poisson pro ess with the parameter  = q (1+jzjzj j )
0

0
2

Denition 4.7 A (s alar) sto hasti pro ess N (t); t 2 [0; 1) with homogeneous
and independent in rements is alled Poisson pro ess with the parameter  > 0,
if

1. P(N (0) = 0) = 1,
2. for any 0  t0 < t1 < : : : < tn the in rements
N (t1 ) N (t0 ); : : : ; N (tn ) N (tn 1 ) are mutually independent,
3. for all t and h > 0 the in rement N (t + h)
with the parameter h,
A.BENHARI

52

N (t) is Poisson distributed

4. the paths of N are ontinuous on the right.

Denition 4.8 A random variable  with values k = 0; 1; : : : possesses a Poisson

distribution with the parameter  > 0; if
1

P( = k) =  k e
k!

it holds:

for

k = 0; 1; 2; : : : :

E  = D2  = 


J (u) = exp  (eiu 1)

( hara teristi fun tion)

1
(h)k e h
k!




1
P N (t) = k = P N (t) N (0) = k = (t)k e
k!
) E N (t) = t


D2 N (t) = E N (t) E N (t) 2 = t

) P N (t + h) N (t) = k

orrelation fun tion:

t

b(t1 ; t2 ) = E N (t1 ) t1 N (t2 ) t2 = E N (t1 )N (t2 ) 2 t1 t2

=  min(t1 ; t2 )
proof: let t1 < t2 :

E N (t1 )N (t2 ) = E N (t1 ) N (t2 )
N (t1 ) + N (t1 )
(N (0) = 0 f.s.)

= E N (t1 ) N (0) N (t2 ) N (t1 ) + E N (t1 )2

independen e of in rements )






= E N (t1 ) N (0) E N (t2 ) N (t1 ) + E N (t1 )2
|

{z
 t1

= t1
(t2

(4) B = 0;  su h that

Rm

}|

{z
 (t2 t1 )

|
{z
}
(EN (t1 ))2 +D2 N (t1 )

t1 ) + (t1 )2 + t1 = 2 t1 t2 + t1

1
jzj2 (dz ) < 1 (property of  with respe t to zero)

Theorem 4.4 ) it exists a q > 0, a (probability) measure 0 on fRm ; Bm g and

a^ 2 Rm su h that
R
g (u) = i(^a; u) + q (ei(u;z) 1)0 (dz )
Rm
sin e
Z
Z
2
i(u; z )
i(u;z ) 1) 1 + jz j (dz )
g (u) = i(a; u)
(
dz
)
+
(
e
jzj2
jzj2
m
m
= i

m
X
k=1

1
with 0 (B ) :=


Z
B

uk ak
|

Rm

R

zk
jzj2 (dz) + 

{z
a^k

1 + jz j2
jzj2 (dz)

and

(ei(u;z)

53

1)0 (dz )

Rm

 :=

Z
Rm

Chemnitz/Fakult
at

A.BENHARI

1 + jz j2
jzj2 (dz)

) J (h; u)

= exp hg (u) = exp ih(^a; u) exp h

1

X

= exp ih(^a; u)

k=0

h

1
(h)k
k!

0 (dz )

Rm

Z

ei(u;z) 

h

k

ei(u;z) 

0 (dz )

(+)

Rm

) J (h; u) is the hara teristi fun tion of the sum ha^ + 1 +


+ N (h) where
1. 1 ; 2 ; : : : 2 Rm are independent random ve tors with the distribution 0 ;
2. a^ is a onstant ve tor and
3. N (h) is a random variable whi h is independent of fk ; k = 0; 1; : : :g
possessing a Poisson-distribution with the parameter h (N (:) is a Poisson
pro ess).
Let  (0) = 0 a.s. then

 (t) =  (t)  (0) h==t a^t +

N
(t)
X
k=1

k

Su h a pro ess is alled generalized or ompound Poisson pro ess with

values in Rm :
gure

(h) = k then:
Let Ik = 10 for Nelse

E exp i(u; ha^ + 1 + : : : + N (h) ) = E

=
=

1
X
k=0
1
X
k=0

1
X
k=0

Ik exp i (u; ha^ + 1 + : : : + k )

E Ik E exp i (u; ha^ + 1 +


+ k )

1
(hq )k e
k| ! {z

hq

}
EIk =P (N (h)=k)

ei(u;ha^)

1
X
k=0

) (+)

ei(u;ha^)

k
Y

E ei(u;p )

p=1
{z
}
|
1 ;:::;k are i.i.d
 Z
k
hq 1 (hq )k
i
(
u;z
)
e 0 (dz )
k!
Rm

(5) a;  as in (4), B 6= 0
Theorem 4.4 )

J (h; u) = exp h(i(a; u) +

|
(4)

A.BENHARI

: : : (dz )

{z
ha^+1 +:::N (h)

.f. of

54

|exp(h({zBu; u))}
(2)

.f. of

where  is a Gaussain random ve tor

with zero mean and ovarian e matrix hB
independent of 1 ; 2 ; : : : ; and the Poisson pro ess N (h).
Let  (0) = 0 and m = 1 =)
(2);(4)

 (t) = a^t + W (t) +

N
(t)
X
k=1

k

 is an example of a jump-diusion pro ess with values in R1

a^ - drift
W (t) - Wiener pro ess (diusion)
k - jump heights
N (t) - jump times

A.BENHARI

55

5 Markov pro esses

Let  (t); t 2 T be a random pro ess with values in fS ; Cg
S : omplete, separable, metri spa e (state spa e)
C : -algebra of Borel sets in S (w.r.t. the metri in S )
T : a nite or innite interval of time
assume: independen e of the future from the past or absen e of an afteree t:

Pf (t) 2 C j  (t1); : : : ;  (tn)g = Pf (t) 2 C j  (tn)g

8 C 2 C ; 8 t1 < t2 < : : : < tn < t
remember: Pf (t) 2 C j  (s)g = PfAj  (s)g = PfAjF(s) g
| {z }
=:A

where (F(s) is the smallest  -algebra su h that  (s) is measurable)

interpretation :  (t) is the position of a parti le, the sto k pri e,. . . , at time t
let |{z}
t > |{z}
tn > |tn 1 >{z: : : > t}1 ;
future

present

past

 (t) depends only on the present value  (tn ) but is independent of the past
values  (ti ) with i < n;
Theorem 1.29: ) E f j g = d( ); where
E f j g is  -measurable
i.e. f
; F g measurable
! fR; Bg
measurable

is a random element in fS ; Cg i.e. f
; Ag
! fS ; Cg
measurable
d
is a C -measurable fun tion
i.e. fS ; Cg
! fR; Bg

) Pf (t) 2 C j  (s)g = P (s;  (s); t; C ) for s < t;

sin e Pf (t) 2 C j  (s)g = E f(t)2C j  (s)g is a  (s)-measurable fun tion
(F(s) -measurable)
Denition 5.1 A random pro ess  (t); t 2 T , with values in S is alled a
Markov pro ess, if
1. Pf (t) 2 C j (t1 ); : : : ;  (tn)g = Pf (t) 2 C j (tn)g ( mod P)
8 t1 < t2 < : : : < tn < t; tk ; t 2 T
2. there exists a fun tion P (s; y; t; C ) with s  t su h that
P (s; :; t; C ) is for xed s; t; C ; a C -measurable fun tion,
P (s; y; t; :) is for xed s; y; t a probability measure on C and
(a) P satises the Chapman-Kolmogorov-equation
P (t1 ; y; t3 ; C ) =

P (t2 ; y2; t3 ; C )P (t1; y; t2 ; dy2)

for t1 < t2 < t3 and

(b) P oin ides with probability 1 with the onditional probability
Pf (t) 2 C j (s)g, i.e. P (s;  (s); t; C ) = Pf (t) 2 C j (s)g (mod P ):
A.BENHARI

56

The fun tions P (s; y; t; C ) are alled transition probabilities of the Markov
pro ess.

ondition 1 is alled the Markov-property or as the absen e of after-

ee ts

ondition 2a (Chapman-Kolmogorov equation) is a ondition of ompatibility or onsisten e to P (s; y; t; C ) for the times t1 < t2 < t3

ondition 2b means that Pf (t) 2 C j  (s)g is a regular onditional distribution (see Denition 1.30), i.e.
{ P (s;  (s); t; C ) is for xed ! a probability on C ( (s) =  (s; ! ) !)
{ P (s;  (s); t; C ) = Pf (t) 2 C j (s)g a.s. for any C 2 C

{ for s = t it holds P (t; y; t; C ) =

1 for y 2 C
0 else

For a Markov pro ess also holds the generalized Markov property:

Pf( (tm+1 ); : : : ;  (tm+n)) 2 C n j  (t1); : : : ;  (tm)g =

Pf( (tm+1 ); : : : ;  (tm+n)) 2 C n j  (tm )g (mod P)
with a Borel set C n from S n and 8 t1 < t2 < : : : < tn+m ; 8 n; m 2 N

()

(i.e. it holds the generalization of Denition 5.1 1. !)

Further generalization of () leads to the following

Theorem 5.1 Let  (t); t 2 T; be a Markov pro ess. Moreover, let Ft =  f (s),
s  t; s 2 T g and Ft =  f (s); s > t; s 2 T g: Then it holds
PfC j Ftg = PfC j  (t)g (mod P)

8 C 2 Ft:

Proof: not given

Remark 5.1 The theorem shows that the dependen e of an event in the future
C 2 Ft on the past and present Ft is ompletely determined by the dependen e
on the present state  (t).
Denition 5.2 Let T = [0; b or T = [0; 1) and fS ; Cg be a measurable spa e.
A family onsiting of
1. an initial distribution P0 on fS ; Cg and
2. transition probabilities P (s; y; t; C ) with t > s; t; s 2 T; C 2 C ; satisfying
the onditions of Denition 5.1 2.
is alled Markov pro ess in the wide sense with values in fS ; Cg
TU Chemnitz/Fakult
at f
ur Mathematik

A.BENHARI

57

Theorem 5.2 (f.d.d.'s of a Markov pro ess)

Let  (t); t 2 T be a Markov pro ess in the wide sense with values in fS ; Cg with
the initial distribution
P0 (C ) (P0 (C ) = P( (0) 2 C ); C 2 C ) and
the transition probabilities P (s; y; t; C ).
Then it holds 8 0 < t1 < : : : < tn ; Ck 2 C :
P( (t1 ) 2 C1 ; : : : ;  (tn) 2 Cn) =
Z Z

:::

S C1

Cn

P0 (dy0)

:::

P (0; y0; t1 ; dy1 )

P( (t1 ) 2 C1 ) =

2: P( (t1 ) 2 C1 ;  (t2) 2 C2 ) =

see

C1

P (t1 ; y1 ; t2 ; dy2 )

C2

P
(0; y0{z; t1 ; C1}) P0 (dy0)
|
S Pf(t )2C j(0)=y g
(see formula
of total probability)
Z
Z
1

P (tn 2; yn 2 ; tn 1 ; dyn 1)P (tn 1 ; yn 1; tn ; Cn):

Spe ial ases:

1:

Z
C1

Cn

P( (t0 ) 2 dy0 ;  (t1 ) 2 dy1 ; : : : ;  (tn) 2 dyn)

P0 (dy0)

P (0; y0; t1 ; dy1 )P (t1 ; y1; t2 ; C2 )

C1
| R
C1

{z
}
P f (t2 )2C2 j (t1 )=y1 gP (0;y0 ;t1 ;dy1 )

P (0; y0; t1 ; dy1)P (t1 ; y1 ; t2 ; C2 ) = Pf (t2 ) 2 C2 ;  (t1 ) 2 C1 j  (0) = y0 g

Theorem 5.3 Let S be a omplete, separable and metri spa e, then for every

Markov pro ess in the wide sense there exists a representation (in the sense of
Denition 2.6).
Proof: onstru tion of f.d.d.'s (see Theorem 5.2);
they satisfy the onditions of ompatibility
Theorem of Kolmogorov
) assertion

Denition 5.3 A Markov pro ess is alled homogeneous if for any t 2 T

and h  0; t + h 2 T; the transition probabilities P (t; y; t + h; C ) are independent
of t, i.e.
P (t; y; t + h; C ) = P (y; h; C ):
In this ase the Chapman-Kolmogorov equation be omes

P (y; h1 + h2 ; C ) =

P (y2; h2 ; C )P (y; h1; dy2)

It an be seen that
A.BENHARI

58

(3)

it is enough to know P (y; h; C ) for all h  ", where " is arbitrarily small,
be ause for h~ > " P (y; ~h; C ) an be determined by (3).

the lo al behaviour of the pro ess determines the global behaviour.

Let  (t); t 2 T be a pro ess with independent in rements :

n

)  (tn) = P ( (tk )  (tk

k=1

1 ))

)  (tn) is a sum of independent random elements;

it an be shown that su h a pro ess is a Markov pro ess
i.e. it holds
Pf (tn) 2 C j  (t1); : : : ;  (tn 1)g = Pf (tn) 2 C j  (tn 1)g;
) Wiener and Poisson pro ess are examples of Markov pro esses;
for the Wiener pro ess the transition probabilities are given by


Z
1
(y x)2
P (s; x; t; C ) = p
exp
dy = P (x; t
2(t s)
2 (t s)

s; C )

(i.e. the Wiener pro ess is a homogeneousR Markov pro ess)

Proof: Theorem 1.35 ) E ff (2 )j1 g = f (x2 ) %%( (;x )) m2 (dx2 )
1

S2

where %(x2 jx1 ) = %%(x (;xx )) is the onditional density of 2 given 1 = x1

here 1 =  (s); 2 =  (t); f (2 ) = IC ( (t)); s < t
%(x1 ; x2 ) density of ( (s);  (t)) w.r.t. m1  m2 (Lebesgue measure in R2 );
% (x1 ) density of 1 =  (s)
1

) E ff (2)j1 = x1 g

= Pf (t) 2 C j  (s) = x1 g = P (s; x1 ; t; C )

Z
Z
%(x1 ; x2 )
%(x1 ; x2 )
dx2 =
dx
=
IC (x2 )
% (x1 )
% (x1 ) 2
S2

the Wiener pro ess is a Gaussian pro ess, Theorem 3.2 ) density of ( (s);  (t))
is given by


1
1  1
p
%(x1 ; x2 ) =
exp
xB x
with x = (x1 ; x2 )
2
2 det B

 
 

E  2 (s) E  (s) (t)
s
min(s; t)
s s
and B =
=
=
E  (t) (s) E  2(t)
min(t; s)
t
s t
det B = st

s2

= s(t

s);

s(t s)

t
s
s s

Using the relations

s(t s) x B 1 x = x21 t 2x1 x2 s + x22 s

= x21 t x21 s 2x1 x2 s + x22 s + x21 s
= x21 (t s) + s(x1 x2 )2

A.BENHARI

59

it follows %(x1 ; x2 ) =

p1
2 s(t

using % (x1 ) = p21s exp

x2
2s

exp
s)

x21
2s

(x1 x2 )2
2(t s)

it follows

%(x ; x )
1
exp
%(x2 j x1 ) = 1 2 = p
% (x1 )
2 (t s)
1

assertion

A.BENHARI

60

(x1 x2 )2
2(t s)

6 Weakly orrelated random fun tions

Idea:  (x) random fun tion; x 2 R m ; m 2 N
 (x);  (y ) independent if the distan e between x and y is larger than "
 (x) "ae ts" the values  (y ) only in an "-neighbourhood of x
values of  show only short range dependen e
introdu ed by Ornstein and Uhlenbe k (1930) in relation with the des ription of
Brownian motion of a parti le
 (x)-for e a ting on a parti le aused by the impa ts of other parti les, x-time
(" = 0 orresponds to "white noise")

Denition 6.1 Let " > 0 be arbitrarily, I = f1; 2; : : : ; ng be an index set. A set
of points Q = fxi : xi 2 Rm ; i 2 I g = fx1 ; : : : ; xn g is alled "-adjoining, if it
an not be separated into two subsets with a distan e larger than ", i.e. for any
two subsets I1 ; I2Sof I with I1 \ I2 = ; and I1 [ I2 = I it holds J (I1 ) \ J (I2 ) 6= ;,
where J (Ip ) := fj 2 I :j xi xj j "g; p = 1; 2.
i2Ip

A single point is always said to be "-adjoining.

A set of points Q~ = fxi : i 2 I~  I g is alled maximally "-adjoining w.r.t.
the set Q, if Q~ is "-adjoining and there exists no r 2 I n I~ su h that Q [ fxr g is
"-adjoining.

x4
x1 x3
x2

x6
x5

"

Example 6.1 Q = fx1 ; : : : ; x6 g; xi 2 R2

fx1; x2 ; x3 g
is "-adjoining but it is not maximally "-adjoining,
sin e fx1 ; x2 ; x3 g [ fx4 g is "-adjoining;
fx1; x2 ; x3 ; x4g is maximally "-adjoining;
fx1; x2 ; x5 g
is not "-adjoining, sin e J (f1; 2g) \ J (f5g) = ;;
| {z } | {z }
f1;2;3g

Rm

f5;6g

Any nite set of points in

an be separated uniquely into disjoint maximally
"-adjoining subsets of points.
in the above example: Q = fx1 ; : : : ; x6 g = Q1 [ Q2
Q1 = fx1 ; x2 ; x3 ; x4 g;
Q2 = fx5 ; x6 g are maximally "-adjoining
hara terization of maximal "-adjoining subsets:
 the points of the subsets form a "tree" where the length of the "bran hes"
does not ex eed "
 the distan e between the points of the subset to points outside the subset
is larger than ".
A.BENHARI

61

Denition 6.2 A random fun tion " (x; ! ) on D  Rm and values in R with
Ef" (x)g = 0 is alled weakly orrelated with the orrelation length " if it
holds

Y
i2I

"(xi ) =

p
Y
j =1

8
<Y

E:

i2Ij

9
=

"(xi )

for any moments of order k = 2; 3; : : : , where I = f1; 2; : : : ; kg and

Q1 = fxi 2 D : i 2 I1 g; : : : ; Qp = fxi 2 D : i 2 Ipg with

p
[
j =1

Ij = I

is the partition of fxi : i 2 I g in maximally "-adjoining subsets.

interpretation: a moment w.r.t. a set of points Q = fxi ; i 2 I g is equal to the

produ t of moments w.r.t. the disjoint maximally "-adjoining subsets Q1 ; : : : ; Qp
in the above example:
6
Q





"(xi ) = E "(x1 )"(x2 )"(x3 )" (x4 )
E "(x5 )"(x6 )
E
i=1

for se ond-order moments (k = 2) it holds



E " (x1 )" (x2 )

e.g.

K" (x1 ; x2 ) =

8
<
:

K"(x1 ; x2 )
for jx1 x2 j  "
E
"(x1 ) E "(x2 ) = 0
else
|

{z } | {z }
=0
=0


x
1 x2
2
 1

"

Remark 6.1 Note that orrelation is usually related to se ond-order moments

while the denition of weakly orrelated fun tion is based on a property of moments of any order.

Theorem 6.1 Let "(x; ! ) be a weakly orrelated with the orrelation length "

and

1 E
X
k=0

j "(x) jk < 1 8 x 2 D:
k!

Further let Qj = fxi 2 D : i 2 Ij g; j 2 1 : : : ; p; be the maximally "-adjoining

subsets of Q = fxi 2 D : i 2 I g.
Then the random ve tors (" (xi ; ! ))i2Ij ; j = 1; : : : ; p, are mutually independent.
Espe ially "(x; ! ) and "(y; ! ) are independent for j x y j> ".
Proof: not given
The theorem motivates the following denition.

Denition 6.3 A random fun tion " (x; ! ) on D  Rm is alled "-dependent

with the dependen e length ", if for any k = 2; 3 : : : the random ve tors
("(xi ))i2Ij , j = 1; : : : ; p; are mutually independent (where Ij ; p; : : : are as above).
A.BENHARI

62

Remark 6.2 If a random fun tion is weakly orrelated with orrelation length
" then the assumption of the above theorem implies its "-dependen e.
But a ( entered)"-dependent
 fun tion needs not to be weakly orrelated be ause
Q
" (xi ) may not exist.
the moments E
i2I

Theorem 6.2 For any " > 0 there exists Gaussian random fun tion whi h is
weakly orrelated with the orrelation length ".
A entered Gaussian random fun tion  (x) with
E  (x1 ) (x2 ) = 0 for jx1 x2 j > "
is weakly orrelated with a orrelation length "0  ".
The probabilisti analysis of solutions to equations ontaining weakly orrelated
fun tions often leads to integral fun tionals of the type

" (x) =

F (x; y )"(y )dy

with some non-random kernel fun tion F .

Example 6.2 Initial value problem for an ODE with a random inhomogeneous
term, D = [0; 1); > 0
f 0 (x) =
solution

f (x; ! ) =
=

f (x) + "(x; ! ); f (0) = 0

Zx
Z0

e|

(x y)  (y; ! )dy
{z } "
F (x;y)

G = Gx = [0; x

F (x; y ) "(y; ! )dy;

Under suitable assumptions it an be derived

1.
Z


1
lim m E " (x1 )"(x) =
F (x1 ; y )F (x2; y )a(y )dy
"#0 "
G

1
with the intensity of ": a(x) := lim m
"#0 "

E " (x)"(x + y ) dy

fjyj"g

2. For " # 0 the f.d.d.'s of p1"m " (x) onverge weakly to the orresponding
f.d.d.'s of a entered Gaussian random fun tion  (x) with

E  (x1 ) (x2 ) =

F (x1 ; y )F (x2 ; y )a(y )dy

results an be extended to
A.BENHARI

63

1. weakly orrelated fun tions with values in R n ; Cn

2. expansions of moments and distribution densities of integral fun tionals "
in powers of ", e.g.

E f" (x1 )"(x2 )g = : : : "m + : : : "m+1 + O("m+2 )

leading expansion terms orrespond to the Gaussian limit fun tion while
the higher order expansion terms des ribe deviations from the Gaussian
limit fun tion for " > 0

A.BENHARI

64

7 Linear theory of random fun tions

7.1

Correlation fun tions

Many pra ti al problems require only the knowledge of se ond-order moments

and not of the omplete f.d.d.'s
Consider random fun tions with values in a linear spa e with nite se ond-order
moments
re all: Hilbert spa e of random variables (see Denition 1.9):

L2 = L2(
; A; P)

:= f r.v. on f
; A; Pg : E j j2 < 1g
(;  ) := E 

Denition 7.1 A random fun tion  (x), x 2 X , with values in

Hilbert random fun tion, if  (x) 2 L2 8x 2 X :
a(x) := E  (x)
mean value
R(x; y ) := E ( (x) a(x))( (y ) a(y )) orrelation fun tion
R(x; x) := E j (x) a(x)j2 =  2 (x)
varian e fun tion
B (x; y ) := E  (x) (y )
ovarian e fun tion

is alled

Remark 7.1 Let x 2 X be xed then  (x) 2 L2 is a point in L2 ,

let x 2 (a; b) then  (x) is the parametri equation of a urve in L2 .
Denition 7.2 A omplex valued fun tion G(x1 ; x2 ); (x1 ; x2 ) 2 X 2 is alled
positive semi-denite kernel on X 2 , if
n
X
p;q=1

G(xp ; xq )zp zq  0

8 xp 2 X ; 8 zp 2 ; p = 1; : : : ; n; 8 n 2 N:
C

Theorem 7.1 The ovarian e- and orrelation fun tions are positive semi-denite kernels on X 2 :
Proof:

0  Ej

0  Ej

n
P

p=1
n
P
p=1

 (xp)zp j2

=

 (xp) E  (xp) zp j2 =

n
P

p;q=1
n
P
p;q=1

B (xp ; xq )zpzq
R(xp ; xq )zp zq

Theorem 7.2 Positive semi-denite kernels G(x1 ; x2 ) possess the following properties:
1. G(x; x)  0
2. G(x1 ; x2 ) = G(x2 ; x1 )
3. jG(x1 ; x2 )j2  G(x1 ; x1 )G(x2 ; x2 )


4. jG(x1 ; x3 ) G(x2 ; x3 )j2  G(x3 ; x3 ) G(x1 ; x1 ) + G(x2 ; x2 ) 2Re G(x1 ; x2 )
Proof:

1. Denition 7.2 with n = 1 :

A.BENHARI

G(x1 ; x1 )
jz1 j2  0
65

assertion 1.

2. Denition 7.2 with n = 2:

G(x1 ; x1 ) jz1 j2 + G(x1 ; x2 ) z1 z2 + G(x2 ; x1 )z2 z1 + G(x2 ; x2 ) jz2 j2
{z
real

{z
) real

{z
real

) G(x1; x2 ) z1z2 + G(x2 ; x1) z2 z1 = G(x1; x2 ) z1 z2 + G(x2 ; x1)z2 z1

) (|G(x1; x2 ) {z G(x2; x1}))z1 z2 + (|G(x2 ; x1 ) {z G(x1 ; x2}))z2z1 = 0
z1 = i; z2 = 1

) Ai + B ( i) = 0 ) A = B
) A(z1 z2 + z2 z1 ) = 0 ) A = B = 0 )

assertion 2.

3. Denition 7.2 with n = 2 :

2
P
G(xp ; xq ) zpzq ; is a positve semi-denite, Hermitian quadrati form )
p;q=1

det

G(x1 ; x1 ) G(x1 ; x2 )
G(x2 ; x1 ) G(x2 ; x2 )
) G(x1 ; x1)G(x2 ; x2)

 0
 G(x1 ; x2)G(x2 ; x1)

2.
=
G(x1 ; x2 )G(x1 ; x2 )
= jG(x1 ; x2 )j2 ) assertion 3.

4. Denition 7.2 with n = 3 : z1 = z; z2 = z

dene: Gij := G(xi ; xj ); i; j = 1; 2; 3
2
2
) G11 jzj G12 jzj + G13 zz3 G21 jzj2 + G22jzj2 G23zz3 + G31 z3z
G32 z3 z + G33 jz3 j2  0
) [G11 + G22 2Re G12 jzj2 + |{z}
G33 jz3 j2
|

{z
a11

a22

+ (G13
|

with y1 := z; y2 := z3 it follows

)
hen e det

assertion 4.

2
P

ij =1

{z
a21

a12

aij yi yj  0


G23}) zz3 + |(G31 {z G32}) zz3

det aa11 aa12

21
22
G11 + G22 2ReG12 G13 G23
G13 G23
G33

0
0

Denition 7.3
1. Let 1 (x); 2 (x) be Hilbert random fun tions with E p(x) = ap (x); p = 1; 2:
Then

R  (x; y ) = E (1 (x) a1 (x))(2 (y ) a2 (y ))

is alled ross orrelation fun tion of 1 and 2 .
1 2

A.BENHARI

66

2. Let  (x) = (1(x); : : : ; m(x)) be a ve tor-valued random fun tion su h that

 (x) 2 Lm2 ; 8x 2 X , where Lm2 is the Hilbert spa e of random ve tors with
values in Cm . For z = (z1 ; : : : ; zm ) 2 Cm the adjoint ve tor is denoted by
z  = z  = (z1 ; : : : ; zm ).
Then a(x) = E  (x) = (E 1 (x); : : : ; E m (x)) is alled mean value and

R(x; y ) = E ( (x) a(x))( (y ) a(y ) = (Rpq (x; y ))1p;qm

Rpq (x; y ) = E (p(x) ap (x))(q (y ) aq (y ))

where

is alled matrix orrelation fun tion of  .

Remark 7.2 If in 1. it holds 1 = 2 =  then R (x1 ; x2 ) sometimes is alled auto orrelation fun tion. The matrix orrelation fun tion R(x; y ) in 2. ontains
the auto orrelation fun tions of k as diagonal entries and the ross orrelation
fun tions of k and l as non diagonal entries, k; l = 1; : : : ; m; k 6= l.
Denition 7.4 A matrix fun tion G(x; y ) = (Gpq (x; y ))1p;qm is alled a positive semi-denite matrix kernel on X 2 , if
n
X
p;q=1

zp G(xp ; xq )zq

where zp G(xp ; xq )zq =

 0; 8 xp 2 X ; 8zp 2
m
P

j;k=1

m; p

= 1; : : : ; n; 8n 2 N

zpj Gjk (xp ; xq )zqk

Theorem 7.3 The matrix orrelation fun tion is a positive semi-denite matrix

kernel.
Proof:


n
X

E  zp ( (xp)
p=1
X
n

= E
=

n
X
p;q=1

p;q=1

zp ( (xp)

2

a(xp ))


a(xp ))( (xq )

a(xq )) zq

zp R(xp ; xq )zq ) assertion

Theorem 7.4 There hold the following properties of positive semi-denite matrix
kernels G(x; y ):
1. the matrix G(x; x) is positive semi-denite 8 x 2 X , i.e.
m
P
Gkl (x; x)zk zl  0 8 z = (z1 ; : : : ; zm ) 2 C m ;
z  G(x; x)z =
k;l=1

2. Gkl (x; y ) = Glk (y; x); i.e. G(x; y ) = G (y; x) = G (y; x)

3. jGkl (x; y )j2  Gkk (x; x)Gll (y; y ):
A.BENHARI

67

Proof:
1. Denition 7.4 with n = 1 :
z1 G(x1 ; x1 )z1  0
) assertion 1.
2. Denition 7.4 with n = 2 :
) z1 G(x1 ; x1)z1 + z2 G(x2 ; x2)z2 + z2G(x2 ; x1 )z1 + z1 G(x1 ; x2)z2  0
|

{z

0

{z

0

{z

real

z2 G(x2 ; x1 )z1 + z1 G(x1 ; x2 )z2 = z1 G(x1 ; x2 )z2 + z2 G(x2 ; x1 )z1

z1 = (i; 0; : : : ; 0) ; z2 = (1; 0; : : : ; 0)

) G11(x1 ; x2 ) + G11 (x2; x1 ) = G11 (x1 ; x2) G11 (x2; x1 ) (1)
z1 = (1; 0; : : : ; 0) ; z2 = (1; 0; : : : ; 0)
) G11 (x1 ; x2) + G11(x2 ; x1 ) = G11(x1 ; x2 ) + G11 (x2; x1 ) (2)
(1)
) G11 (x1 ; x2 ) G11 (x2 ; x1) = (G11 (x1; x2 ) G11(x2 ; x1 )
(2)
)
G11 (x1 ; x2 ) G11 (x2 ; x1 ) = G11 (x1 ; x2 ) G11 (x2 ; x1 )
) G11 (x2 ; x1) = G11 (x1 ; x2) ) Gkk (x1; x2 ) = Gkk (x2 ; x1 )

z1 = (i; 0; : : : ; 0); z2 = (0; 1; 0; : : : ; 0)
) G12 (x1 ; x2) = G21(x2 ; x1 )
z1 = (1; 0; : : : ; 0); z2 = (0; 1; 0; : : : ; 0)
) assertion 2.
3. Denition 7.4 with n = 2 :
) z1 G(x1 ; x1 )z1 + z2 G(x2; x2 )z2 + z1 G(x1 ; x2)z2 + z2 G(x2 ; x1 )z1  0
z1 = (a; 0; : : : ; 0) ; z2 = (0; b; 0; : : : ; 0)
) G11 (x1 ; x1)jaj2 + G22(x2 ; x2 )jbj2 + G12 (x1; x2 )ab + G21(x2 ; x1 )ab  0


 G11 (x1 ; x1 ) G12 (x1 ; x2 ) 
)  G21(x2 ; x1 ) G22(x2 ; x2 )   0
) G11 (x1; x1 )G22 (x2; x2 )  G12(x1 ; x2 )G21(x2 ; x1 )
= G12 (x1 ; x2 )G12 (x1 ; x2 ) = jG12 (x1 ; x2 )j2
analogously for arbitrary k; l 2 f1; : : : ; mg
) assertion 3.

Theorem 7.5 A fun tion R(x; y ); x; y 2 X is a (matrix) orrelation fun tion if

and only if it is a positive semi-denite (matrix) kernel.

Proof:
ne essity: follows from Theorem 7.1 and Theorem 7.3
su ien y: let R(x; y ) be positve semi-denite, Theorems 3.3, 3.4, 3.8 )
9 Gaussian random fun tion with R as orrelation fun tion
assume now that X is a metri spa e with the metri 

Denition 7.5 A Hilbert random fun tion  (x); x 2 X is alled mean-square

(m.-s.) ontinuous in x0 2 X , if
E j (x)  (x0 )j2 ! 0 for (x; x0 ) ! 0:
A.BENHARI

68

Remark 7.3 Be ause of Cheby hev - inequality:

P(j (x)  (x0 )j > ")  "1 E j (x)  (x0 )j2
m.-s. ontinuity in x0 implies that  is sto hasti ally ontinuous in x0 (see De2

nition 4.3).

Remark 7.4 The m.-s. ontinuity on X (i.e. for all points in X ) does not imply

the ontinuity of the paths.

see: let  (t) be a Poisson pro ess (see Denition 4.7)
)  (t + h)  (t); h > 0; is Poisson distributed with the parameter qh; q > 0

) P  (t + h)  (t) = k

E j (t + h)  (t)j2

1
(hq )k e hq
k!
1
X
1
=
k2 (hq )k e
k!
k=0
=

hq

= hq + (hq )2

h!0

)  (t) is m.-s. ontinuous 8 t 2 [0; 1)

but values of  (t) are integers ) paths are not ontinuous
Theorem 7.6 A Hilbert random fun tion  (x) is m.-s.- ontinuous in x0 2 X
if and only if the ovarian e fun tion B (x; y ) = E  (x) (y ) is ontinuous at the
point (x0 ; x0 ).
Proof:

apply Theorem 1.9 with (x) = (x; x0 )

Stationary random pro esses

Denition 7.6 A random pro ess  (t); t 2 X  R1 is alled stationary (in
the stri t sense), if the joint distribution of
( (t1 +  ); : : : ;  (tn +  ))
does not depend on  , 8 n 2 N; 8 t1 ; : : : ; tn 2 X and 8 
(i.e. f.d.d.'s of  are invariant w.r.t. time shifts)

let  (t) be a stationary Hilbert random fun tion on

2 R1 with  + tk 2 X

X = ( 1; +1) then

a(t) = E  (t) = a = onst :

R(t1 + ; t2 +  ) = E ( (t1 +  ) a)( (t2 +  ) a) is independent of 
) R(t1; t2 ) = R((t1 t2 ) + t2; 0 + t2 ) = R(t1 t2 ; 0) = R(t1 t2 )

Denition 7.7 A mean-square ontinuous Hilbert random pro ess  (t) on X =

( 1; 1) with values in Cm is alled wide-sense stationary or weakly stationary, if
1. E  (t) = a = onst
2. E ( (t1 )
A.BENHARI

a)( (t2 ) a) = R(t1

t2 ).
69

Denition 7.8 Let X be a linear spa e. A omplex-valued fun tion f (x); x 2 X ;

is alled positive semi-denite, if
n
X
p;q=1

f (xp

xq )zp zq  0;

8 n 2 N; xp 2 X ; zp 2 ; p = 1; : : : ; n:
C

Example 7.1 The orrelation fun tion of a wide-sense stationary random pro ess is positve semi-denite.

Theorem 7.7 Let f be positive semi-denite, then it holds

1. f (0)  0
2. f (x) = f ( x)
3. jf (x)j  f (0)
( i.e. f is bounded)
4. jf (x1 ) f (x2 )j  2f (0)[f (0) Re f (x2 x1 )

(i.e. if f is onitinuous at 0 then it is uniformly onitinuous on X .

Proof:

apply Theorem 7.2 with

G(x1 ; x2 ) = f (x1

x2 )

Consider ve tor-valued wide-sense stationary pro esses  (t) 2 Cm , Def. 7.7 )

E k (t) = ak = onst
E (k (t1 ) ak )(l (t2 ) al ) = Rkl (t1 ; t2 ) = Rkl (t1 t2 )
i.e. the omponents of  are also wide-sense stationary (k = l)

Denition 7.9 If 1 (t) and 2 (t) are wide-sense stationary and the ve tor pro ess
(1 (t); 2 (t)) is also wide-sense stationary then the pro esses 1 and 2 are alled
wide-sense stationarily related or stationarily orrelated.
Example 7.2 Let  (t) be entered wide-sense stationary, then 1 (t) =  (t) and
2 (t) =  (2t) are wide-sense stationary but not stationarily related sin e
R12 (t1 ; t2 ) = E 1 (t1 )2 (t2 ) = E  (t1 ) (2t2 ) = R (t1

2t2 ):

Extension to positive semi-denite omplex-valued matrix fun tions:

Denition 7.10 Let X be a linear spa e. The matrix fun tion

G(x) = (Gjk (x))1j;km , x 2 X is alled positive semi-denite,if
n
X
p;q=1

zp G(xp

xq )zq

 0;

8 n 2 N; 8xp 2 X ; 8 zp 2

m;

p = 1; : : : ; n:

Example 7.3 Matrix orrelation fun tions of wide-sense stationary ve tor pro esses are positive semi-denite.

Theorem 7.8 Let G be a positive semi-denite matrix fun tion, then it holds
1. G(0) is a positive semi-denite matrix,
2. Gkl (x) = Gkl ( x); i.e. G(x) = G ( x)
A.BENHARI

70

3. jGkl (x)j2

 Gkk (0)Gll (0):

Proof: apply Theorem 7.4 with G(x1 ; x2 ) = G(x1

x2 )
Examples of wide-sense stationary random pro esses

Example 7.4 Standardized non- orrelated sequen e, X = ZZ :

f (n); n = 0; 1; : : : g;  (n) 2 Cm

0 ;

with a = E  (n) = 0
and
R(n) = E  (k + n) (k) = I0 nn =
6 0
=
(i.e. Rij (n) = E i (k + n)j (k) = ij 0n )
Example 7.5 Pro ess of moving average
Let f (n); n = 0; 1; : : : g as above and fAn ; n = 0; 1; : : :g with An 2 Cmm be a
sequen e of matri es:
1
P
 (n) := Ak  (n k)
k=0

 fk = Ak  (n k); k = 0; 1; : : : g are orthogonal ve tors in Lm2 (

; A; P)
i.e.
E k l = 0 for k =
6 l sin e
E k l = E   (n k) A
k A}l  (n l)
| {z
=
=

m
X

Bkl

Bkl;pq E  p(n k)q (n l)

|
p;q=1
8 m
< PB
kk;pp
p=1
:

where jjAjj2 = tr[A A =

see

k (n)k

p;q=1

k=0

Apq Apq =

m
X
p;q=1

()

for k 6= l

jApq j2

(Frobenius norm)

kAk k2 < 1

 1 1 
P 
P
k
l
k=0
l=0
1
() P
=
Ak 2 <
k=0

= E  (n)  (n) = E
=

1
P
k;l=0

k k

E k l

  (n)

is wide-sense stationary

1
P

see E  (n + p) (n) = E
Ak  (n + p
=
=

A.BENHARI

= tr[Ak Ak = jjAk jj2 for k = l

m
X

1
P

series onverges in Lm
2 if

{z
pq
kl

1
P

k=0

k;l=0

1
P
l=0

1
P 
k)
 (n
l=0

Ak E
 (n + p {zk)  (n l}) Al
|
n+p

k;n l

I =p+l;k
I

Ap+l Al =: R(p)

71

l) A
l

Remark 7.5 generalization of example 7.4 to ontinuos time pro esses:

let  (t); t 2 R, be a pro ess with E  (t) = 0; E j (t)j2 = 1; E  (t) (s) = 0 for
t 6= s
 is not m.-s.- ontinuous
sin e its ovarian e fun tion

0
t
=
6
s
B (t; s) = 1 t = s
is not ontinuous at (t; t) (see Theorem 7.6).

)  is alled a pro ess of white noise type

Example 7.6 Random os illations
 (t) =

X
k

k eiuk t =

X
k

k ( os(ik t) + i sin(uk t))

k eiuk t : harmoni os illations with frequen y u2k and power j k j2

f k g : orthogonal entered r.v.; i.e. E k = 0; E k j = kj 2k
fuk g : (frequen y) spe trum of the pro ess  (t)

) R(t1; t2 )

= E  (t1 ) (t2 ) = E
=

X
k

X
j;k

2k exp(iuk (t1

j k exp(iuj t1

t2 )) =: R(t1

iuk t2 )

t2 )

)  (t) is a wide-sense stationary pro ess

motivates the denition of a new hara teristi of a random pro ess:
P 2
F (u) :=
k : "spe tral fun tion" of  ;
k
uk <u

average power arried by the harmoni s of  (t) with frequen ies smaller than u
F (u) ompletely hara terizes the average powers E j k j2 = 2k
P
sin e 2k = F (uk + 0) F (uk );
2k = F (u2 ) F (u1 )
u1 u<u2

orrelation fun tion of  an be written in terms of the spe tral fun tion:

R(t) =

A.BENHARI

X
k

Z1

2k eiuk t =

eitu F (du)

{z
}
|
Lebesgue-Stieltjes integral

72

7.2

Spe tral representation of orrelation fun tions

Denition 7.11 A random fun tion f (x); x 2 Rm g with values in C is alled

homogeneous, if
1. E  (x) = a = onst
2. R(x1 ; x2 ) = E ( (x1 )

a)( (x2 ) a) = R(x1

x2 ).

The orrelation fun tion of a homogeneous random fun tion depends only on the
ve tor x1 x2 and it holds:
n
P
R(xj xk )zj zk  0 8 n; 8 xj 2 R m ; 8 zj 2 C; j = 1; : : : ; n:
j;k=1

Theorem 7.9 Let  be a homogeneous random fun tion on Rm with the orrelation fun tion R(x). If R(x) is ontinuous at x = 0 then  (x) is mean-square
ontinuous for all x 2 Rm :
Proof: E j (x + h)

 (x)j2 = E ( (x + h)  (x))( (x + h)  (x))

= R(0) R(h) R( h) +R(0)
|
{z }
= R(h)

= 2(R(0) Re R(h))

assertion

Theorem 7.10 The fun tion R(x); x 2 Rm , is the orrelation fun tion of a
mean-square ontinuous homogeneous random fun tion f (x); x 2 R m g if and
only if R(x) admits a representation
R(x) =

()

ei(x;u) F (du)

Rm

Bm of Rm .

where F is a nite measure on the borel sets

F is uniquely determined on Bm .

Moreover the measure

Proof:
su ien y ((): let R(x) be given by (), then

 R(x) is positive semi-denite, sin e

n
X
j;k=1

R(xj

xk )zj zk =
=

Z X
n
Rm
Z
Rm

 R(x) is ontinuous atR x = 0, sin e

lim R(h) = lim

h!0

h!0 Rm

ei(xj

xk ;u) z z F (du)
j k

j;k=1

2
n
X


i
(
x
;u
)
k
e
zk  F (du)



k=1

ei(h;u) F (du) =

R
Rm

1
F (du) = R(0)

follows from Lebesgues theorem on dominated onvergen e (see basi

ourse Theorem 3.12, jei(h;u) j  1 = jei(0;u) j and F is a nite measure)
A.BENHARI

73

Theorem 3.8 )
9 omplex-valued Gaussian random fun tion  (x)
possessing R(x) as orreletion fun tion
 is m.-s.- ontinuous sin e R(x) is ontinuous at x = 0 (see Theorem 7.9)
ne essity ()): follows from the next Theorem 7.11
if  (x) is a m.-s.- ontinuous homogeneous random fun tion then its orrelation fun tion R(x) is positive semi-denite and ontinuous at x = 0
) R(x) is ontinuous 8 x(exer ise) Theorem 7.11 ) representation ()

Remark 7.6 A simple example of a homogeneous random fun tion possessing a

orrelation fun tion given in () is the following:
let  be a random ve tor in Rm with the distribution
1
P( 2 A) = F (A); 8 A 2 Bm ; F0 := F (Rm );
F0
and  be r.v. whi h is uniformly distributed on [ ;  and independent of  , set

 (x) :=

F0 ei [(;x)+ :

Then it follows

E  (x) =

F0

E ei(;x) E ei

= 0 sin e

R(x; y ) = E  (x) (y ) = F0 E ei(;x

E ei

y)

1
=
2

Z

eiv dv = 0

ei(u;x y) F (du) = R(x y )

Rm

assertion

Theorem 7.11 Every ontinuous and positive semi-denite fun tion R on Rm
admits a representation () (with a uniquely determined F ).
Proof: idea: onstru t the measure F using the Fourier transform of

RN (x) := R(x) exp

|

taking the limit N

remarks:

 R(x)

holds:

!1

jxj2 ;
2N

{z
!1 8x

Z1

jRN (x)jdx  R(0)

Z1

exp

Fourier transform of f (x): f~(z ) := (p21)m

inversion formula: f (x) = (p21)m

A.BENHARI

may be not absolutely integrable, but for its " orre tion" RN (x) it

74

x2
dx < 1
2N
R

Rm

Rm

f (x)e i(x;z) dx
f~(z )ei(x;z) dz

 onsider the Fourier transform of RN (x):

R~ N (z ) =

p1 m
( 2 )

R(x) exp

Rm

jxj2 i(x; z) dx

2N

and prove (see below) (1): R~N (z )  0

(2): R~N (z ) is integrable
(3): R~N (z ) is dierentiable
then it folllows

(1),(2)

) FN (A)

(Rm ; Bm )

R
:= (p21)m R~ N (z )dz; A

2 Bm

is a nite measure on

 FN (A) := FFNN(R(Am)) is a probability measure with the hara teristi fun tion:
Z

JN (u) =

ei(u;z) FN (dz )

Rm

1
1
p
m
FN (R ) ( 2 )m

| {z }
1
R(0)

ei(u;z)

m
ZR

1
1 ~
p
R (z )dz
m
FN (R ) ( 2 )m N

ei(u;z) R~ N (z )dz

Rm

{z


2
RN (u)=R(u) exp j2uNj

(be ause of (2) and (3) the inversion formula an be applied)

FN

(Rm )

1
= p m
( 2)

(0;z ) dz = R (0) = R(0)

R~ N (z ) e|i{z
N
}
=1

Rm

1
R(u)
e
 ) JN (u) = R(0)

juj2

 ) 8 u 2 Rm it holds:

u)
JN (u) = RR((0)
e

J (u) is ontinuous at u = 0;

2N

juj2

2N

N !1

R(u)
R(0)

=: J (u);

Theorem 1.15 ) J (u) is the hara teristi fun tion of a probability measure
F  , moreover FN onverges weakly to F 
) 9 nite measure F = R(0)F 

Theorem 1.14 ) measure F  is uniquely determinded (by J (u))

proof of the assertions (1), (2), (3):

(1) to prove: R~ N (z )  0
R(x) is positive semi-denite

R R

R(x y )g (x)g (y )dxdy  0

Rm Rm
Rm , sin e

for any integrable fun tion g (x) on

the dening property of positive semi-deniteness implies the assertion for the integral sums, moreover
R(x) is bounded
A.BENHARI

75

 hoose g (x) = exp( jxNj + i(x; z )); N > 0; z 2 Rm

R R
) 0
R(x y ) exp( jxj N+jyj i(x y; z ))dxdy
2

Rm R m
R R

Rm Rm

p
R( 2 u) exp( juj N+jvj
2

i( 2u; z ))dudv

y = 2 u; x + y = 2 v; x = p12 (u + v ); y = p12 (v
;:::;xm ;y ;:::;ym )
jxj2 + jyj2 = juj2 + jvj2; j ((ux ;:::;u
j=1
m ;v ;:::;vm )

see x

R
Rm

R( 2 u) exp( juNj

vgl.

= N

= N

R
Rm
m R

R1
exp( jvNj )dv = ( exp(

Rm

1
j
uj2
R( 2 u) exp( N

1
2 p m
2
m

Rm

exp( jvNj )dv

2

s2 )ds)m
N

p21 m

i( 2 u; z ))du

= N

i( 2 u; z ))du

R(w) exp(

Rm

u);

{z
R~ N (z )

(w = 2u)

jwj2 i(w; z))dw

2N

p mp
= N  m R~ N (z )
(2) to prove : R~N (z ) is integrable
~ g~)L = (f; g )L
Parseval equation for Fourier integrals: (f;
f (x) = RN (x);
f~(z ) = R~N (z );
p
g (x) = " m exp( jx2"j ); g~(z ) = exp( 12 "jz j2 )
R
) j(f;~ g~)j = j R~N (z) exp( 12 "jzj2 )dzj
2

Rm

= j(f; g )j = j

Rm
R

R(x) exp( j2xNj

jxj2 )p" m dxj

2"

exp( jx2"j )dx = 2 R(0)

m
R
for " ! 0 follows from Fatou's Theorem:
p
R
j R~N (z)dzj  2 mR(0)

 R(0) p"1m

Rm

integrability

re all Fatou: fn ! f f"ur fn  0;

fn (x)d  K R
) f ist integrable and f (x)d  K ;
(3) to prove : R~N (z ) is dierentiable
holds, sin e
R~N (z ) is the Fourier transform of the ontinuous fun tion RN (x)
R
with j jxj2 RN (x)dxj < 1 :
Rm

see m = 1 :

R~N (z ) =


1
 (R
~
 h N (z + h)

R1

H (x)e

ixz dx



ixz
R~ N (z ))
H (x)( ix)e dx
1
 1

R

ihx 1
e
ixz

=  H (x)e ( h + ix)dx
R1

A.BENHARI

with H (x) := p12 RN (x)

76

 1
R
= 

 h2

1
ihx
h (e

see



ixz 1 hx2 e #ixh dx
2


H (x)e

1
R1

1 hx2 e #ixh
2

1) = ix

jH (x)j
x2
1 dx

R1
h
p
= 2 2 jR(x)je
1

R1 2
xe

dx h!!0 0
1
) assertion
Denition 7.12 The measure F in representation () of Theorem 7.10 is alled
spe tral measure (to the ontinuous and positive semi-denite fun tion R(x)).
The orresponding distribution fun tion
F (u) = F (Iu)

x2

2N

x2 dx

ph
2 2 jR(0)j

x2

2N

Iu = fx 2 Rm : x < ug

where

is alled spe tral fun tion. IfR F (A) is absolutely ontinuous with respe t to
Lebesgue measure, i.e. F (A) = f (u)du, then f (u) is alled spe tral density.
A

Theorem 7.12 If R(x) is absolutely integrable (i.e. jR(x)jdx < 1) then the
Rm
spe tral density f (u) exists and it holds
Z

R(x) =

ei(x;u) f (u)du:

Rm

~ g~)L = (f; g )L with

Proof: apply Parseval equation for Fourier integrals: (f;
f~(z ) = R~ N (z ); f (x) = RN (x) = R(x) exp( 21N jxj2 ) (as in Theorem 7.11)
g~(z ) = IK (z ) with K = (y h; y + h)
= fz : yk hk < zk < yk + hk ; k = 1; : : : ; mg
2

1
g (u) = p m
2

Z
Rm

m
1 Y
= p m
2 k=1

p1 m

1
= p m
2

ei(u;z) g~(z )dz

m
Y

yZ
k +hk

ei(u;z) IK (z )dz

Rm

eiuk zk dzk

yk hk

1
exp(i(yk + hk )uk ) exp( i(yk
2 k=1 iuk

R~ N (z )dz =

Z
Rm
Z

R~N (z )~g (z )dz =

R(u) exp

Rm |

{z

2N

Rm

77

g (u)

du

| {z }
} j:jp2m 2m h :::h

 p 1 m V (K ) jR(u)jdu
2

hk )uk )

RN (u)g (u)dz

Rm

u2

jj

j:jjR(u)j
1
Z

A.BENHARI

see j iu1k (ei(yk +hk )uk

V (K ) =

m
Q

ei(yk

j  j u2k eiyk uk sin(hk uk )j  2jhk j

hk )uk )

2hk

k=1
FN (K )

R
dene
:= p21 m R~ N (z )dz as in the proof of Theorem 7.11
K
) FN is absolutely ontinuous
w.r.t. Lebesgue measure 8 N
N ! 1 ) F is absolutely ontinuous w.r.t. Lebesgue measure
R
) 9 f su h that F (A) = f (z)dz
A

(see Radon-Nikodym theorem; measure theory Theorem 7.4)

) R(x) =

Rm

ei(x;z) F (dz ) =

Rm

ei(x;z) f (z )dz

assertion

Corollary 7.1 A fun tion R(t); t 2 ( 1; 1); is the orrelation fun tion of a
m.-s.- ontinuous wide-sense stationary pro ess if and only if it admits a repreR1
sentation R(t) = eitu F (du); where F (:) is a nite measure on B1 .
1

Proof: apply Theorem 7.10 with m = 1

Denition 7.13 A random fun tion is alled isotropi if its orrelation fun tion
satises the ondition
v
u m
uX
x2 = t (x1;p
p=1

R(x1 ; x2 ) = R(x1 ; (x1 ; x2 )) where (x1 ; x2 ) = jx1

x2;p )2 ;

i.e. it depends only on x1 and the distan e between x1 and x2 (but not on the
dire tion of x1 x2 ).

For a homogeneous and isotropi fun tion it holds

R(x1 ; x2 ) = R(x1

x2 ) = R((x1 ; x2 )) = R(jx1

If m = 1 and R is real then R(x) = R( x) = R(jxj)

stationary pro esses are isotropi .

x2 j):

) real valued wide-sense

Theorem 7.13 The fun tion R(); 0   < 1; is the orrelation fun tion of
a homogeneneous, isotropi , m.-s.- ontinuous random fun tion if and only if it
admits a representation

R() = 2

 m  Z1

I m (r)
2

1
G(dr);
m
(r)
2

where G is a nite measure on [0; 1) and Ip (x) is the Bessel fun tions of rst
kind, i.e.
1
 x p+2k
X
1
k
Ip(x) = ( 1)
k! (p + k + 1) 2
k=0
with the Gamma fun tion

A.BENHARI

R1

(x) = e t tx 1 dt:
0

78

Remark 7.7 For the Gamma fun tion and the Bessel fun tion their hold the
following relations
 (1) = 1; ( 12 ) = p;

 I (x) =

1
2

2
x

os x; I (x) =
1
2

R1

m = 1 : R() = p12 ( 12 ) I (r)

1
2

(n + 1) = n!

2
x sin x

 (xpIp(x))0 = xpIp 1(x) ) Ip0 = Ip

spe ial ases:

(x + 1) = x (x)

1
(r)

()

p
x Ip

R1

G(dr) =

1
2

Theorem 7.10, R(x) real ) R() = R( ) =

os(r) G(dr)

R1 ir
e F (dr)

(where G(A) = F (A) + F ( A); A 2 B([0; 1)))

m = 2 : R() =
m = 3 : R() =

R1
0

I0 (r) G(dr)

R1

) R()

2 ( 23 ) I (r) p1r G(dr)

1
2

see ( 23 ) =

1
2

p

( 21 ) =

R1 sin(r)
r G(dr )
0
q
= x2 sin x;

; I (x)
1
2

Proof: of Theorem 7.13

onsider a sphere with radius  : and the enter at the origin:
B = fx 2 R m : (0; x) < g
open sphere
m
S = fx 2 R : (0; x) = g
boundary
R
volume
V = dx
B
R

O = s(dx) =
S

2
( m2 )

m 1 

m
2

( m==2 2) surfa e

isotropy ) R(x) = R(jxj) ) R is onstant on S

R(x)s(dx) = R() O

Z Z

S
Fubini

S Rm
Z Z
Rm

ei(x;u) F (du) s(dx)

ei(x;u) s(dx) F (du)

(+)

S

it holds
Z
S

d
f (x)s(dx) =
d

Z
B

f (x)dx and

Z
B

ei(x;u) dx

2
=
juj

m
2

I m (juj)
2

( an be proven using analyti results)

A.BENHARI

79

ei(x;u) s(dx)

S

d
=
d

m 2
=
2 juj


(+)

2
=
juj
Z
1
R() =
O m
R

it holds
Z

2
juj

m 1
2

m
2

I m (juj)
2

2 m
2
I (juj) +
juj
juj

m
2

m

I 0m (juj)
juj
| 2 {z }
()
= I m2 1 2mjuj I m2

jujI m 1(juj)

2
juj

f (juj)F (du) = nlim

!1

Rm



= nlim
!1

m

n
X
k=1
n
X
k=1

jujI m 1 (juj)F (du)

2

f (rk )F (Brk n Brk )

1

f (rk ) G([rk 1; rk )) =

Z1

f (r)G(dr)

G([a; b)) := F (Bb n Ba ) for 0  a < b;

r1 < r2 < : : : ;
rk 2 [rk 1 ; rk ) (see integral sums)

dene

) R() = 2

 m  Z1

I m (r)
2

1
m
(r)

G(dr) ) assertion

Consider  (t; x) where 1 < t < 1; x 2 Rm :

let  (t; x) be homogeneous w.r.t. (t; x) and isotropi w.r.t. x


) E  (t + s; x) (s; y) homogeneous
=
R(t; x y ) isotropi
=
R(t; (x; y ))
Theorem 7.14 A fun tion R(t; ) is the orrelation fun tion of a m.-s.- ontinuous random fun tion  (t; x) whi h is homogeneous w.r.t. (t; x) and isotropi
w.r.t. x if and only if

R(t; ) =

Z1 Z1

10

 m

2
m (r )G(dv  dr ) where
m (y ) =
y

eitv

m

Here G is a nite meassure on the half-plane f(v; r) : r 2 [0; 1); v 2 (

Proof: Theorem 7.10 )

R(t; x)

=
proof Theorem 7.13

A.BENHARI

Z1

1
Z1
1

eitv
eitv

Rm
Z1

I m (y ):
2

1; +1)g:

ei(x;u) F (dv  du)

m (r)G(dv  dr) ) assertion

80

8. Brownian motion

8.1

Generalities on sto hasti pro esses

A sto hasti pro ess is a phenomenon whi h evolves in time in a random manner. There are
many examples of phenomena whi h an be thought of as a fun tion both of time and of a
random (or un ertainty) fa tor, think of the pri e of shares, the size of some populations, or the
number of parti les registered by a Geiger ounter.
In the last hapter we have alled any sequen e of random variables dened on the same probability spa e a (dis rete time) sto hasti pro ess. We know already mathemati al examples,
of su h dis rete pro esses: Sequen es of independent, identi ally distributed random variables
Y1 ; Y2 ; : : :, their partial sums
Xn = Y1 +


+ Yn ;
whi h are the random walks based on a sequen e Y1; Y2 ; : : : and, dened in the last hapter, the
Galton-Watson pro ess with ospring distribution given by (p0 ; p1 ; p2 ; : : :). In this hapter we
start the dis ussion of ontinuous time sto hasti pro esses. They are not so easy to onstru t,
but of great pra ti al and theoreti al importan e. In this hapter we get to know the most
important example, the Brownian motion.
Denition: Suppose I  IR is an interval. A ( ontinuous time) sto hasti pro ess (with values
in IRd) is a family fX (t) : t 2 I g of random variables with values in IRd dened on the same
probability spa e (
; A; IP).
If we also
in lude the variable ! in our onsideration, we now write it in square bra kets X (t) :
d

! IR maps ! to X (t)[!. Before even knowing an example we make an observation: we may

onsider every sto hasti pro ess as a random fun tion, taking the parameter t as the variable
of the fun tion. Abstra t measurability questions are settled in the following lemma.
Lemma 8.1 Let fX (t) : t 2 I g be a sto hasti pro ess. Dene by F the set of all fun tions
f : I ! IRd and equip F with the -eld F generated by the sets ff 2 F : f (t) 2 Ag where t 2 I
and A  IRd is Borel. Then X :
! F denes an F -valued random variable.
Proof:

A.BENHARI

By our measurability riterion it su es to he k that X 1 (B ) 2 A for ea h B = ff 2

81

: f (t) 2 Ag in the generator of F . This is lear, as X 1(B ) = f! 2

: X (t)[! 2 Ag 2 A.

We say that two sto hasti pro esses fX (t) : t 2 I g on (

; A; IP) and fY (t) : t 2 I g on
(
0 ; A0; IP0) are equivalent if the asso iated random fun tions X and Y have the same distribution.
By the Uniqueness Theorem this is the same as requiring that for all t1  : : :  tn 2 I and
A1 ; : : : ; An Borel,
IP X (t1 ) 2 A1 ; : : : ; X (tn ) 2 An = IP0 Y (t1 ) 2 A1 ; : : : ; Y (tn ) 2 An :
We also say that X is a version of Y .
Our spe ial interest fo uses on sto hasti pro esses, su h that the random fun tion X [! is
almost surely ontinuous. This means that on the underlying probability spa e (
; A; IP) there
is a set A 2 A with IP(A) = 1, su h that t 7! X (t)[! is a ontinuous fun tion for ea h ! 2 A.
On also says that X has almost surely ontinuous paths.
However, one an observe (this is an exer ise) that for two equivalent pro esses X and Y , X
may be almost surely ontinuous, but Y is almost surely not ontinuous. This implies that the
set
ff 2 F : f is ontinuous g
is not in the -eld F . It is therefore useful to onstru t an almost surely ontinuous pro esses
rst by means of probability measures on the spa e of ontinuous fun tions and then dene X (t)
afterwards as the value of the random fun tion at time
n

8.2

Denition of Brownian motion

In 1827 the English botanist Brown observed that pollen parti les suspended in a liquid perform irregular random movements. This is due to the hitting of pollen by the mu h smaller
mole ules of the liquid. These hits o ur a large number of times in any small interval of time,
independently of ea h other and hen e a simple mathemati al model of this pro ess should be
a sto hasti pro ess fB (t) : t  0g with the following features:
(1) for all times 0  t1  t2  : : :  tn the displa ements or in rements B (tn)
B (tn 1 ); B (tn 1 ) B (tn 2 ); : : : ; B (t2 ) B (t1 ) are independent, we say that B (t) is a
pro ess with independent in rements,
(2) the distribution of the displa ement B (t + h) B (t) does not depend on t, we say that the
pro ess is stationary or has stationary in rements.
(3) the pro ess fB (t) : t  0g has almost surely ontinuous paths.
A real valued pro ess with the rst two properties is sometimes alled a Levy Pro ess. It should
be lear that pro esses with these features do ome up naturally as a model in many other
situations in nature, s ien e and other elds of appli ations. The rst question however must
be: Do nontrivial pro esses with su h features exist (in a mathemati al sense)? In parti ular,
it is not lear whether the randomness required in the rst two onditions does not ontradi t

A.BENHARI

82

the ontinuity required in the last ondition. We approa h this question rst in the ase of
dimension d = 1.
A good starting point for an answer to this question is to nd ne essary onsequen es of these
assumptions. Surprisingly, it turns out that the distributions of the displa ements are almost
ompletely determined by the three onditions. Here is our rst major probabilisti theorem.
Theorem 8.2 Suppose that fB (t) : t  0g is a real valued stationary pro ess with independent
in rements and almost surely ontinuous paths. Then there are  and   0 su h that, for ea h
t  0 and h  0, the in rement B (t + h) B (t) is normally distributed with expe tation h and
varian e h2 .

The theorem motivates the following denition.

Denition: A sto hasti pro ess fB (t) : t  0g is alled a Brownian motion with drift
parameter , diusion parameter 2 and start in x 2 IR if the following holds:
 B (0) = x,
 the pro ess has independent in rements,
 for all t  0 and h > 0, the in rements B (t + h) B (t) are normally distributed with
expe tation h and varian e 2h,
 almost surely, the fun tion t 7! B (t) is ontinuous.
We say that fB (t) : t  0g is a standard Brownian motion if  = 0,  = 1 and x = 0.
One an show easily that if B (t) is a standard Brownian motion, then the pro ess Y (t) =
x + B (t) + t is a Brownian motion with start in x, drift parameter  and varian e parameter
2 . Theorem 3.2 now has the following form:
Theorem 8.3 (Chara terization of Brownian motion) Suppose fB (t) : t  0g is a real
valued sto hasti pro ess with stationary, independent in rements and almost surely ontinuous
paths. If B (0) = x, then there is  and   0 su h that this pro ess is a Brownian motion with
start in x, drift parameter  and varian e parameter 2 .

We now ome to the proof of Theorem 8.2. The proof uses the entral limit theorem. We
re all a formulation of the entral limit theorem, whi h was proved (in a slightly more general
form) in the le ture \Sto hastis he Methoden", see Satz 4.2.
Central Limit Theorem: For ea h n 2 IN let X1n ; : : : ; Xnn be independent and identi ally
distributed random variables with expe tation n, positive varian e n2 and nite ( entred) third
moment n = IEjXin IEXinj3 su h that
lim pn = 0 :
n!1 n3 n
Then we have, for all a  b 2 [ 1; 1,
n Xn 
1
1 b e x =2 dx :
n
i
p
lim
IP p
2
(
a;
b
)
=
n!1
n i=1 n
2 a
n

A.BENHARI

83

Proof of Theorem 8.2: We rst x t = 0 and h  0 and show that the in rement B (h) B (0)
is normally distributed, before showing that expe tation and varian e have the given stru ture.
To determine the distribution of the in rements we x h > 0. For ea h n 2 IN and 1  k  n
we dene
hk
B h(kn 1) if this is less than 1 in absolute value,
Ykn = B n
0
otherwise.
(

Almost surely, B (h) B (0) = limn!1 nk=1 Ykn.

If we hadn't ut the values of the in rements at 1 this would learly hold without the
limit. As it stands we have to show that for large n no utting is needed, i.e. almost surely
hk
h(k 1)
n
lim max
B
B
= 0:
(3.1)
n!1 k=1
n
n
This holds simply be ause every ontinuous fun tion on [0; h is uniformly ontinuous.
P

Step 1:
Proof:

We now establish some fa ts about the distribution of the Ykn. By our assumptions, for a given
n, all Ykn have the same distribution and are independent.
Step 2: For all > 0, we have limn!1 nIPfjY1n j  g = 0.
Proof: Be ause almost sure onvergen e implies onvergen e in probability we infer from (3.1)
h(k 1)
hk
n
1 = nlim
IP max B
B
<
!1
k=1
n
n
n
hk
h(k 1)
= lim IP
B
B
<




n!1

k=1

n



o

n
= nlim
!1 IP jB (h=n) B (0)j <
nIPfjB (h=n) B (0)j  g n
= nlim
1
!1
n
= exp nlim
!1 nIPfjB (h=n) B (0)j  g ;
using Euler's formula. Hen e limn!1 nIPfjB (h=n) B (0)j  g = 0. As jY1nj  jB (h=n)
the statement follows.
n

Note that in parti ular,

lim IEjY1nj = nlim
n!1
!1
This implies that also

IPfjY1n j  g d

lim IPfjY1nj  g d = 0:

0 n!1

lim nIPfjY1n IEY1nj > g = 0 :

Step 3: If liminf n!1 nVar(Y1n ) = 0, then, almost surely B (h)
Proof: We have, by Bienayme's equality,
n!1

Var

A.BENHARI

X

k=1

Ykn

B (0)j

= nVar(Y1n) ;

84

(3.2)
B (0) is onstant.

andn a subsequen e of this onverges to 0 as n ! 1. In parti ular, a subsequen e of nk=1 Ykn

n
2
2
k=1 IEYk onverges in L to 0. Convergen e in L implies onvergen e in probability, at the
same time, by Step 1, limn!1 nk=1 Ykn = B (h) B (0) in probability. This implies
P

B (h) B (0) = nlim

!1

k=1

IEYkn ;

whi h is deterministi and, in parti ular, normally distributed.

Now we an on entrate on the nontrivial ase liminfn!1 nVar(Y1n) > 0. Dene Xkn = pnYkn.
Then
1 n Xn
p
B (h) B (0) = nlim
(3.3)
k
!1 n
X

k=1

In order to apply the entral limit theorem to this expression we have to he k the moment
onditions. Let n be the expe tation, n2 be the varian e
and n the third ( entred) moment
of X1n. They all exist be ause jXkn j is bounded by pn.
n
Step 4: nlim
!1 n3 pn = 0.
Proof: We have, by Step 3,
liminf
2 = liminf
nVar(Ykn ) > 0 ;
n!1 n
n!1
Choose a small > 0. Let Z1n = X1n IEX1n. Be ause jY1n IEY1nj is bounded by 2 we infer from
(3.2),
n = IE[jZ1n j3
 n3=2 IE jY1n IEY1nj3 1fjY n EY n jg + 8IPfjY1n IEY1nj > g
 pnnIE jY1n IEY1nj2 + o(pn)
 pnIE[(Z1n)2 + o(pn) :
Hen e
n
1
p

limsup :
limsup
3
n!1 n n
n!1 n
As an be hosen arbitrarily small and limsup1=n < 1 the statement follows.
h

Step 5: The in rement B (h) B (0) is normally distributed.

Proof: Observe that by the Central Limit Theorem, for all a; b,
n

lim IP
n!1
At the same time, by (3.3),
n Xn
1
i
lim IP p
n

n!1

A.BENHARI

n i=1

n

p1

Xin n
n i=1 n

n

2 (a; b) = 21

2 (a; b) = nlim
!1 IP

85

B (h) B (0)
n

x2 =2 dx :

pn
n

2 (a; b)

(3.4)

p
p
= nlim
IP B (h) B (0) 2 (an + nn ; bn + nn ) :
!1
This an only hold true if (n ) and (pnn) stay bounded. Then we an pi k onvergent subsequen e with limits  and  and infer that the distributions of B (h) B (0) and X +  oin ide
for a standard normally distributed random variable X . As X +  is normally distributed with
expe tation  and varian e 2 the proof is nished.
n

We an now nish the proof of Theorem 8.2 by showing the spe ial stru ture of the expe tations and varian es.
Step 6: There is  and   0 su h that, for all t; h  0, IE(B (t + h) B (t)) = h and
Var(B (t + h) B (t)) = h2 .
Proof: By stationarity it su es to show this for t = 0. Dene the fun tion f; g : [0; 1) ! IR
by f (h) = Var(B (h) B (0)) and g(h) = IE(B (h) B (0)). For all h; k  0 we have by stationarity,
g(h + k) = IE B (h + k) B (h) + IE B (h) B (0) = g(k) + g(h) :
and, by Bienayme's equality and stationarity,
f (h + k) = Var(B (h + k) B (0)) = Var(B (h + k) B (k)) + Var(B (k) B (0)) = f (h) + f (k) :
Hen e there is a  with g(h) = h and a 2  0 su h that f (h) = 2h.


We nish this se tion with an example, whi h shows that there are other pro esses, whi h have
stationary, independent in rements but fail to have ontinuous paths.
Example Consider X (t) the number of ustomers arriving at a store by time t  0. Intuitively
the pro ess fX (t) : t  0g has to satisfy the following assumptions
 The number of ustomers arriving during one time interval does not ae t the number of
ustomers arriving in another disjoint time interval. Mathemati ally, this means that the
pro ess has independent in rements.
 The rate at whi h ustomers arrive should be onstant, more pre isely, there is some   0
su h that IE[X (t) = t.
 Customers arrive one at a time. To make this pre ise we assume that X (t) is in reasing,
takes values in IN and we have
IPfX (t + h) = X (t) + 1g = h + o(h);
IPfX (t + h)  X (t) + 2g = o(h):
Brownian motion satises the rst two, but not the last assumption. A sto hasti pro ess
fullling these assumptions is alled a Poisson pro ess with rate (or intensity) . We shall see
as an exer ise that it is uniquely determined up to equivalen e. Here is one way to onstru t it:
Let S be a Poisson distributed random variable with parameter  and Y1; Y2 ; Y3; : : : independent
random variables with uniform distribution on [0; 1). For 0  t  1 let
X (t) = #fYi : Yi  t and i  S g :
Then X satises the assumptions on the interval [0; 1) and we extend X to [0; 1) by glueing
together independent opies of X .

A.BENHARI

86

Gaussian random variables and pro esses

8.3

In this se tion we prepare the existen e proof of Brownian motion with some lemmas about
Gaussian random variables. This and the following two se tions are essentially taken from Peres
(1998).
We have seen that the normal distribution omes up naturally in the study of sto hasti pro esses. One of the drawba ks of this distribution is that its distribution fun tion an not be
expressed in terms of lassi al fun tions. Therefore the following (quite pre ise) estimate will
later be useful.
Lemma 8.4 Suppose X is standard normally distributed. Then, for all x  0,
x
p1 e x =2  IPfX > xg  x1 p1 e x =2:
x2 + 1 2
2
Proof: The right inequality is obtained by the estimate
1 1 u e u =2 du = 1 p1 e x =2 :
IPfX > xg  p
x 2
2 x x
2

For the left inequality we dene

1
f (x) = xe x =2 (x2 + 1)
e
x
Remark that f (0) < 0 and limx!1 f (x) = 0. Moreover,
Z

u2 =2 du :

2x x e u =2 du = 2x x e u =2 du e
whi h is positive for x  0, by the rst part. Hen e f (x)  0, proving the lemma.
f 0(x) = (1 x2 + x2 + 1)e

x2 =2

Z

x2 =2 

We now look more losely at random ve tors with normally distributed omponents. Our motivation is that they arise, for example, as ve tors onsisting of the in rements of a Brownian
motion. Let us larify some terminology.
Denition: A random variable X = (X1 ; : : : ; Xd )T with values in IRd has the d-dimensional
standard Gaussian distribution if its d oordinates are standard normally distributed and independent (independent whether we write it as row{ or olumn). A random variable Y with values
in IRn is alled Gaussian if there exists an n  d matrix A and an n dimensional ve tor b su h
that Y T = AX + b. The ovarian e matrix of the ve tor Y is given by
Cov(Y ) = IE (Y IEY )(Y IEY )T = AAT ;
here the expe tations are dened omponentwise.
Our rst lemma shows that applying an orthogonal d  d matrix does not hange the distribution
of a standard Gaussian random ve tor.
Lemma 8.5 If A is an orthogonal d  d matrix, i.e. AAT = Id , and X is a d-dimensional
h

standard Gaussian ve tor, then AX is also a d-dimensional standard Gaussian ve tor.

A.BENHARI

87

Proof: As the oordinates of X are independent, standard normally distributed, X has a density
f (x1 ; : : : ; xd ) =

p1 e

x2i =2

= (21)d=2 e

kxk2 =2 ;

2
where kp
k is the Eu lidean norm. The density of AX is (by the transformation rule)
f (AT x) AAT . The determinant is 1 and hen e, sin e orthogonal matri es preserve the Eu lidean norm, the density of X is invariant under A.
i=1

Corollary 8.6 Let X1 and X2 be independent and normally distributed with expe tation 0 and
varian e 2 > 0. Then X1 + X2 and X1 X2 are independent and normally distributed with
expe tation 0 and varian e 22 .
Proof: (X1 =; X2 =)T

is standard Gaussian by assumption. Look at

A=

p1
2
p12

p1
2
p12

This isp an orthogonal matrix and applying it to our ve tor yields ((X1 + X2 )=(p2); (X1
X2 )=( 2)), whi h thus must have independent standard normal oordinates.
The next lemma shows that the distribution of a Gaussian random ve tor is determined by its
expe tation and ovarian e.
Lemma 8.7 If X and Y are d-dimensional Gaussian ve tors with IEX
Cov(Y ), then X and Y have the same distribution.

= IEY

and

Cov(X ) =

It is su ient to onsider the ase IEX = IEY = 0. By denition, there are standard
Gaussian random ve tors X1 and X2 and matri es A and B with X = AX1 and Y = BX2 .
By adding olumns of zeroes to A or B , if ne essary, we an assume that X1 and Xk2 are both
k-ve tors and A; B are both d  k matri es. Let A and B be the ve tor subspa es of IR generated
by the row ve tors of A resp. B . To simplify notation assume that the rst l row ve tors of A
form a basis of A. Dene the linear map L : A ! B by
L(Ai ) = Bi for i = 1; : : : ; l:
Here Ai is the ith row ve tor of A. Our aim is to show that L is an orthogonal isomorphism
and then use the previous lemma. Let us rst show that L is an isomorphism. Our ovarian e
assumption gives that AAT = BB T . Assume there is a ve tor v1A1 + : : : vl Al whose image is 0.
Then the d-ve tor
v = (v1 ; : : : ; vl ; 0; : : : ; 0)
satises vB = 0. Hen e
kvAk2 = vAAT vT = vBB T vT = 0 :
We on lude that vA = 0. Hen e L is inje tive and dim A  dim B. Inter hanging the roles
of A and B gives that L is an isomorphism. As the entry (i; j ) of AAT = BB T is the s alar
Proof:

A.BENHARI

88

produ t of Ai and Aj as well as Bi and Bj , the mapping

L is orthogonal. We an extend it on
the ortho omplement of A to an orthogonal map L : IRk ! IRk (resp. orthogonal k  k-matrix).
Then X = AX1 and Y = BX2 = ALX2 . As LX2 is standard Gaussian, by the previous lemma,
X and Y have the same distribution .
Corollary 8.8 A Gaussian random ve tor X has independent entries if and only if its ovarian e matrix is diagonal.

We end this se tion with the denition of an important lass of pro esses.
Denition

A sto hasti pro ess fY (t) : t 2 I g is alled a Gaussian pro ess, if for all t1  t2  : : : tn the
ve tor (Y (t1 ); : : : ; Y (tn )) is a Gaussian random ve tor.
Show as an exer ise that every Brownian motion is a Gaussian pro ess, i.e. given times
t1  : : :  tn nd a matrix A and a ve tor b su h for a standard Gaussian ve tor X , we have
(B (t1 ); : : : ; B (tn)) = AX +
8.4

Existen e of Brownian motion and Wiener measure

The entral result of this se tion is the following theorem, whi h establishes the existen e of
Brownian motions. Re all that we need only onstru t a standard Brownian motion B , as
X (t) = x + B (t) + t is a Brownian motion with arbitrary starting point, drift and diusion
onstant.
Theorem 8.9 (Wiener 1923) Standard Brownian motion exists.

We prove this using a onstru tion of Paul Levy (1948). We will use the existen e theorem
for ountable produ ts. We rst onstru t Brownian motion on the interval [0; 1 as a random
element on the spa e C [0; 1 of ontinuous fun tions. The idea is to onstru t the right values of
Brownian motion step by step on the nite sets
Dn = 2kn : 0  k  2n
of dyadi points. If the values on Dn are onstru ted we interpolate them linearly and later we
dene Brownian motion as the uniform limit of these ontinuous fun tions, whi h is automati ally ontinuous.
To do this let D = 1n=0 Dn and let (
; A; IP) be a ountable produ t spa e su h that a olle tion
fZd : d 2 Dg of independent, standard normally distributed random variables an be dened
on the spa e. Let B (0) = 0 and B (1) = Z1 . For ea h n 2 IN we onstru t random variables
B (d), d 2 Dn su h that
 for all r < s < t in Dn the random variable B (t) B (s) has N (0; t s)-distribution and
is independent of B (s) B (r),
n

A.BENHARI

89

 the ve tors (B (d) : d 2 Dn ) and (Zd : d 2 D n Dn) are independent.

Note that we have already done this for D0 = f0; 1g. If we have su eeded in doing it for some
n 1, we pro eed by dening the B (d) for d 2 Dn n Dn 1 by
B (d

2 n) + B (d + 2 n) + Zd :
2
2(n 1)=2
The values of B used in this denition are both in Dn 1 and the se ond property is learly
fullled. Sin e (1=2)[B (d + 2 n) B (d 2 n ) is (by indu tion) normally distributed with
expe tation 0 and varian e 1=2n+1 and Zd =2(n+1)=2 is independent with the same distribution,
their sum B (d) B (d 2 n) and their dieren e B (d + 2n) B (d) are independent with the
same distribution by Corollary 3.6. Now if d 2 Dj for some 1  j  n every in rement of length
2 n with right endpoint a dyadi point in (d 2 j ; d is independent from all in rements of
length 2 n with left endpoint a dyadi point in [d; d + 2 j ), by onstru tion and independen e
of the Zd for dierent d. The rst of our properties follows from this.
Having thus hosen the values of the pro ess on all dyadi points, we interpolate between them.
Formally, dene
Z1
for x = 1
F0 (x) = 0
for x = 0
linear in between.
and, for ea h n  0,
2 (n+1)=2 Zx for x 2 Dn n Dn 1
Fn (x) = 0
for x 2 Dn 1
linear
between onse utive points in Dn:
These fun tions are ontinuous on [0; 1 and for all n and d 2 Dn
B (d) =

8
>
<
>
:

8
>
<
>
:

B (d) =

i=0

Fi (d) =

i=0

Fi (d):

(3.5)

This an be seen by indu tion. It holds for n = 0. Suppose that it holds for n 1. Let
Sin e for 0  i  n 1 the fun tion Fi is linear on [d 2 n; d + 2 n, we get
n 1
n 1 F (d 2 n ) + F (d + 2 n )
B (d 2 n ) + B (d + 2 n )
i
i
Fi (d) =
=
:
2
2
i=0
i=1
Sin e Fn(d) = 1=2(n 1)=2 Zd , this gives (3.5).
On the other hand, we have, by denition of Zd and by Lemma 3.4, for large n,
d 2 Dn n Dn 1 .
X

png  exp

IPfjZd j 

so that the series

n=0

A.BENHARI

IPf9d 2 Dn

with jZd j  png 

2 n 

X X

n=0 d2Dn

90

png

IPfjZd j 

 onverges as soon as > p2log 2. Fix su h a . By the Borel-Cantelli Lemma

there exists a
random (but nite) N su h that for all n  N and d 2 Dn we have jZd j < pn. Hen e,
kFn k1 < pn2 n=2 :
(3.6)
This upper bound implies that the series
B (t) =

n=0

Fn (t)

is uniformly onvergent on [0; 1 and we denote the ontinuous limit by fB (t) : t 2 [0; 1g.
It remains to he k that the in rements of this pro ess have the right nite-dimensional joint
distributions. This follows dire tly from the properties of B on the dense set D  [0; 1 and the
ontinuity of the paths. Indeed, suppose that t1 > t2 > t3 are in [0; 1. We nd sequen es ti;n in
D onverging to ti and infer from the ontinuity of B that
B (t3 ) B (t2 ) = nlim
!1 B (t3;n ) B (t2;n ) :
As a limit of normally distributed random variables, this in rement is itself normally distributed
with mean 0 and varian e
lim t t2;n = t3 t2 :
n!1 3;n
The analogous fa t holds for B (t2) B (t1). Moreover, the random variables entering in the
limits are independent if n is large enough that t1;n > t2;n > t3;n. Hen e, the in rements must
be independent, too. From Corollary 3.8 we infer that the pro ess has independent in rements
on [0; 1.
We have thus onstru ted a Brownian motion B on [0; 1. By the existen e of produ t spa es
there exists a probability spa e on whi h a sequen e B1; B2 ; : : : of independent C [0; 1-valued
random variables with the properties of our B an be dened. We glue them together by letting
B (t) = B[t (t

[t) +

[X
t 1
i=0

Bi (1) :

This denes a ontinuous random fun tion in C [0; 1) and one an see easily from what we have
shown so far that the requirements of a standard Brownian motion are fullled.
We end this hapter by noting that our pro edure denes a natural probability measure W on
the spa e ff 2 C [0; 1) : f (0) = 0g of ontinuous real valued fun tions starting in 0. This
probability measure is alled the Wiener measure
8.5

Basi path properties of Brownian motion

The Brownian motion has two very useful invarian e properties. The rst of them is the s aling
invarian e, the se ond is the invarian e under time-inversion. In ea h ase there is a transformation on the spa e of fun tions, whi h hanges the individual Brownian random fun tions but
leaves their distribution un hanged.

A.BENHARI

91

Lemma 8.10 (S aling invarian e) Suppose fB (t) : t  0g is a standard Brownian motion

and a > 0. Then the pro ess fX (t) : t  0g dened by
X (t) =
is also a standard Brownian motion.

B (a2 t)
a

Continuity of the paths, independen e and stationarity of the in rements remain un hanged under the res aling. It remains to observe that
1
X (t) X (s) = B (a2 t) B (a2 s)
a
is normally distributed with expe tation 0 and varian e (1=a2 )(a2 t a2s) = t s.
Proof:

Lemma 8.11 (Time inversion) Suppose fB (t)

Then the pro ess fX (t) : t  0g dened by
X (t) =

: t  0g

is a standard Brownian motion.

0
t=0
tB (1=t) t > 0

is also a standard Brownian motion.

Proof: Like Brownian motion fX (t)g is a Gaussian pro ess su h that the Gaussian random
ve tors (X (t1 ); : : : ; X (tn )) have expe tation 0. The ovarian es, for t; h  0, are given by
Cov(X (t + h); X (t)) = (t + h)t Cov(B (1=t + h); B (1=t)) = t(t + h) t +1 h = t :
Hen e X is a variant of Brownian motion. Its paths are learly ontinuous for all t > 0 and in
t = 0 we use the following two fa ts: First, the distribution of X on the rationals Q is the same
as for a Brownian motion, hen e
lim X (t) = 0 almost surely.
t!0;t2Q

And se ond, X is almost surely ontinuous on (0; 1), so that

lim X (t) = tlim
X (t) :
!0
t!0;t2Q

Corollary 8.12 (Law of large numbers) Almost surely, limt!1 B (t)=t = 0.

Proof:

Using the time-inversion we see that limt!1 B (t)=t = limt!1 X (1=t) = X (0) = 0.

We now prove two theorems that make the degree of ontinuity of the paths of Brownian motion
more pre ise. Pay attention to the order of the almost surely and the for ea h in the following
theorem and note that a hange of this order would give a ( orre t, but) mu h weaker statement.

A.BENHARI

92

Theorem 8.13 There exists a random variable C su h that, almost surely, for ea h
t + h  1,
q




B
(
t
+
h
)
B
(
t
)

C
h log(1=h) :


Proof: We go ba k to the onstru tion of the Brownian motion.

motion as a series

B (t) =

n=0

0t

We have represented Brownian

Fn (t) ;

where ea h Fn is a pie ewise linear fun tion. Its derivative exists almost everywhere, and by
denition and (3.6),
kFn0 k1  2k2Fnnk1  C1(!) + 2 pn2n=2 :
The random onstant C1 is here to deal with the nitely many ex eptions to (3.6). Now for ea h
t; t + h 2 [0; 1,
jB (t + h) B (t)j 

n=0

jFn(t + h) Fn(t)j 

n=0

hkFn0 k1 +

n=l+1

2kFn k1 :

Hen e, using (3.6) again, if l > N for a random N , this is bounded by

h

X

n=0

C1 (!) + 2 n2n=2

+2

n=l+1

n2

n=2

p
p
 C2(!)h l2l=2 + C3(!) l2

l=2 :

Choosing l = log2(1=h) and C (!) su iently large to take are of the ases l  N we get




B (t + h) B (t)  C (!) h log(1=h) :

This theorem is sharp in the sense that the fun tion

fun tion whi h de reases faster as h # 0.

h log(1=h)

annot be repla ed by any

Theorem 8.14 There exists a onstant > 0 su h that, almost surely, for every " > 0 there
exist t  0 and 0 < h < " with
q

B (t + h) B (t) > h log(1=h) :

Let < p2log 2 and dene the events

Ak;n = B ((k + 1)2 n )
Then, using Lemma 3.4,
Proof:

p
IP(Ak;n ) = IPfB (2 )) > n2
n

A.BENHARI

n=2 g

93

B (k2

) > pn2

n=2

p
p
n
= IPfB (1) > ng  2n + 1 e

2 n=2 :

By our assumption on , we have

Therefore, using 1

xe
IP

2n 1

 \

k=0

for all x,

A k;n

= (1

2n IP(Ak;n) ! 1 :
(Ak;n))2n  exp( 2nIP(Ak;n)) ! 0 :

IP

by onsidering h = 2 n one an now see that

IP 8h < "8t with h + t  1 : B (t + h)
n

B (t)  h log2 (1=h)

= 0:

For Holder- ontinuity of Brownian motion we have the following onsequen e.

Corollary 8.15 For every  < 1=2 Brownian motion is almost surely -Holder ontinuous, but
not 1=2-Holder ontinuous.
Proof: Observe that, for every  > 0, there ispC1 > 0 su h that
p h log(1=h) < C1h
every C > 0, and su iently small h we have h log(1=h) > C h
p

and, for

We shall ome ba k to a longer dis ussion of the properties of Brownian motions later in the
le ture, in parti ular we will then prove that Brownian motion is nowhere
8.6

Higher dimensional Brownian motion

We dene (standard) d-dimensional Brownian motion as the pro ess fB (t) : t  0g dened

by B (t) = (B1 (t); : : : ; Bd (t)), where B1 ; : : : ; Bd are d independent Brownian motions. Note
that we are able to onstru t a nite produ t spa e, on whi h dd independent Brownian motions
an be dened. The d-dimensional Brownian motion is an IR -valued pro ess with stationary,
independent in rements and almost surely ontinuous paths.
8.7

Geometri Brownian motion

In order to model a time homogenous sto k pri e in the simplest manner one would require a
pro ess fX (t) : t  0g with the following features:
 the pro ess X is almost surely ontinuous and has positive values,
 for all 0  t1  t2  : : :  tn the returns X (tn )=X (tn 1 ); X (tn 1 )=X (tn 2 );
: : : ; X (t2 )=X (t1 ) are independent.
 the distribution of the returns X (t + h)=X (t) does not depend on t.
These assumption already determine the model up to two onstants:

A.BENHARI

94

Theorem 8.16 Suppose that the pro ess fX (t) : t  0g satises the assumptions above and
X (0) = x > 0 is the initial pri e. Then there is a  and a  su h that log X (t) is a Brownian
motion with start in log x, drift  and varian e 2 . The pro ess X is alled geometri Brownian
motion with trend parameter  and volatility parameter .
Proof:

log X satises the onditions of the Chara terization Theorem for Brownian motion.

Of ourse, this model is not the nal word about modelling a sto k pri e. For example, in
pra ti e, trend and volatility parameters will depend on t. The denition of su h more ompli ated pro esses has to be deferred to the se ond part of the le ture, when methods of sto hasti
analysis are available.

A.BENHARI

95

9.The strong Markov property of Brownian motion

We start the dis ussion of the Markov property with a thorough introdu tion of the term onditional expe tation, whi h is essential to the on epts of the Markov property and also of
martingales.
9.1

Conditional expe tations

Suppose that (
; A; IP) is a probability spa e and X and Z are random variables on this spa e.
We assume that both random variables take on nitely many real values fx1 ; : : : ; xm g resp.
fz1 ; : : : ; zn g ea h with positive probability. We suppose that X and Z are not independent. How
does knowledge about the out ome of Z in uen e the out ome of X ? This an be des ribed by
means of onditional probabilities
IP X = xi and Z = zj
:
IP X = xi j Z = zj :=
IPfZ = zj g
One way to look at this is the following: if we have observed the event fZ = zj g this hanges
our per eption of the random variable X , it is now dened on a dierent probability spa e, on
whi h only those ! an o ur, whi h satisfy Z (!) = zj . The new spa e still onsists of the set

and the -eld A, but the probability measure is now on entrated on the set
Z 1(zj ) = f! 2
: Z (!) = zj g :
The new probability measure IPf
jZ = zj g is given by
IP A and Z = zj
IP A j Z = zj :=
:
IPfZ = zj g
The random variable X may still be dened on the spa e, but its distribution has hanged and
is now the onditional distribution given Z = zj . Its expe tation is now
n

IE

A.BENHARI

X j Z = zj

:=

k=1

96

xk IP X = xk jZ = zj :

This expe tation depends on zj and an be interpreted as a mapping (or random variable) on

namely by
IE X j Z :
! IR ;
IE X j Z (! ) = IE X j Z = Z (! ) :
The mapping IEfX jZ g has the following properties :
1) it is measurable with respe t to the -eld generated by the sets Z 1fzj g for j = 1; : : : ; n.
2) for every A  fz1 ; : : : ; zn g we have Z (A) IEfX jZ g(!)dIP(!) = Z (A) X (!)dIP(!).
n

The rst property just means that IEfX jZ g is onstant on ea h set Z 1fzj g and the se ond
property follows from the al ulation
IEfX jZ g(! ) dIP (! ) =
IEfX jZ = z gIPfZ = z g
Z (A)
Z

z 2A

X X

z 2A k=1

xk IP X = xk jZ = z

= zg ;

IPfZ

the last term equals, by the denition of onditional probabilities,

m

X X

z 2A k=1

xk IP X = xk
X (!)

m
X
k=1

and Z = z =

1fX (!)=xk g

z 2A

X X

z 2A k=1

1fZ (!)=z g dIP

xk 1fX (!)=xk g 1fZ (!)=zg dIP(!)

(!) =

Z 1 (A)

X (!) dIP(!) :

One ould say that we have de omposed the probability spa e a ording to the information
oming from Z , ea h probability measure IPf
jZ = zj g is on entrated on a dierent region of
the spa e
, be ause the additional information we had onsisted of the knowledge of the ell
in whi h the random ! was to be found.
What an we say if additional information is oming into our experiment from other sour es
than the observation of the values of a dis rete random variable su h as Z ? Can we get a similar
de omposition? How an we des ribe information?
Information from our point of view is a sub olle tion B  A of events, about whi h we have
already the knowledge whether they o ur or not. Su h a sub olle tion, by simple onsiderations
is ne essarily a -eld. Hen e we adopt the point of view that information an be modelled by
means of (sub)--elds B  A. Let us give some examples:
 Suppose we have observed the value of a random variable Z 0 : (
; A; IP) ! (
0 ; A0). Then
we have knowledge about all the events fZ 2 Ag if A runs through the -eld A0. These
sets form a -eld Z 1(A0). In the ase that Z takes on only nitely many values (as
before) the -eld onsists of all nite unions of the ells (or atoms) Z 1(zj ).
 Suppose we have observed the path of a sto hasti pro ess fX (t) : t  0g up to time T .
The information gained by this is en oded in the -eld FT generated by all the in rements
X (t) X (s) for s  t  T , equivalently generated by
fX (tn ) X (tn 1 ) 2 An; : : : ; X (t1 ) X (t0 ) 2 A1 g

A.BENHARI

97

for all Ai Borel and t0  t1  : : :  tn  T . In reasing the T gives us a whole nested

sequen e of -elds FT ; T  0, whi h model the in rease of knowledge when we observe a
longer and longer part of the pro ess.
We now know what we need: an extension of the notion of onditional expe tation from nitely
valued random variables to -elds. Observing that we formulated our properties of the onditional expe tation in the spe ial ase in su h a way that we an use them to formulate a new
denition.
Theorem 9.1 Let (
; A; IP) be a probability spa e, F  A a sub--eld and X a random variable
with IEjX j < 1. Then there is a random variable Y = IEfX jFg with IEjY j < 1 alled the
onditional expe tation of X given F with the following two properties:
1) IEfX jFg is F -measurable,
2) for all F

2 F,

IEfX jFg dIP

X dIP :

Any two random variables Y satisfying these two onditions oin ide almost surely. If F =
Z 1 (A0 ) is the -eld of preimages of all Borel sets under a random variable Z , one also writes
IEfX jZ g for IEfX jFg and says this is the onditional expe tation of X given Z .

Remark:

By hosing F =
in the last property, we see that
IE IEfX jFg = IEX :
n

We start with the proof of the uniqueness. Suppose Y1 and Y2 both satisfy the denition
of a onditional expe tation. Suppose further that IPfY1 > Y2 g > 0. Then there is a natural
number n su h that IPfY1 Y2 > 1=ng > 1=n. Note that the event F = fY1 Y2 > 1=ng is in
F . Hen e
1=n2  F (Y1 Y2) dIP = F X dIP F X dIP = 0 ;
a ontradi tion. Therefore IPfY1 > Y2 g = 0. Ex hanging the role of Y1 and Y2 yields
IPfY1 = Y2 g = 1.
Z

Before we prove existen e, we formulate some properties of onditional expe tations. Note rst
that uniqueness implies the following property alled linearity: For all a; b real, almost surely,
IE aX + bY jFg = aIEfX jFg + bIEfY jFg :
Pay attention to the order of the quantors and of the almost surely. The following theorem is to
be proved as an exer ise. It des ribes the onvergen e properties of onditional expe tations.
n

Theorem 9.2 Let (

; A; IP) be a probability spa e, F  A a sub--eld and X a random variable
with IEjX j < 1. Then every onditional probability IEfX jFg has the following properties.
Positivity If X  0, then IEfX jFg  0 almost surely.

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98

Monotone Convergen e If 0  Xn " X , then IEfXn jFg " IEfX jFg almost surely.

Fatou If 0  Xn and IEfXn jFg < 1, then

liminf
X j Fg  liminf
IEfXn j Fg almost surely.
n!1 n
n!1

IEf

Dominated Convergen e If there is a random variable Z su h that IEZ < 1 and jXn j  Z
for all n, and if Xn ! X almost surely, then IEfXn jFg ! IEfX jFg.

The next set of properties is of more probabilisti nature. If F and G are -elds we denote by
F _ G the -eld generated by their union.
Theorem 9.3 Let (
; A; IP) be a probability spa e, F  A a sub--eld and X a random variable
with IEjX j < 1. Then every onditional probability IEfX jFg has the following properties.



= IEfX jGg almost surely.

Taking out what is known. If Z is F -measurable and bounded, then IEfZX jFg = Z IEfX jFg
almost surely. If X itself is F -measurable, then IEfX jFg = X almost surely.
Independen e. If X is independent of F , then IEfX j Fg = IEfX g almost surely.
Tower property. If G  F is a sub--eld, then IE

IEfX jFgG

Independen e (Advan ed ase). Suppose that G ; H  A are sub--elds, su h that

G _ X 1 (A0) are independent. Then, almost surely,
IEfX jG _ Hg

H and

= IEfX jGg :

Proof: By linearity we an assume that X  0 in all parts of the proof.

For the tower property

one rst observes that the left hand side is G measurable and, for every G 2 G  F ,
IE IEfX jFg G dIP =
IEfX jFgdIP =
XdIP :
G
G
G
Hen e the integrand on the left hand side satises all the properties of onditional expe tation
IEfX jGg and must be a onditional expe tation of X given G .
To see the se ond property, we observe that Z IEfX jFg is F -measurable and, be ause Z is
bounded, say by C > 0, satises IEjZ IEfX jFgj  C IEjIEfX jFgj < 1 : We just have to show, for
every F 2 F ,
ZX dIP = Z IEfX jFg dIP ;
F
F
then it follows that Z IEfX jFg is a onditional expe tation of ZX given F . The given equality
holds for Z = 1H , H 2 F , by denition and follows for bounded F -measurable Z by the
standard measure theory ma hinery. The parti ular ases mentioned at the end holds, be ause
in the given situation, X itself saties the onditions of a onditional expe tation of X given F .
For the last property observe that the onstant fun tion IEfX g is F -measurable and we just
have to show, for all F 2 F ,
X (!) dIP(!) = IP(F )IEfX g :
F
Z

A.BENHARI

99

We show the more general statement that, for all h : IR ! [0; 1),
Z

h(X (!)) dIP(!) = IP(F )IEfh(X )g :

Note that, if h = 1A , the left hand side is IP(F \ fX 2 Ag) and the right hand side is
IP(F )IPfX 2 Ag, so that our statement is the denition of independen e of the events fX 2 Ag
and F . By the standard measure theory ma hinery this an be extended to arbitrary h and
plugging in h(x) = x gives the desired result. The last property is similar and an exer ise.
The proof of the existen e illustrates that IEfX jFg is in a sense a proje tion of X on the
spa e of F -measurable random variables. Our strategy is to show this rst for random variables
X satisfying IEjX j2 < 1. The idea is that then X is an element of the Hilbert spa e
L2(
; A; IP) = X : (
; A) ! IR; A-measurable with IEjX j2 < 1
of square integrable fun tions on the probability spa e with two fun tions X and Y identied if
IPfX = Y g = 1. The s alar produ t on this spa e is
hX; Y i = IE XY :
Hen e the norm is kX k2 = IEjX j2 . If you do not know that this denes a Hilbert spa e, then see
the exer ises, where the ompleteness of this spa e is proved, by he king that every Cau hy
sequen e onverges:
Lemma (Completeness): If fXn g is a sequen e of random variables on a probability spa e
(
; A; IP) su h that IEjXnj2 < 1 for all n and limk!1 supn;mk IEjXn Xm j2 = 0 ; then there is
a random variable X on (
; A; IP) su h that limn!1 IEjXn X j2 = 0 :
Hilbert spa es are the mathemati al stru ture that allows to make sense of the notion of proje tions. For our purpose we need the following.
n

Lemma 9.4 Suppose that V  L2 (

; A; IP) is a omplete linear subspa e and X 2 L2 (
; A; IP).
Then there exists a Y 2 V , alled the proje tion of X on V su h that

 kX Y k = I := inf fkX W k : W 2 V g,
 hX Y; Z i = 0 for all Z 2 V .
Remark: Y

surely.

is alled the proje tion of X onto Y and any two proje tions are equal almost

Proof: Re all that ompleteness of V means that every Cau hy-sequen e of random ve tors Yn
in V onverges in norm to a random variable Y 2 V . We rst hoose a sequen e fYng in V su h

that

kX Ynk ! I :

Using the s alar produ t one an see that

2k 12 (Yn Ym)k2 = kX Ynk2 + kX

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100

Ym k2

2kX 12 (Yn + Ym)k2 :

Be ause 12 (Yn Ym ) 2 V , the subtra ted term is at least I 2 and hen e fYng is a Cau hy sequen e
and onverges to some Random variable Y 2 V . By the triangle inequality
I  kX Y k  kX Yn k + kY Yn k ! I ;
and thus kX Y k = I . For every Z 2 V we have Y + tZ 2 for ea h t 2 IR and hen e

kX Y tZ k2  kX Y k2 ;
whi h implies 2thZ; X Y i + t2kZ k2  0. As a fun tion of t this has a minimum in t = 0 and

hen e the derivative at 0 must vanish, whi h is the statement.

We now show the existen e of onditional expe tation rst for a random variable X 2
L2 (
; A; IP). We proje t X onto the omplete subspa e
V := L2 (
; F ; IP)  L2 (
; A; IP) ;
and all the result Y . As Y 2 V it is F -measurable. Moreover,
hX Y; Z i = 0 for all Z 2 V .
If F 2 F we may hoose Z = 1F 2 V there and get
X dIP = hX; 1F i = hY; 1F i = Y dIP :
F
F
Hen e Y is a onditional expe tation of X given F . It remains to show the same if X just
fullls IEjX j < 1. It su es to onsider the ase X  0. Choose Xn = X ^ n and observe that
Xn 2 L2 (
; A; IP) and there are onditional expe tations IEfXn jFg. By Theorem 4.2 (Positivity)
Z

they are positive and in reasing. Let

= nlim
!1 IEfXn jFg :
Clearly, Y is F -measurable and, as Xn in reases to X , we an use monotone onvergen e to see
that, for every F 2 F ,
Y dIP(!) = nlim
!1 F IEfXn jFg dIP(!) = nlim
!1 F Xn dIP(!) = F X dIP(!) :
F
This also implies IEY = IEX < 1 and hen e Y is a onditional expe tation of X given F .
Z

As an exer ise we investigate the situation when two real valued random variables X and Z
have a joint density f (x; z). Then, learly, the density of X is fX : x 7! f (x; z) dz and the
density of Z is fZ : z 7! f (x; z) dx. Assume that
IEjX j = jxjfX (x) dx = jxj f (x; z ) dz dx < 1 :
One an dene a fun tion
if fZ (z) 6= 0 ;
fX jZ (xjz ) = 0f (x; z )=fZ (z ) otherwise
.
With this fun tion dene a random variable
Y = xfX jZ (xjZ ) dx :
Then Y is a onditional expe tation of X given Z .
R

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101

9.2

The weak Markov property and Blumenthal's

01-Law

Suppose that fX (t) : t  0g is a sto hasti pro ess. Intuitively, the Markov property of a pro ess
says that if we know the pro ess fX (t)g on the interval [0; s, this is as useful as just knowing
the endpoint X (s). We will see that Brownian motion is a pro ess having this property.
We now work on the spa e
= C ([0; 1)) of ontinuous fun tions with the Borel -eld A
generated by all in rements and the probability measures IPx, whi h are the distributions of
Brownian motion started in x. The orresponding expe tations and onditional expe tations
are denoted IEx and IExf
j
g. On
we have for every s > 0 shift transformations s; s :
!

dened by
sB (t) = B (s + t)
and sB (t) = B (s + t) B (s) :
Note that one an onsider s and s as
-valued random variables and thus as sto hasti
pro esses by
s (t) = s (t)[B = sB (t) = B (t + s) ;
and analogously for s. Dene the -eld F 0 (t) to be the -eld generated by the in rements
B (tn ) B (tn 1 ); : : : ; B (t2 ) B (t1 ) for all 0  t1 


 tn  t. Note that
F 0(t)  F 0 (s) for all t  s :
A family fF (t) : t  0g of -elds su h that F (t)  F (s) for all t  s is alled a ltration.
Theorem 9.5 (Weak Markov property) For every s  0 and every bounded random variable Y : (
; A) ! IR we have

s j F 0 (s)g = IExfY s j B (s)g = IEB(s) fY g almost surely,

where the right hand side is the fun tion '(x) = IEx fY g evaluated at x = B (s). In parti ular,
the pro ess fB (s + t) B (s) : t  0g = fs (t) : ; t  0g is a standard Brownian motion
independent of F 0 (s).
IEx fY

In order to prove the result in this generality we need one more measure theoreti tool, the
monotone lass theorem. This is an improvement of our standard measure theory ma hinery.
Lemma 9.6 (Monotone lass theorem) Let B be a \-stable system that ontains
and
generates the -eld A. Let H be a olle tion of real valued fun tions ontaing all indi ators
1A ; A 2 B su h that

 if f; g 2 H then f + g 2 H and f 2 H for all real ,

 if fn 2 H is nonnegative and in reasing to a bounded fun tion f , then f 2 H.
Then H ontains all bounded A-measurable fun tions.

The proof of this an be found in the book of Durrett, Chapter 5, Theorem (1.5) or in most
texts on measure theory.

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102

Proof: The parti ular statement at the end of the theorem is evident from the independen e of
the in rements of Brownian motion, be ause F 0 (s) is generated by the in rements up to time
s and independen e of F 0 (s) from the given pro ess starting in 0 is just independen e from its
in rements. In the formal language of onditional expe tations we get, for ea h Y of the spe ial
form Y (B ) = X (B (0))Z (0 B ), using 0s = s,

s j F 0 (s)g = IExfX (B (s))Z (s B ) j F 0 (s)g = X (B (s))IExfZ (sB ) j F 0 (s)g ;

as we may take out what is known. By the parti ular statement, we have IExfZ (sB ) j F 0 (s)g =
IEx fZ (s B )g = IEB (s) fZ (0 B )g and hen e, we may pro eed the last hain with,
= X (B (s))IEB(s) fZ (0 B )g = IEB(s) fY g :
The same argument an be arried out repla ing F 0 (s) by the -eld generated by (the preimIEx fY

ages of) B (s). The argument an be extended from these spe ial Y to general bounded Y by
applying the monotone lass theorem to the olle tion H of all fun tions Y for whi h the theorem
holds and using the sets of the form fB (0) 2 A1 g \ f0B 2 A2g, A1  IR Borel, A2 2 A, as
\-stable olle tion B.

We now dis uss a formal generalization of the weak Markov property, whi h has surprising
appli ations. For this we make ea h -eld a bit larger by allowing an innitesimal glan e into
the future. Dene
F + (s) = F 0 (t) :
\

t>s

fF + (s)g

Then
is a slightly larger ltration, for whi h the weak Markov property still holds.
Re all that we are dealing with Brownian motion dened on C ([0; 1)).
Theorem 9.7 For every s  0 and every bounded random variable Y
IEx fY

s j F + (s)g = IEB(s) fY g almost surely.

: (
; A) ! IR we have

We observe that the pro ess fB (t + s) B (s) : t  0g is also independent of F +(s).

This holds be ause, by ontinuity,
B (t + s) B (s) = nlim
!1 B (sn + t) B (sn )
for a stri tly de reasing sequen e fsng onverging to s, and ea h in rement B (sn + t) B (sn)
is independent of F +(s). The remainder of the proof is as before.
Proof:

We now look at the germ eld F +(0), whi h heuristi ally omprises all events dened in terms
of Brownian motion on an innitesimal small interval to the right of the origin.
Theorem 9.8 (Blumenthal's 01-law.) Let x 2 IR and A 2 F + (0). Then IPx fAg 2 f0; 1g.
Proof:

Let A 2 F + (0). Observe that 0 =id. By the previous two theorems

IEx f1A j F + (0)g = IEx f1A j F 0 (0)g :

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103

Now F 0 (0) = f;;

g and thus 1A is independent of F 0 (0). Hen e on the left hand side
IEx f1A j F 0 (0)g = IEx f1A g = IPx (A). On the other hand, 1A is F + (0)-measurable and hen e
the right hand side equals IExf1A j F + (0)g = 1A almost surely.
As a rst appli ation we show that Brownian motion has positive and negative values and zeroes
in every small interval to the right of the origin. This is quite remarkable!
Theorem 9.9 Dene  = inf ft > 0 : B (t) > 0g and  = inf ft > 0 : B (t) = 0g. Then
IP0 f = 0g = IP0 f = 0g = 1 :
Proof: The event
1
f = 0g =
there is 0 < " < 1=n su h that B (") > 0
\ n

n=1

is learly in F +(0). Hen e we just have to show that this event has positive probability. This
follows, as, for t > 0,
IP0 f  tg  IP0 fB (t) > 0g = 1=2 :
Hen e IP0f = 0g  1=2 and we have shown the rst part. The same argument works repla ing
B (t) > 0 by B (t) < 0 and from these two fa ts IP0 f = 0g = 1 follows, using the intermediate
value property of ontinuous fun tions.
As an exer ise we prove another 01-law. Dene G (t) to be the -eld dened by all in rements
 t1. G (t) des ribes the future at time t. Let T = t0 G (t) be the

B (t1 ) B (t0 ) for t  t0

-eld of all tail events.

Theorem 9.10 Let x 2 IR and A 2 T . Then IPx fAg 2 f0; 1g.

9.3

Stopping times and the strong Markov property

Heuristi ally, the weak Markov property states that Brownian motion is started anew at ea h
deterministi time instan e. It is a ru ial property of Brownian motion that this holds also for
an important lass of random times. These random times are alled stopping times, they are of
vital importan e.
The basi idea is that a random time T is a stopping time if we an de ide whether fT < tg by
just knowing the path of the sto hasti pro ess up to time t. Think of the situation that T is
the moment where some random event related to the pro ess happens.
Denition

A random variable T with values in IR [ f1g is alled a stopping time with respe t to the
ltration fF (t) : t  0g if, for every t  0, fT < tg 2 F (t). It is alled a stri t stopping time if,
for every t  0, fT  tg 2 F (t). Every stri t stopping time is also a stopping time, be ause
fT < tg =

A.BENHARI

fT  t 1=ng 2 F (t) :

n=1

104

For ertain ni e ltrations stri t stoppping times and stopping times agree. In order to ome
into this situation we are going to work with the ltration fF + (t)g in the ase of Brownian
motion and refer the notions of stopping time, et . always to this ltration. As this ltration
is larger than fF 0 (t)g, there are more stopping times. The ru ial property whi h distinguishes
fF + (t)g from fF 0 (t)g is right- ontinuity, whi h means that
F +(t + ") = F + (t) :
\

">0

To see this note that

\

">0

F +(t + ") =

1 1

\ \

n=1 k=1

F 0(t + 1=n + 1=k) = F +(t) :

Theorem 9.11 Every stopping time T with respe t to the ltration fF + (t)g is automati ally a
stri t stopping time.
Proof:

Suppose that T is a stopping time. Then

fT  tg =

fT < t + 1=kg 2

k=1

n=1

F +(t + 1=n) = F + (t) :

We give some examples.

 Of ourse, every deterministi time t  0 is also a stopping time.
 Suppose G is an open set. Then T = inf ft  0 : B (t) 2 Gg is a stopping time.
Proof:

Let Q be the rationals in (0; t). Then, by ontinuity of B ,

fT < tg = fB (s) 2 Gg 2 F + (t) :
[

s2Q

 If Tn " T is an in reasing sequen e of stopping times, then T is also a stopping time.

Proof:

fT  tg =

n=1

fTn  tg 2 F +(t) :

 Suppose H is a losed set, for example a singleton. Then T = inf ft  0 : B (t) 2 H g is a

stopping time.
Proof: Let G(n) be an open neighbourhood of K with K = G(n). Then Tn = inf ft 
0 : B (t) 2 G(n)g are stopping times, whi h are in reasing to T .
T

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105

 Let T be a stopping time. Dene stopping times

Tn = (m + 1)2 n if m2 n  T < (m + 1)2 n :

In other words, we stop at the rst time of the form k2 n after T . It is easy to see that
Tn is a stopping time. We use it later as a dis rete approximation to T .
We now want to prove that Brownian motion starts anew at ea h stopping time. For this purpose
we dene, for every stopping time T , the -eld
F (T ) = fA 2 A : A \ fT < tg 2 F +(t) for all t  0g :
This means that the part of A that lies in fT < tg should be measurable with respe t to the
information available at time t. Heuristi ally, this is the olle tion of events that happened
before the stopping time T . As in the proof of the last theorem we an infer that fT  tg may
repla e fT < tg without hanging the denition.
We need three lemmas, the third of whi h is proved as an exer ise.
Lemma 9.12 If S  T are stopping times, then F (S )  F (T ).
Proof:

If A 2 F (S ), then A \ fT  tg = (A \ fS  tg) \ fT  tg 2 F +(t) :

T
Lemma 9.13 If Tn # T are stopping times, then F (T ) = 1
n=1 F (Tn ).

Proof:
By the last lemma, F (Tn ) 
T1
A 2 n=1 F (Tn ), then for all t  0,

F (T ) for all n, whi h proves . On the other hand, if

A \ fT < tg =

Hen e A 2 F (T ).

n=1

A \ fTn < tg 2 F + (t) :

This result an be used in the proof of the following lemma. Use the dis rete approximation of
T by a sequen e Tn # T , see the last example.
Lemma 9.14 If T is a stopping time, then the random variable B (T ) is F (T )-measurable.
Theorem 9.15 (Strong Markov property) For every almost surely nite stopping time T
0 and every bounded random variable Y :
 IR ! IR we have
IEx fY

(T ; T ) j F (T )g = IEB(T ) fY (
; T )g almost surely.

In parti ular, the pro ess

fB (T + t) B (T ) : t  0g
is a standard Brownian motion independent of F (T ).

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106

Proof: We show our statement rst for stopping times S su h that only ountably many values
s1 < s2 < s3 < : : : are taken with positive probability and we an use this to ondition with
respe t to the value of S . Let A 2 F (S ), then
Z

Y (S B; S ) dIPx (B ) =

Now,

n=1 A\fS =sn g

Y (S ; S ) dIPx =

n=1 A\fS =sn g

Y (sn ; sn ) dIPx :

A \ fS = sn g = (A \ fS  sng) n (A \ fS  sn 1 g) 2 F + (sn ) ;

so by the denition of onditional expe tation and the weak Markov property, the sum is equal
to
1

n=1 A\fS =sn g

IEB (sn ) fY (sn ; sn )jF + (sn )g dIPx =

n=1 A\fS =sn g

IEB (S ) fY

n=1 A\fS =sn g

(
; S )g dIPx =

IEB (S ) fY

IEB (sn ) fY

(
; sn )g dIPx

(
; S )g dIPx :

By denition of onditional expe tation and Lemma 4.14 we infer that

IEx fY (S ; S )jF (S )g = IEB (S ) fY (
; S )g :
It remains to generalize this to general stopping times T . For this purpose we look at the
stopping times Tn dened by
Tn = (m + 1)2 n if m2 n  T < (m + 1)2 n :
For them the strong Markov property holds and we have Tn # T and hen e also F (Tn )  F (T ).
We hoose Y of the form
Y (f; T ) = F (f (tn ) f (tn 1 ); : : : ; f (t2 ) f (t1 ); T ) ;
for a ontinuous bounded fun tion F : IRn ! IR and 0  t1  : : :  tn. Then, by ontinuity of B
and dention of Tn,
Y (T B; T ) = nlim
!1 Y (Tn B; Tn ) :
Let A 2 F (T ). Sin e T  Tn, we infer A 2 F (Tn ) and hen e, by denition of onditional
expe tation,
Y (Tn ; Tn ) dIPx = IEB(Tn ) fY (
; Tn )g dIPx :
A
A
By bounded onvergen e we infer
Z

Y (T ; T ) dIPx =

IEB (T ) fY

(
; T )g dIPx :

As the integrand on the right hand side is F (T )-measurable,

IEx fY (T ; T )jF (T )g = IEB (T ) fY (
; T )g almost surely.

A.BENHARI

107

Now, in order to pass to more general Y , one an rst pass to an indi ator of the form
Y (f; T ) = 1A (f (tn ) f (tn 1); : : : ; f (t2 ) f (t1 ); T ) ;
for A  IRn open, by applying our result to a monotonously in reasing sequen e of ontinuous
fun tions Yk onverging to Y and using the theorem of monotone onvergen e. Then we an use
the monotone lass theorem to the olle tion H nof all fun tions Y for whi h the theorem holds,
using the inverse images of the open sets A  IR under
(f; T ) 7! (f (tn) f (tn 1); : : : ; f (t2) f (t1); T ) 0  t1  : : :  tn :
as \-stable olle tion B. Finally, note that the parti ular statement at the end follows immediately from the formula just proven.
Let T = inf ft  0 : B (t) = max0s1 B (s)g. It is intuitively lear that T is not a
stopping time. To prove it, observe that almost surely T < 1. B (t + T ) B (T ) does not take
negative values in a small neighbourhood to the right of 0, whi h ontradi ts the strong Markov
property and Theorem 4.9.
We will see many appli ations of the strong Markov property later, the next subse tion names
an interesting one.
Remark:

9.4

The re e tion prin iple

The re e tion prin iple states that Brownian motion re e ted at some stopping time T is still
a Brownian motion. More formally:
Theorem 9.16 (Re e tion prin iple) If T is a stopping time and fB (t)g is a standard
Brownian motion, then Brownian motion re e ted at T dened by
B  (t) = B (t)1ftT g + (2B (T ) B (t))1ft>T g
is also a standard Brownian motion.

By the strong Markov property both

fB (t + T ) B (T ) : t  0g and f (B (t + T ) B (T )) : t  0g
are Brownian motions and independent of the beginning fB (t) : t 2 [0; T g. Hen e the on atenation (glueing together) of the beginning with the rst part and the on atenation with
the se ond part have the same distribution. The rst is just fB (t)g, the se ond is the obje t
fB  (t)g introdu ed in the statement.
Proof:

Let M (t) = max0st B (s). A priori it is not at all lear what the distribution of this random
variable is, but we an determine it as a onsequen e of the re e tion prin iple. Re all that B (t)
has distribution N (0; t).

A.BENHARI

108

Theorem 9.17 If a > 0 then IP0 fM (t) > ag = 2IP0 fB (t) > ag = IP0 fjB (t)j > ag.

Let T = inf ft  0 : B (t) = ag and let fB  (t)g be Brownian motion re e ted at T .

Then fM (t) > ag is the disjoint union of the events fB (t) > ag and fM (t) > a; B (t)  ag and
sin e the latter is exa tly fB (t)  ag the statement follows from the re e tion prin iple.
Proof:

A.BENHARI

109

10.Martingales

In this hapter we get to know the pro esses whi h orrespond to fair games, the martingales.
We rst study the theory mainly for dis rete time and later (in Probability II ) extend the
theory to ontinuous time. Symmetri random walk and the riti al Galton-Watson pro ess
(whose ospring distribution has expe ted value one) turn out to be important examples of
dis rete time martingales. The word martingales originally denotes a spe ial gambling strategy,
indi ating the onne tion to fair games.
10.1

Martingales: Denition and Examples

We now look at dis rete time pro esses fXn g and a ltration, i.e. an in reasing sequen e
F (0)  F (1)  F (2)  : : :
of -elds. We always assume that the pro ess fXn g is fF (n)g-adapted, whi h means that
Xn is F (n)-measurable,
but in most ases we even onsider the ltration F (n) generated by the (preimages of) random
variables X0 ; : : : ; Xn . This ltration is alled the natural ltration for fXng.
Denition

A dis rete time pro ess fXn : n  0g is alled a martingale relative to the ltration fF (n)g if
 fXn g is fF (n)g-adapted,
 IEfjXn jg < 1 for all n, and
 IEfXn j F (n 1)g = Xn 1 almost surely, for all n  1.
If we have just  in the last ondition, then fXn g is alled a supermartingale.
Let us onvin e ourselves, before starting the dis ussion of martingales, that there are plenty of
interesting examples.

A.BENHARI

110

1) Suppose
that X1 ; X2 ; : : : are independent random variables with IEjXn j < 1 and IEXn = 0.
Let Sn = Pnk=1 Xk be the partial sums and F (n) be the natural ltration of the fSng. Observe
that this is also the natural ltration for the fXn g. Then
IEfSn j F

(n 1)g = IE

n 1

nX

k=1

Xk + Xn  F (n

1) =

nX1
k=1

Xk + IEXn = Sn 1 :

Hen e the random walk fSn g is a martingale.

2) Suppose that X1 ; X2 ; : : : are independent nonnegative random variables with IEXn = 1. Let
Mn = nk=1 Xk . Let F (n) be the natural ltration. Then,
IEfMn j F (n 1)g = Mn 1 IE Xn F (n 1) = Mn 1 IEXn = Mn 1 :
Hen e fMng is a martingale.
3) Let the ltration fF (n)g be arbitrary and X an integrable random variable. Dene
Xn = IEfX jF (n)g, one should interpret Xn as the data a umulated about X at time n. The
martingale property of fXn g follows from the tower property of onditional expe tation
IEfXn jF (n 1)g = IEfIEfX jF (n)gjF (n 1)g = IEfX jF (n 1)g = Xn 1 :
Q

4) Re all the denition of the Galton Watson pro ess fXn g with ospring distribution
(p0 ; p1 ; p2; : : :). There are independent random variables Yk , k 2 A, su h that
Xn =
Yk :
X

k2T;jkj=n 1

The Yk are independent with the distribution given by the sequen e (p0 ; p1; : : :) and
Xn 1 = #fk 2 T; jkj = n 1g :
Let F (n) be the -eld on
 generated by the Yk with jkj  n 1. Note that Xn is F (n)measurable. We see that
IEfXn jF (n 1)g =
IE 1fk2T g Yk F (n 1) =
1fk2T g IE Yk F (n 1) ;




k2A;jkj=n 1

k2A;jkj=n 1

where we have taken out what is known. As Yk is independent of F (n 1) if jkj = n 1 we

may ontinue with
1fk2T g IE Yk F (n 1) =
1fk2T g IEfYk g = Xn 1 IEfYk g :
X

k2A;jkj=n 1

k2A;jkj=n 1

Hen e fXng is a martingale if and only if the expe ted number of ospring is
IEfYk g

and a supermartingale if this is  1.

A.BENHARI

n=0

npn = 1

111

Let us dis uss some onsequen es of the denition. First note that, for every martingale fXn g,
from the tower property of onditional expe tation, for all m < n,
IEfXn jF (m)g = IEfIEfXn jF (n 1)g j F (m)g = IEfXn 1 jF (m)g = : : : = Xm :
Taking expe ted values gives,
IEfXn g = IEfX0 g for all n:
It is immediate from the denition that, for every martingale fXn g,
IEfXn Xn 1 jF (n 1)g = 0 :
(5.1)
Considering fXn g to be the apital of a gambler at time n, this an be interpreted as saying
that the game is fair, the expe ted prot in ea h step is 0. In the supermartingale ase this is
 0 and the game is unfavourable. Let us explore this interpretation a bit more.
Suppose that fCn : n  1g is your stake on game n. You have to base your de ision on Cn on
the history of the game up to time n 1. Formally, Cn has to be F (n 1)-measurable. We use
this to dene:
A pro ess fCn : n  1g is alled previsible if Cn is F (n 1)-measurable.
Your winnings in game n are then Cn(Xn Xn 1) and the total winnings up to time n are given
by
n
Yn = Ck (Xk Xk 1 ) =: (C  X )n :
X

k=1

The pro ess (C  X ) is alled the martingale transform of X by C , it is the dis rete analogue of
the sto hasti integrals. The big question is now: an you hoose fCn g su h that your expe ted
total winnings are positive? A positive answer to this question would be the most useful result
of this le ture, however, we an prove:
Theorem 10.1 (You an't beat the system) Let C be a bounded, previsible pro ess (i.e.
su h that jCn (!)j  C for all n  1 and ! 2
). Then, if fXn g is a martingale, so is
f(C  X )n g. Moreover, (C  X )0 = 0 and hen e IEf(C  X )g = 0
Proof: It is lear that (C  X )n is integrable (as Cn is bounded) and by denition the pro ess
fYng = f(C  X )n g is adapted to the ltration fF (n)g and starts in 0. We al ulate
IEfYn jF

=
This proves it all.

nX1
k=1

(n 1)g = IE

Ck (Xk

nX

k=1

Ck (Xk

Xk 1 ) + Cn IEfXn

Xk 1 )F (n

Xn 1 jF (n

1)

1)g = Yn

1:

The proof also shows, if also Cn  0 and fXn g is a supermartingale, so is f(C  X )n g.

In the next two se tions we study the two most important theorems in martingale theory: Doob's
Optional Stopping Theorem and Doob's Martingale Convergen e Theorem.
Remark:

A.BENHARI

112

10.2

Doob's Optional Stopping Theorem

We now study stopping times for martingales. The intuition is very similar to the stopping
times we have dis ussed for Brownian motions, but some te hni al points are easier.
Suppose that fXn g is a martingale for the ltration fF (n)g on a probability spa e (
; A; IP).
To avoid te hni alities assume that the union of all F (n) generates A. A map T :
! IN [f1g
is alled a stopping time if
fT  ng = f! : T (!)  ng 2 F (n) for all n < 1 :
This orresponds to stri t stopping times in the ontinuous time setting, repla ing fT  ng by
fT < ng would hange the denition, but as in dis rete time fT < ng = fT  n 1g a stopping
time in this weaker sense is a stopping time for the shifted ltration F 0 (n) := F (n + 1) so that
no new theory would evolve from su h a hange. However one an require
fT = ng = f! : T (!) = ng 2 F (n) for all n < 1 ;
and this denition is equivalent to our stopping time denition. This is easy to see, as the rst
denition implies
fT = ng = fT  ng n fT  n 1g 2 F (n) ;
and the se ond denition implies
fT  ng =

k=0

fT = kg 2 F (n) :

Interpreting fXn g as a game we interpret the stopping times as those instan es when we an
quit playing (and obtain our winnings or pay our losses). If we follow that strategy and play
unit stakes up to time T and then quit playing, the stake pro ess C is
Cn = 1fnT g = 1 1fT n 1g ;
whi h is F (n 1)-measurable and hen e fCn g is previsible. The winnings pro ess is
(C  X )n =

k=1

Ck (Xk

Xk 1 ) = XT ^n X0 ;

We dene X T , the pro ess X stopped at T , as

XnT (!) = XT (!)^n (!) :
Re all that X T X0 is the martingale transform of X by the (bounded) stake pro ess C dened
above. Theorem 5.1 an be applied and yields:
Theorem10.2(Elementary stopping theorem) If X is a martingale and T a stopping time,
then X T is a martingale. In parti ular,
IEfXT ^n g

= IEfX0 g for all n :

If X is a supermartingale, then so is X T and we still have

IEfXT ^n g  IEfX0 g

A.BENHARI

for all n :

113

We look at a simple random walk. Let Y1 ; Y2; : : : be a sequen e of independent

random variables with distribution
1
IPfYn = 1g = IPfYn = 1g = ;
2
and let
n
Xn = Yk ;
Example:

k=1

the simple random walk. We have seen that this pro ess is a martingale (with respe t to the
natural ltration) and we have studied this pro ess a little in the le ture Sto hastis he Methoden.
Let
T = inf fn  0 : Xn = 1g :
Clearly, T is a stopping time. It is not straightforward to see that
IPfT < 1g = 1 ;
but this follows from the fa ts proved in Sto hastis he Methoden and should be a epted for
the moment. Our theorem then states that
IEfXT ^n g = IEfX0 g for all n:
However, we have XT = 1 almost surely and hen e
1 = IEXT 6= IEX0 = 0 :
In some sense this means that you an beat the system if you have an innite amount of time
and redit.
After this example one would very mu h like to see onditions whi h make sure that for ni e
martingales and stopping times we have IEXT = IEX0. This is the ontent of Doob's optional
stopping theorem.
Theorem 10.3(Doob's optional stopping theorem) Let T be a stopping time and X a
martingale. Then XT is integrable and
IEfXT g

= IEfX0 g ;

if one of the following onditions hold:

(1)
(2)

T is bounded (i.e. there is N su h that T (!) < N for all !),

T is almost surely nite and X is bounded, (i.e. there is a real K su h that jXn (!)j < K
for all n and !),

(3) IEfT g < 1 and there is K > 0 su h that, for all n and !, jXn(!)

Xn 1 (!)j  K .

If fXn g is a super-martingale and either one of the three previous onditions or

(4) X is nonnegative and T almost surely nite.

holds, then XT is integrable and IEfXT g  IEfX0 g.

A.BENHARI

114

We assume that fXn g is a supermartingale. Then fXT ^n g is a supermartingale and, in

parti ular, integrable, and
IEfXT ^n X0 g  0 :
For (1) the result follows by hoosing n = N . For (2) let n ! 1 and use dominated onvergen e.
For (3) we observe that

Proof:

jXT ^n X0j =

T ^n

k=1

(Xk

Xk 1 )  KT :

By assumption KT is an integrable fun tion and we an use dominated onvergen e again. For
(4) we use Fatou's lemma to see
IEfXT g = IEfliminf XT ^n g  liminf IEfXT ^n g = IEfX0 g :
n!1
n!1

The statement for martingales follows by applying the previous to the supermartingales fXng
and f Xn g separately.

In the situation of our example these onditions must fail. A glan e at the third ondition gives
a striking orollary:
Corollary 10.4For a simple random walk the expe ted rst hitting time of level 1 is innite.
10.3

Appli ation to Brownian Motion: Exit from an interval

Suppose (a; b) is an interval ontaining the origin. At whi h end does Brownian motion leave the
interval? In this se tion we use martingales to al ulate the probability that Brownian motion
leaves su h an interval at the upper or lower end. We use the strong Markov property to embed
a martingale into Brownian motion. Let us rst state the main result of this se tion.
Theorem 10.5 Let fB (t) : t  0g be standard Brownian motion and suppose that a < 0 < b
and T = inf ft  0 : B (t) 62 (a; b)g. Then T is an almost surely nite stopping time and
IP

Proof:

B (T ) = a

= b b a and IP B (T ) = b = b
n

a
:
a

The fa t that T is almost surely nite follows from the fa t that, almost surely,
p
limsup
jB (t)= tj = 1 ;
t!1

whi h was proved as an exer ise.

We rst suppose that a and b are rationals. Then there are integers n > 0 and p; q su h that
a = p=n and b = q=n. We dene a sequen e T0 ; T1 ; T2 ; : : : of stopping times by T0 = 0,
Tk+1 = inf ft > Tk : jB (t) B (Tk )j = 1=ng for all k  0 :

A.BENHARI

115

Then we study the dis rete time pro ess Xk = B (Tk ). This pro ess takes values in the set
D = fl=n : l integer g:
Denote by Yk = Xk Xk 1 the in rements of the pro ess. Then, by the strong Markov property, the Yk are independent and identi ally distributed. The individual distributions are, by
symmetry, given by
1
IPfYk = 1=ng = = IPfYk = 1=ng :
2
In parti ular, as the expe ted value is zero, the pro ess
Xk =

i=1

Yi

is a martingale, see example 1. Let S = inf fk  0 : Xk = p=n or Xk = q=ng : This is a stopping

time for the martingale. The relationship between this stopping time S and the stopping time
T is given by
B (T ) = XS :
Hen e, we have to show the middle step in the equation
IPfB

(T ) = ag = IPfXS = p=ng = q q p = b b a :

We look at the expe ted value of XS . By denition this is

p
p
q
q
IEfXS g = IPfXS = g + IPfXS = g :
n
n
n
n

Now look at the stopped martingale fXnS g dened by XnS = XS^n and apply Doob's optional
stopping theorem. Condition (2) is satised be ause X S is bounded from above by q=n and
from below by p=n and S is almost surely nite. Hen e,
IEfXS g = IEfXSS g = IEfX0S g = IEfX0 g = 0 :
Abbreviating P = IPfXS = p=ng and Q = IPfXS = q=ng we thus get
0 = np P + nq Q and, learly, 1 = P + Q :
Solving this system of equations gives the required result for X and hen e also for Brownian
motion.
It remains to look at irrational values a < 0 < b. This an be dealt with by approximation. Let
an " a be a sequen e of rationals in reasing to a and bn " b be a sequen e of rationals in reasing
to b and Tn the exit time from the interval (an; bn). Then
IPfB

(T ) = ag  IPfB (Tn ) = ang = bn bn an ! b b a :

The other inequality an be obtained by approximating a and b from above by rationals in the
same manner. This nishes the proof.

A.BENHARI

116

A similar theorem an be proved for simple random walk fXng. We hoose integers a < 0 < b.
What is the probability that fXn g hits a before b? Look at the stopping times
S a = inf n  0 : Xn = a and S b = inf n  0 : Xn = b :
Then show as an exer ise
b
IPfS a < S b g =
:
b a
We now look at an amusing example of Keeler and Spen er:
Optimal doubling strategy for ba kgammon: In our idealization we need a ontinuous time
fun tion B (t) : [0; T ! [0; 1, whi h models your urrent han es of winning. For ba kgammon
it is best to hoose Brownian motion fB (t) : t  0g started at 1=2 and stopped upon leaving
the interval [0; 1. At the beginning the stake is, say, one. You and the opponent both have the
right to announ e a doubling of the stake. If player A does this, player B has the right to either
a ept this | then the game goes on with doubled stakes and only B has the right to announ e
the next doubling | or player B gives up and loses the urrent stake.
A doubling strategy onsists of two numbers 0 < b < 1=2 < a < 1 and you announ e a double
if B (t)  a and give up if the opponent announ es a double and B (t) < b. An optimal strategy
a ; b must satisfy:
 when B (t) = b a epting and giving up must have the same expe ted payo.
Denoting by v your expe ted winnings from unit stake when you announ e a doubling at B (t) =
a , this means, by the previous theorem,

 
1 = ab
2v + a a b
( 2) :
Now, learly, 1=2 < a  1 b . The expe ted winnings per unit stake are v = 1 if you announ e
a doubling at 1 b, at the instant when the opponent starts giving up. If a < 1 b your
expe ted winnings are lower (otherwise he would give up), so that ne essarily a = 1 b and
v = 1. Hen e,


1 = 1 b b
2 + 11 2bb
( 2) :
Solving the system we obtain b = 1=5 and a = 4=5.
Result: If your opponent announ es a double you should give up if you feel your han es of
winning are below 20%. You should announ e a double if your han es are above 80%.
n

10.4

Doob's Martingale Convergen e Theorem

Doob's famous forward onvergen e theorem gives a su ient ondition for the almost sure
onvergen e of martingales fXn g to a limiting random variable.
Theorem 10.6 (Martingale Convergen e Theorem) Let fXn g be a supermartingale, whi h
is bounded in L1 , i.e. there is K > 0 su h that IEjXn j  K for all n. Then there exists a realvalued random variable X on the same probability spa e su h that
lim X = X almost surely.
n!1 n

A.BENHARI

117

Note that if Xn is nonnegative, we have

IEjXn j = IEfXn g = IEfX0 g := K
and thus Xn is automati ally bounded in L1 and limn!1 Xn = X exists.
The proof of the lemma is based on the idea of ounting the number of up rossings of intervals.
Basi ally, if fXng does not onverge it os illates and hen e rosses some interval [a; b innitely
often.
Formally, pi k two numbers a < b and let I = [a; b. The number UN [a; b of up rossings of [a; b
made by fXn g up to time N is dened as the largest integer k su h that there are integers
0  s1 < t1 < s2 < t2 <


< sk < tk  N
with Xsi < a and Xti > b for all 1  i  k. Clearly, Un[a; b is a random variable. We shall
show:
Important remark:

Lemma10.7(Doob's up rossing lemma) Let fXn g be a supermartingale and a < b. Then,

for all N ,
(b a)IEfUN [a; bg  IEf(XN a) g :
Proof: We will dis uss this in the language of fair games. Suppose that we bet on the game
fXn g with the following anti- y li strategy: Initially our stake C0 is zero. We leave it like this
until Xn < a when we hoose unit stake Cn+1 = 1. We play unit stakes until Xn > b when we
stop and hoose Cn+1 = 0, keep it until Xn < a, and so fourth. Formally,
C1 = 1fX0 <ag

and Cn = 1fCn =1g 1fXn bg + 1fCn

Cn is learly previsible and we study the martingale transform
1

Yn = (C  X )n =

k=1

Ck (Xk

=0g 1fXn 1 <ag :

Xk 1 ) :

Re alling our strategy, we observe that

YN  (b a)UN [a; b (XN a) :
Ea h up rossing in reases the value of Yn by at least b a and the last term is responsible for
a possible unnished up rossing at the end. As C is previsible, nonnegative and bounded, Y is
a supermartingale and
0 = IEfY0g  IEfYN g  (b a)IEfUN [a; bg IEf(XN a) g :
This is the ne essary inequality.
From this we an observe that the expe ted number of up rossings is bounded if IEf(XN
is bounded.

A.BENHARI

118

a)

Lemma 10.8Let fXn g be a supermartingale, whi h is bounded in L1 . Then, for the in reasing
limit
U [a; b := lim UN [a; b
N !1

we have

(b

a)IEfU [a; bg  jaj + sup IEjXn j < 1 :

n

In parti ular, IPfU [a; b = 1g = 0 :

Proof:

Re all that, by the up rossing lemma,

(b a)IEfUN [a; bg  IEf(XN a) g  jaj + IEjXN j  jaj + sup
IEjXn j :
n

Now let N ! 1 using monotone onvergen e.

We are almost done, look at the event
M [a; b := fliminf
X < a < b < limsup Xn g
n!1 n
n!1

and observe that if Xn does neither onverges nor diverges to 1, there are rationals a < b
su h that event M [a; b takes pla e. But if M [a; b takes pla e, then U [a; b = 1, whi h has
probability zero. Taking the union over the ountable olle tion of rationals a < b we obtain
that almost surely fXn g onverges to a possibly innite random variable X . But, by Fatou's
lemma,
IEjX j = IEfliminf jXn jg  liminf IEjXn j  K < 1 ;
n!1
n!1
hen e jX j < 1 almost surely. This nishes the proof of Doob's martingale onvergen e theorem.
Examples. a) Let fXn g be a simple random walk. Then fXn g is a martingale, whi h does
not onverge. Namely, by the re urren e of simple random walks, both level 0 and level 1 are
rea hed innitely often, ontradi ting onvergen e. Clearly, fXn g is not L1 -bounded.
b) If F (0)  F (1)  : : : is a ltration of a measurable spa e whose -eld is generated by the
union of the F (n) and X is a nonnegative random variable, then we infer from the martingale
onvergen e theorem that
lim IEfX jF (n)g
n!1
exists almost surely. It is a natural suspi ion (and we will show in the next se tion) that this
limit is almost surely equal to X .
) We now look at the Galton-Watson pro ess fXn g ospring distribution given by (p0 ; p1 ; : : :).
Assume that the mean ospring number is
1

n=0

npn = 1 :

As fXn g is a nonnegative martingale it onverges almost surely to a random variable X  0.

Be ause fXng is integer-valued we must have Xn = X for su iently large n almost surely.

A.BENHARI

119

Now assume p1 < 1 (in the ase p1 = 1 trivially Xn = 1 for all n). For every k > 0 we then
have, for any K ,
IPfXn

= k for all n  K g  Mlim

!1

n=K +1

IPfXn

= k j Xn 1 = kg = 0 ;

hen e X = 0 almost surely. In other words, the riti al Galton-Watson pro ess be omes extin t
in nite time. However, re all that IEfXn g = 1 for all n. The onvergen e in the martingale
onvergen e theorem does not hold for the expe ted values.
10.5

Uniformly integrable martingales

The key to the dieren e between the two examples is the question when the almost sure
onvergen e in the martingale onvergen e theorem an be repla ed by L1 - onvergen e. We
rst study a general riterion for L1- onvergen e of an arbitrary sequen e of random variables.
Re all that a sequen e fXn g of random variables onverges in L1 to X i IEjXn X j ! 0. This
also implies that IEfXn g ! IEfX g.
Denition: A sequen e fXn g of random variables is alled uniformly integrable if, for every
" > 0 there is K  0 su h that
jXn j dIP < " for all n :
fjX j>K g
Z

Theorem 10.9 (a) Every bounded sequen e of random variables is uniformly integrable.
(b) If a sequen e of random variables is dominated by an integrable, nonnegative random variable Y , i.e. if jXn j  Y for all n, then the sequen e is uniformly integrable.
( ) Let p  1. A sequen e is Lp -bounded if supn IEfjXn jp g <
Lp -bounded for some p > 1 is uniformly integrable.

1.

Every sequen e, whi h is

(d) Every uniformly integrable sequen e is L1 -bounded.

(e) There are L1 -bounded sequen es, whi h are not uniformly integrable.

Proof:

Clearly, (a) follows from (b), whi h we now prove. Observe that,
Z

fjXn j>K g

jXnj dIP 

Now, using monotone onvergen e,

fjY j>K g

jY j dIP :

= liminf
1fjY jK gjY j dIP :
K !1
Hen e limK !1 fjY j>K g jY j dIP = 0 and this implies uniform integrability of our family.
We ome to ( ) and suppose that supn IEfjXn jpg < C for some p > 1. Observe that, for every
K,
IEjY j

fjXn j>K g

A.BENHARI

jXnj dIP  K 1

120

fjXn j>K g

jXn jp dIP  K 1 pC :

Choosing K large gives uniform integrability. (d) is easy, sin e

IEjXn j 
jXn j dIP +
jXn j dIP  1 + K
fjX j>K g
fjX jK g
Z

for suitably hosen K . Finally, suppose that U is uniformly distributed on (0; 1) and let
Xn = n1fU 1=ng  0 :
Then IEjXnj = 1 and hen e the family is L1-bounded, but
jXn j dIP = 1 for all n > K ;
fjX j>K g
Z

and hen e the family annot be uniformly integrable.

Re all that every almost surely onvergent sequen e also onverges in probability, whi h means
that
lim IPfjXn X j > "g = 0 for all " > 0 :
n!1
We an now state the key theorem of this se tion.
Theorem 10.10(Uniform Integrability Theorem) Suppose that fXn g is a uniformly integrable sequen e of random variables, whi h onverges in probability to a random variable X . Then
the sequen e onverges also in L1 .

For every K  0 we dene the uto-fun tion

K
if x > K
'K (x) = x
if jxj  K
K if x < K:
By uniform integrability one an hoose K su h that, for all n,
"
"
IEfj'K (Xn ) Xn jg < and IEfj'K (X ) X jg < :
3
3
Sin e
j'K (X ) 'K (Xn )j  jX Xnj
we infer that f'K (Xn )g onverges in probability to f'K (X )g. Hen e there is N su h that
"
"
IP j'K (Xn ) 'K (X )j >
<
6 12K for all n  N :
Then, for n  N ,
j'K (Xn ) 'K (X )j dIP
IEfj'K (Xn ) 'K (X )jg 
fj' (X ) ' (X )j>"=6g
Proof:

8
>
<
>
:

+ fj' (X ) ' (X )j"=6g j'K (Xn ) 'K (X )j dIP

K n K
 2K IP j'K (Xn ) 'K (X )j > 6" + 6"  "=3 :
n

A.BENHARI

121

We thus get, from the triangular inequality, for all n  N ,

IEfjXn X jg  IEfjXn 'K (Xn )jg + IEfj'K (Xn ) 'K (X )jg + IEfjX
This ompletes the proof.

'K (X )jg  " :

Note that, by Theorem 5.9(b), the uniform integrability theorem is a generalization of the
dominated onvergen e theorem.
We go ba k to the study of martingales. Let fF (n)g be a ltration and fXng a martingale with
respe t to this ltration. The next theorem shows that every uniformly integrable martingale is
of the form that data is a umulated about a random variable X .
Theorem 10.11(Convergen e for uniformly integrable martingales) Suppose that the
martingale fXn g is uniformly integrable. Then there is an almost surely nite random variable X su h that
lim X = X almost surely and in L1 :
n!1 n
Moreover, for every n, Xn = IEfX jF (n)g.

Be ause fXn g is uniformly integrable, it is in parti ular L1-bounded and thus, by the
martingale onvergen e theorem, almost surely onvergent to a real-valued random variable X .
By the previous theorem this onvergen e holds also in the L1 -sense. To he k the last assertion,
we verify the two properties of onditional expe tation. F (n)-measurability of Xn is lear by
denition, so let F 2 F (n). For all m  n we have, by the martingale property,

Proof:

We let m ! 1. Then

Xm dIP =

Xm dIP

hen e we obtain, as required,

F
Z

F
Z

X dIP 

X dIP =

Xn dIP :

jXm X j dIP ! 0 ;
Xn dIP :

The previous theorem shows that every uniformly integrable martingale is of the type that
data about some (hidden) random variable is a umulated (see example 3). Conversely, every
martingale of this type is uniformly integrable and onvergent to the hidden variable. This is
the ontent of Levy's upward theorem.
Theorem 10.12(Levy's upward theorem) Let X be an integrable random variable on
(
; A; P ) and fF (n)g be a ltration su h that the union of the F (n) generates A. Dene
Xn = IEfX jF (n)g. Then fXn g is a uniformly integrable martingale and

lim

X
n!1 n

A.BENHARI

= X almost surely and in L1 :

122

The key to the proof of the theorem is the following lemma.

Lemma 10.13Let X be an integrable random variable and fF (n)g be a sequen e of sigma-elds.
If Xn = IEfX jF (n)g, the sequen e fXn g is uniformly integrable.
Proof:

Let " > 0 be given. Choose > 0 su h that, for F 2 A,

IPfF g <

implies

jX j dIP < " :

This is possible, sin e otherwise we ould nd a sequen e F (n) 2 A of events with IP(F (n)) < 2 n
and F (n) jX jdIP  ". Then look at the event H that innitely many of the events F (n) happen.
By Borel-Cantelli IP(H ) = 0 but at the same time
R

jX j dIP = limsup
1F (n) jX j dIP  limsup
n!1
n!1

1F (n) jX j dIP

 ";

using Fatou's lemma. This is a ontradi tion.

Having at our disposal, we hoose K larger than IEjX j=. By onsidering positive and negative
part of X separately, we obtain, almost surely,
IEfX jF (n)g  IE jX j F (n) :
Hen e, using Markov's inequality,
K IPfjIEfX jF (n)gj > K g  IE IEfX jF (n)g  IE IEfjX j jF (n)g = IEjX j ;
whi h implies
IEjX j
IPfjIEfX jF (n)gj > K g 
< :
K
Note that this event is in F (n). We obtain, from the denition of onditional expe tation, for
all n,
jIEfX jF (n)gj dIP 
IEfjX j jF (n)g dIP
fjIEfX jF (n)gj>K g
fjIEfX jF (n)gj>K g




=
This nishes our proof.

fjIEfX jF (n)gj>K g

jX j dIP < " :

We already know that fXn g is a martingale (see example

se tion) and that it is uniformly integrable. Hen e there is a random variable Y su h that
lim X = Y almost surely and in L1:
n!1 n
We have to show that X = Y almost surely. Now the uniqueness theorem enters again. We may
assume that X  0, whi h also implies Xn  0 and hen e Y  0 almost surely. Observe that
IEfX g = IEfXn g ! IEfY g :
Proof of the Upward Theorem.

A.BENHARI

123

Dene probability measures P and Q on A by

1
1
P (A) =
X dIP and Q(A) =
Z

IEfX g A

IEfX g A

Y dIP :

Now F := F (n) is a \-stable system whi h generates A. If A 2 F (n), then, for all m  n,
1
1
P (A) =
X dIP =
Xm dIP :
S

IEfX g A

Also,

IEfX g A

1
1
lim
X
d
IP =
lim Xm dIP = Q(A) ;
m
m!1 IEfX g A
IEfX g A m!1
where the rst equality follows, as before, from L1 - onvergen e. The uniqueness theorem now
yields P (A) = Q(A) for all A 2 A. Let A = fX > Y g 2 A. Then IP(A) > 0 would imply,
by denition, P (A) > Q(A), whi h is a ontradi tion. Hen e, IP(A) = 0, whi h means X  Y
almost surely. In the same manner one an show X  Y almost surely, and this nishes the
proof of the Upward Theorem.
Z

Theorem 10.14(Levy's downward theorem) Suppose that fG ( n) : n  0g is a olle tion

of -elds su h that

G ( 1) :=

k=0

G ( k) 


 G ( n) 


 G ( 2)  G ( 1) :

Let X be an integrable random variable and dene

X
Then

= IEfX jG ( n)g :

lim X n = IEfX jG ( 1)g almost surely and in L1 :

n!1

Fix a positive integer N . We look at the ltration fF (n)g given by

F (n) = G ((n N ) ^ ( 1))
and the adapted pro ess Yn = X ((n N ) ^ ( 1)). Be ause, by the tower property,
IEfYn j F (n 1)g = IE IEfX j G ((n N ) ^ ( 1))g G ((n 1 N ) ^ ( 1))
Proof:

= IE X G ((n 1 N ) ^ ( 1)) = Yn 1 ;
this is indeed a martingale. We obtain, from the up rossing lemma,
(b a)IEfUN [a; bg  IEf(X 1 a) g :
Letting N ! 1 shows that, almost surely, the total number of down rossings of [a; b by the
pro ess fX n g is nite. Now one has this simultaneously for all rationals a < b and we an
argue for fX n g as in the martingale onvergen e theorem. Hen e, lim X n = X 1 exists almost

A.BENHARI

124

surely. By Lemma 5.13 the sequen e is even uniformly integrable and hen e onvergen e holds in
L1 . To see that X 1 = IEfX jG ( 1)g, rst observe that, for all m and G 2 G ( 1)  G ( m),
Z

and then let m ! 1 to see that X

given F ( 1).

X dIP =

m dIP ;

satises the onditions of a onditional probability of X

Exponential in rease of a rabbit population.

Suppose that fXn g is a Galton-Watson pro ess. Re all that in the riti al ase  = 1 we have
seen that the pro ess dies almost surely in nite time. Now we shall give onditions that the
pro ess grows exponentially with positive probability. Assume that the ospring distribution
(given by the sequen e fpng) has
Example:

 mean  = 1n=0 npn > 1 (super riti al ase),

2
2
 positive and nite varian e 2 = 1
n=0 n pn  .
P

We rst show that Mn = Xn=n denes a martingale. To see this re all that there are independent random variables Yk , k 2 A, su h that
Xn =
1fk2T g Yk :
X

k2A;jkj=n 1

The Yk are independent with the distribution given by the sequen e (p0 ; p1; : : :) and
Xn 1 = #fk 2 T; jkj = n 1g :
Let F (n) be the -eld on
 generated by the Yk with jkj  n 1. Note that Xn is F (n)measurable. We see that
IE

Xn 
F (n
n

1) =

X
 nXn 1 IEfYk g = nn 11 :


k2A;jkj=n 1
X

k2A;jkj=n 1

(n 1)

1)

IE 1fk2T g Yk F
1fk2T g IE

Yk F (n

Hen e fMk g is a martingale. As Mk  0 there exists a random variable M  0 with

lim M = M almost surely.
n!1 n

We want to show that IPfM > 0g > 0. For this purpose we show that fMng is uniformly
integrable. If this holds we have
IEM = lim IEMn = 1 ;
n!1

A.BENHARI

125

hen e M  0 annot be identi ally zero so that IPfM > 0g > 0. To he k uniform integrability
it su es to he k L2-boundedness (see Theorem 5.9 ). We have
IEfMn2 jF (n 1)g = IEfMn2 1 jF (n 1)g + IEf2Mn 1 (Mn Mn 1 )jF (n 1)g
+ IEf(Mn Mn 1)2 jF (n 1)g
= Mn2 1 + IEf(Mn Mn 1)2 jF (n 1)g :
To ompute the se ond term observe
IEf(Mn Mn 1 )2 jF (n 1)g =  2n IEf(Xn Xn 1 )2 jF (n 1)g
and that, on fXn 1 = N g,
IE

(Xn

Xn 1 )2 jF (n

Combining this yields

Now, IEfXn 1 g = n

1) = IE

n

k2T;jkj=n 1

N

F (n 1) = N2 = Xn 12 :

= IEfMn2 1g + (2 =2n )IEfXn 1 g :

1 g = n 1 . Hen e,

IEfMn2 g

1 IEfMn

IEfMn2 g

whi h implies by indu tion,

and we infer that the
surely, for all large n,

Yk

= IEfMn2 1 g + n+1 ;
1

X
1
IEfMn2 g  1 +  2
k+1 < 1 ;

n=1
martingale fMng is L2-bounded. Altogether

Xn = Mn n 

we have shown that, almost

2 ;
so that if M > 0 the Galton Watson pro ess in reases exponentially and the event fM > 0g has
positive probability.
10.6

Kolmogorov's strong law of large numbers

In this se tion we give a very short proof of Kolmogorov's strong law of large numbers under
minimal moment onditions. Martingale theory will serve as the major tool.
Theorem 10.15Suppose that fXn g is a sequen e of independent and identi ally distributed integrable random variables. Then

lim 1
n!1 n

k=1

Xk =  almost surely and in L1 ;

where  is the ommon expe ted value of the Xn .

A.BENHARI

126

Proof: Abbreviate Sn = nk=1 Xk . Let G ( n) be the -eld generated by the random variables
Sn ; Sn+1 ; Sn+2 ; : : : and G ( 1) the interse tion of all these elds. From the exer ises we know
P

that

IEfX1 jG

( n)g = Snn almost surely:

Hen e, by Levy's downward theorem,

1 n X = lim IEfX1 jG ( n)g = IEfX1 jG ( 1)g almost surely and in L1 :
lim
k n!1
n!1 n
X

k=1

Now the limit is measurable with respe t to the tail -eld T of the sequen e fXng and, as this
has only events of probability zero or one (by Kolmogorov's 0-1-law), we have IEfX1 jG ( 1)g = 
almost surely for some onstant value . Be ause we have L1- onvergen e we also have
 = IE

and this nishes the proof.

A.BENHARI

Sk
IEfSk g
lim
=
lim
= IEXn for all n;
k!1 k
k!1 k
o

127

11.The Donsker invariance principe

Suppose we have a high pre ision ma hine whi h produ es units of given length. Many very
small ee ts hange the adjustment of the ma hine slightly, so that after some time the small
perturbations have summed up and the ma hine needs readjustment. Indeed ea h of these small
perturbations is again the sum of many small ee ts, so that the total perturbation after time
t is
[nt
P (t) = Xk
X

k=1

where Xk are the independent perturbations o urring in the time interval [k=n; (k + 1)=n)
satisfying IEfXk g = 0 and varian e of order 1=n. If we onsider in reasingly small ee ts, we
in rease the n and the question is whether this leads to onvergen e of the pro ess fP (t)g to a
limit pro ess, whi h would then be a good model for the perturbing pro ess. This is the problem
of a fun tional entral limit theorem, whi h we address in this hapter. The main result is that
all random walks whose in rements have nite varian e an be res aled so that they onverge
in distribution to Brownian motion.
We start with a proper denition of the onvergen e of distributions on fun tion (and more
general metri ) spa es.
11.1 Convergen e of distributions on metri spa es

The on epts of onvergen e of random variables we have studied so far,

 almost sure onvergen e,
 onvergen e in probability,
 L1 - onvergen e (and Lp- onvergen e),
refer to the sequen es of random variables fXn g onverging to a random variable X all on the
same probability spa e. The values of the approximating sequen es lead to on lusions about
the values of the limit random variable. This is entirely dierent for onvergen e in distribution,
whi h we now study. Intuitively if fXn g onverges in distribution to X , this just means that the

A.BENHARI

128

shape of the distributions of Xn for large n is like the shape of the distribution of X . Sample
values from Xn allow no inferen e towards sample values from X and, indeed, there is no need
to dene Xn and X on the same probability spa e. In fa t, onvergen e in distribution is only
related to the onvergen e of the distributions of the random variables and not to the random
variables themselves.
We start by giving a denition of onvergen e in distributions for random variables in metri
spa es, explore some of its properties and then show that the on ept of onvergen e in distribution for real-valued random variables known from the previous ourse is onsistent with our
denition.
Denition: Suppose (M; d) is a metri spa e and A the Borel--eld on M . Suppose that Xn
and X are M -valued random variables. Then we say that Xn onverges in distribution to X , if,
for every bounded ontinuous g : M ! IR,
lim IEfg(Xn )g = IEfg(X )g:
n!1
We write Xn ) X for onvergen e in distribution.
Warning: If M = IR and Xn ) X this does not imply that IEfXn g onverges to IEfX g. Note
that g(x) = x is not a bounded fun tion on IR.
Here is an alternative approa h, whi h shows that onvergen e in distribution is in fa t a onvergen e of the distributions. The statement of the following proposition is trivial.
Proposition 11.1Let Prob(M ) be the set of probability measures on (M; A). A sequen e fPn g 
Prob(M ) onverges weakly to a limit P 2 Prob if, for every ontinuous, bounded fun tion g :
M ! IR,
Z
Z
lim g dPn = g dP :
n!1

Then the limit of a onvergent sequen e is uniquely determined. Suppose that Xn and X are M valued random variables. Then Xn onverges in distribution to X , if and only if the distributions
of Xn onverge weakly to the distribution of X .

Proof: Only the uniqueness of the limit needs proof. If P and Q are two limits of the same
sequen e, then f dP = f dQ for all bounded ontinuous f : M ! IR. For every open set
G  M we may hoose an in reasing sequen e fn(x) = nd(x; G ) ^ 1 of ontinuous fun tions
onverging to 1G and infer from monotone onvergen e that P (G) = Q(G). Now P = Q follows
from the Uniqueness Theorem.
R

In omplete, separable metri spa es M weak onvergen e stems from a suitably dened metri
on the spa e Prob(M ). The ase M = IR will be dis ussed as an exer ise.
Examples:

 Suppose M = f1; : : : ; mg is nite and d(x; y) = 1 1fx=yg . Then Xn ) X if and only if

limn!1 IPfXn = kg = IPfX = kg for all k 2 M .
 Let M = [0; 1 and Xn = 1=n almost surely. Then Xn ) X , where X = 0 almost surely.
However, note that limn!1 IPfXn = 0g = 0 =6 IPfX = 0g = 1.

A.BENHARI

129

Theorem 11.2 Suppose a sequen e fXn g of random variables onverges almost surely to a random variable X (of ourse, all on the same probability spa e). Then Xn onverges in distribution
to X .

Suppose g is bounded and ontinuous. The g(Xn ) onverges almost surely to g(X ).
As the sequen e is bounded it is also uniformly integrable, hen e onvergen e holds also in the
L1 -sense and this implies onvergen e of the expe tations, i.e. IEfg(Xn )g ! IEfg(X )g.
Proof:

Theorem11.3 (Portmanteau Theorem) The following statements are equivalent

(i) Xn ) X .

(ii) For all losed sets K  M , limsupn!1 IPfXn 2 K g  IPfX 2 K g.

(iii) For all open sets G  M , liminf n!1 IPfXn 2 Gg  IPfX 2 Gg.

(iv) For all Borel sets A  M with IPfX 2 Ag = 0, limn!1 IPfXn 2 Ag = IPfX 2 Ag.
(v) For all bounded measurable fun tions g : M
have IEfg(Xn )g ! IEfg(X )g.

! IR with IPfg is dis ontinuous at X g = 0 we

Proof:

Let gn(x) = 1 (nd(x; K ) ^ 1), whi h is ontinuous and bounded, is 1 on K and

onverges pointwise to 1K . Then, for every n,
limsup IPfXk 2 K g  limsup IEfgn (Xk )g = IEfgn (X )g :

(i))(ii)

k!1

k!1

Let n ! 1. The integrand on the right hand side is bounded by 1 and onverges pointwise
and hen e in the L1 -sense to 1K (X ).
(ii))(iii) Follows from 1G = 1 1K for the losed set K = G .
(iii))(iv) Let G be the interior and K the losure of A. Then, by assumption, IPfX 2 Gg =
IPfX 2 K g = IPfX 2 Ag and we may use (iii) and (ii) (whi h follows immediately from
(iii)) to get
limsup
IPfXn 2 Ag  limsup IPfXn 2 K g  IPfX 2 K g = IPfX 2 Ag;
n!1
n!1
liminf
IPfXn 2 Ag  liminf IPfXn 2 Gg  IPfX 2 Gg = IPfX 2 Ag:
n!1
n!1

From (iv) we infer that the onvergen e holds for g of the form g(x) = Nn=1 an1An
where An satises IPfX 2 Ang = 0. Let us all su h fun tions elementary. Given g as in
(v) we observe that for every a < b with possibly a ountable set of ex eptions
IP X 2  fx : g (x) 2 (a; bg = 0 :

(iv))(v)

A.BENHARI

130

Indeed, if X 2  fx : g(x) 2 (a; bg then either g is dis ontinuous in X or g(X ) = a or

The rst event has probability zero and so have the last two ex ept possibly for
a ountable set of values of a; b. By de omposing the real axis in small suitable intervals
we thus obtain an in reasing sequen e gn and a de reasing sequen e hn of elementary
fun tions both onverging pointwise to g. Now, for all k,
limsup
IEfg (Xn )g  limsup IEfhk (Xn )g = IEfhk (X )g ;
n!1
n!1
g(X ) = b.

and

liminf
IEfg (Xn )g  liminf IEfgk (Xn )g = IEfgk (X )g :
n!1
n!1
and the right sides onverge, as k ! 1, by bounded onvergen e, to IEfg(X )g.
(v))(i) This is trivial.
To remember the dire tions of the inequalities in the Portmanteau Theorem it is useful to re all
the last example Xn = 1=n ! 0 and hoose G = (0; 1) and K = f0g to obtain ases where the
opposite inequalities fail.
The notion of onvergen e in distribution for real valued random variables is already known
from the previous ourse. We an now see, that the on epts agree for the ase of real random
variables.
Theorem 11.4(Helly-Bray Theorem) Let Xn and X be real valued random variables and
dene the asso iated distribution fun tions Fn (x) = IPfXn  xg and F (x) = IPfX  xg. Then
the following assertions are equivalent.
(a) Xn onverges in distribution to X ,

(b) nlim
!1 Fn (x) = F (x) for all x su h that F is ontinuous in x.

Proof:

Use property (iv) for the set A = ( 1; x.

(b))(a) We hoose a dense sequen e fxn g with IPfX = xn g = 0 and note that every open set
G  IR an be written as the ountable union of disjoint intervals Ik = (ak ; bk with ak ; bk
hosen from the sequen e. We have
lim IPfXn 2 Ik g = nlim
n!1
!1 Fn (bk ) Fn (ak ) = F (bk ) F (ak ) = IPfX 2 Ik g :
Hen e, for all N ,

(a))(b)

liminf
IPfXn 2 Gg 
n!1

k=1

liminf
IPfXn 2 Ik g =
n!1

and as N ! 1 the last term onverges to IPfX 2 Gg.

A.BENHARI

131

k=1

IPfX

2 Ik g ;

We nish this se tion with an easy observation, whi h follows dire tly from the denition:
Lemma 11.5 If Xn ) X and g : M ! IR is ontinuous, then g(Xn ) ) g(X ).
11.2 The Donsker Invarian e Prin iple: Statement and Appli ations

Let fXn g be a sequen e of independent and identi ally distributed random variables and assume
that they are normalized, so that IEfXn g = 0 and Var(Xn ) = 1. This assumption is no loss of
generality, be ause if Xn has nite varian e we an always onsider the normalization
Xpn

IEfXn g

Sn =

Var(Xn ) :
We look at the random walk generated by the sequen e
n

k=1

Xk ;

and interpolate linearly between the integer points, i.e.

S (t) = S[t + (t [t)(S[t+1 S[t ) :
This denes a random fun tion S 2 C [0; 1). We now dene a sequen e
fS ng of random
p
fun tions in C [0; 1 by s aling S with a fa tor n in the time and a fa tor n in the spa e axis.
More pre isely
S (nt)
S n (t) = p for all t 2 [0; 1.
n
Theorem11.6 (Donsker's Invarian e Prin iple) On the spa e C [0; 1 of ontinuous fun tions on the unit interval with the metri indu ed by the sup-norm, the sequen e fS n g onverges
in distribution to a standard Brownian motion fB (t) : t 2 [0; 1g.

The theorem is also alled fun tional entral limit theorem. Before dis ussing the proof, we
shall dis uss onsequen es and appli ations of the theorem. Using the normalization indi ated
before one obtains that fXn g is any sequen e of independent and identi ally distributed random
variables with expe tation  and nite, positive varian e 2, then fS ng onverges in distribution
to a Brownian motion with drift parameter  and diusion parameter 2.
As a rst appli ation we prove a entral limit theorem with minimal moment onditions.
Theorem 11.7(Central Limit Theorem) Suppose that fXk g is a sequen e of independent,
identi ally distributed random variables with IEfXk g = 0 and Var(Xk ) = 1. Then

p1

n k=1

Xk ) X ;

where X is a standard normally distributed random variable.

A.BENHARI

132

Proof:

Consider the ontinuous fun tion g : C [0; 1 ! IR dened by g(f ) = f (1). Then
n
p1 X = g(S n )
X

n k=1

and g(B ) is standard normally distributed. Hen e the statement follows from Donsker's theorem
by means of Lemma 6.5.
The next two theorems give examples why the name invarian e prin iple is justied. The limits
we obtain are invariant under (i.e. do not depend on) the hoi e of the exa t distribution of the
random variables Xn. A spe ial ase of interest is IPfXn = 1g = 1=2 = IPfXn = 1g in whi h
ase the asso iated random walk is the symmetri random walk.
Theorem 11.8 Suppose that fXk g is a sequen e of independent, identi ally distributed random
variables with IEfXk g = 0 and Var(Xk ) = 1. Let fSn g be the asso iated random walk and
Mn = maxfSk

: 0  k  ng

its maximal value up to time n. Then, for all x 2 IR,

p
2
lim
IPfMn  x ng = p
n!1
2

1
x

y2 =2 dy :

Proof: Suppose that g : IR ! IR is a ontinuous bounded fun tion. Dene a ontinuous bounded

fun tion G : C [0; 1 ! IR by
G(f ) = g max f (x) :
x2[0;1


Then, by denition,
IE

G(S n )

= IE

and

IE

n 

g 0max
t1

G(B )

n 
o
S (tn) o
pn = IE g max0pknn Sk ;
n 

= IE

Hen e, by Donsker's Theorem,

lim IE
n!1

n 

o

g 0max
B (t) :
t1

o
n 
o
M
pnn = IE g 0max
B
(
t
)
:
t1

From the Portmanteau Theorem and the re e tion prin iple we infer
lim IPfMn  xpng = IPf0max
B (t)  xg = 2IPfB (1)  xg ;
n!1
t1
and the latter probability is the given integral.

A.BENHARI

133

Theorem 11.9(Ar -sine law for the last sign- hange) Suppose that fXk g is a sequen e of
independent, identi ally distributed random variables with IEfXk g = 0 and Var(Xk ) = 1. Let
fSng be the asso iated random walk and
Nn = maxf1  k  n : Sk Sk 1  0g

the last time the random walk hanges its sign before time n. Then Nn =n onverges in distribution to a random variable with density

In parti ular, for all x 2 (0; 1),

1
x(1

x)

for x 2 (0; 1):

p
2
lim
IPfNn  xng = ar sin( x) :
n!1


Remark: Note that this is surprising: the probability is high that Nn =n is near 0 or 1.
Proof: Step 1: Dene a bounded fun tion g on C [0; 1 by
g(f ) = maxft  1 : f (t) = 0g:

It is lear that g(S n ) diers from Nn=n by a term, whi h is bounded by 1=n and hen e vanishes
asymptoti ally. Hen e Donsker would imply onvergen e of Nn=n in distribution to
g(B ) = supft  1 : B (t) = 0g
if g was ontinuous. g is not ontinuous, but we shall see that g is ontinuous on the set C of all
f 2 C [0; 1 su h that f takes positive and negative values in every neighbourhood of every zero
and f (1) 6= 0. We shall also see that Brownian motion is almost surely in C . From property (v)
in the Portmanteau Theorem we an infer that, for every ontinuous bounded h : IR ! IR,
lim IE
n!1

n 

n
o
n
o
n
o
Nn o
=
lim
IE h g (S n ) = IE h g (B ) = IE h(supft  1 : B (t) = 0g) :
n!1
n

Step 2: g is ontinuous on C .
Let " > 0 is given and f 2 C . Let

and hoose 1 su h that

0 =

min jf (t)j ;

t2[g(f )+";1

1 ; 1 )  f (g(f ) "; g(f ) + ") :

Let 0 < < 0 ^ 1 . If now kh f k1 < , then h has no zero in (g(f ) + "; 1, but has a zero
in (g(f ) "; g(f ) + "), be ause there are s; t 2 (g(f ) "; g(f ) + ") with h(t) < 0 and h(s) > 0.
Thus jg(h) g(f )j < ".
Step 3: Almost surely, every neighbourhood of every zero of Brownian motion fB (t) : 0  t 
1g ontains positive and negative values and B (1) 6= 0.
Obviously, B (1) 6= 0 almost surely. For ea h rational q 2 [0; 1) let tq be the rst zero of
Brownian motion after q. As tq is a stopping time we know from the strong Markov property

A.BENHARI

134

that fB (t + tq ) : t  0g is a Brownian motion and by Theorem 4.9, almost surely, there exist
positive and negative values in every small interval to the right of tq . Taking the union over all
rationals gives that, almost surely, all the zeroes of the form tq have positive and negative values
in every neighbourhood. But if t is a zero whi h is not equal to tq for any rational q there exists,
for every rational q < t a zero tq in the interval [q; t), hen e t has positive and negative values
in every small interval to its left.
Step 4: Cal ulate the distribution of the random variable L = supft  1 : B (t) = 0g.
This will be done with the help of the Markov property and the re e tion prin iple. Write
Ta = inf ft > 0 : B (t) = ag ;
whi h is a stopping time. We get the distribution of Ta from the re e tion prin iple, let a  0,
1 1
p exp( x2=2t) dx ;
IPfTa  tg = IPf sup B (s)  ag = 2IPfB (t)  ag = 2
2t
a
0st
Z

hange variables x = ( t=s)a, dx=ds = apts 3=2=2,

0
t
p
= 2 t p21t exp( a2 =2s)( ta=2s3=2 ) ds = 0 p 1 3 a exp( a2=2s) ds:
2s
The latter integrand is hen e the density of Ta. Re all now that B under IPx is a Brownian
motion with start in x. We now use the Markov property,
IPfL  sg = IE IEf1fT (s )>1 sg jF 0 (s)g
= IE IPB(s) fT0 > 1 sg
1
1
= 2 0 p21s exp( x2 =2s) 1 s p21r3 x exp( x2=2r) dr dx
1 1
1
p
= 1
x exp( x2 (r + s)=2rs) dx dr
p

 1
Z

sr3 0
p1 3 r rs
dr
1 s sr + s
Z 1 
(r + s)2 1=2 s dr;
 1 s
rs
(r + s)2
and substitute t = s=(r + s) with dt = s=(r + s)2dr to see that this equals

= 1
= 1

 0

1 dt = 2 ar sin(px) :

t(1 t)

For the proof of the Donsker invarian e prin iple we have essentially two possibilities:
 Suppose that a subsequen e of fS ng onverges in distribution to a limit X . This limit
is a ontinuous random fun tion, whi h is easily seen to have stationary, independent
in rements. Hen e it is a Brownian motion and one an he k that it must have drift 0
and varian e 1. So Brownian motion is the only possible limit point of the sequen e fS ng.
The di ult part of this proof is to show that every subsequen e of fS n g has a onvergent
subsubsequen e (the tightness property).

A.BENHARI

135

 We will follow the idea behind Theorem 6.2 and onstru t the random variables
X1 ; X2 ; X3 ; : : : on the same probability spa e as the Brownian motion in su h a way that
fS n g is with high probability lose to a Brownian motion. This is alled embedding the

random walk in to Brownian motion and an be done with the famous embedding theorem
of Skorokhod (1965).
As the rst approa h is more measure theoreti , we will prefer the se ond approa h, whi h
represents a typi al te hnique in probability theory. The proof uses almost all the te hniques
we have developed in the le ture so far.
11.3 The Skorokhod Embedding Theorem
Theorem11.10 (Skorokhod Embedding Theorem) Suppose that X is a real valued random
variable with IEfX g = 0 and IEfX 2 g < 1. Then X and a Brownian motion fB (t) : t  0g
an be dened on a joint probability spa e su h that there exists a stopping time T su h that
IEfT g = IEfX 2 g < 1 and, almost surely, B (T ) = X .
Examples:

 Dene the produ t spa e

1
C [0; 1), where
1 is a probability spa e on whi h X an

be dened and the se ond fa tor is Wiener spa e. Simply let

T = inf ft  0 : B (t) = X g :
Then B (T ) = X , as required, but this simple re ipe gives no guarantee that IEfT g < 1.
In fa t, the next example shows that this annot always be the ase.
 To see that some onditions have to be imposed on the X for the theorem to hold true
onsider X = 1 onstant. In order to have T with B (T ) = X = 1 we have to hoose
T  inf ft  0 : B (t) = 1g: We have seen (exer ise) that this implies IEfT g = 1, so that
the theorem annot hold in this situation.
 Now assume that X may take two values a < b. In order that IEfX g = 0 we must have
a < 0 < b and
b
a
IPfX = ag =
and
IPfX = bg =
:
b a
b a
Choosing
T = inf ft : B (t) 62 (a; b)g ;
we have seen in Theorem 5.5 that B (T ) = X has the given distribution. Moreover, by a
re ent exer ise, IEfT g = ab is nite.
Proof: We will use the last example as a building blo k for the general ase. The idea is to
hoose the boundaries of an interval (U; V ) at random so that the Brownian motion at the rst
exit time from this interval has the right distribution.
Write P for the distribution of X . Then
0
1
= E fX g =
(
u) dP (u) = E fX + g =
v dP (v) :
1
0
Z

A.BENHARI

136

If ' is bounded, measurable with '(0) = 0, then

Z

'(x) dP (x)

+
=
Z

Z

( u) dP (u)
1

Z

'(u) dP (u)

dP (v)

Z

'(v) dP (v)
1

We thus obtain the key formula

1 1 dP (v)
'(x) dP (x) =
Z

Z

dP (u)(v

v dP (v)

dP (u)(v'(u) u'(v)):
v

u)

v u

'(u) +

o
u
'(v) :
v u

Note that the expression in the urly bra kets is IEf'(B (T ))g, where T is the rst exit time of
the interval (u; v). We now let (
1; A1; IP1) be a probability spa e on whi h a pair (U; V ) of
random variables an be dened with U  0 and V  0 and distribution given by
IP1 f(U; V ) = (0; 0)g = P fX = 0g
and, for Borel sets A  ( 1; 0)  (0; 1),
1
IP1 f(U; V ) 2 Ag =
dP (u) dP (v)(v u) :
ZZ

(u;v)2A

Note that this properly denes the distribution of the random ve tor (U; V ). We formally dene
probability measures u;v on fu; vg by 0;0 f0g = 1 and
and u;v fvg = v uu for u < 0 < v:
With this denition the key formula an be written as follows. For all bounded measurable
fun tions ',
'(x) dP (x) = IE1 '(x)U;V (dx) :
Now dene the produ t spa e
(
; A; IP) = (
1; A1 ; IP1)
(C [0; 1); A0 ; IP0 )
of
1 and Wiener spa e. Observe that (U; V ) and fB (t) : t  0g are independent random
variables on this spa e. Dene
T = inf ft  0 : B (t) 62 (U; V )g:
This an be seen either as a stopping time with respe t to F + (t)  A onditional on U = u and
V = v or, on the whole spa e, as a stopping time with respe t to the ltration F (t) = A
F + (t).
Our key formula gives (denoting expe tations with respe t to IP0 by IE0 and expe tations with
respe t to IP1 by IE1), by Fubini's Theorem,
u;v fug =

v
v u

(B (T ))g = IE1 fIE0 f'(B (T ))gg = IE1

IEf'

A.BENHARI

nZ

nZ

'(x)U;V (dx)

137

'(x) dP (x) = E f'(X )g:

Hen e B (T ) and X have the same distribution. It remains to show that IEfT g < 1. First re all
that
IEfT g = IE1 fIE0 fT gg = IE1 f UV g:
Now we use the distribution of (U; V ), using the alternative expressions for = 01 v dP (v) =
0 ( u) dP (u),
1
1 0 dP (u)( u) 1 dP (v) v(v u)
IE1 f UV g =
R

=
=
=

dP (u)( u)

u+

dP (v)

1 2
v dP (v)

( u)2 dP (u) + 0
E f(X )2 g + E f(X + )2 g
1

v2 o

E fX 2 g:

Note that we had to enlarge Wiener spa e in order to dene T . This an be avoided (Dubin's
For the purpose of our proof the Skorokhod representation is satisfa tory, it
allows, by means of the Markov property, to embed the whole random walk in the Brownian
motion.
stopping rule).

Corollary11.11 Suppose that X1 ; X2 ; X3 ; : : : are independent, identi ally distributed real valued
random variables with mean zero and varian e 1. Then there exists a sequen e of stopping
times 0 = T0  T1  T2  T3  : : : su h that the in rements Tn Tn 1 are independent,
identi ally distributed, IEfTn g = n < 1 and, almost surely, the sequen e fB (Tn ) : n  1g has
the distribution of the random walk fSn g asso iated with fXn g.
Proof: We dene the spa e (
1 ; A1 ; IP1 ) su h that a sequen e of independent variables (Un ; Vn )
an be dened for Xn as in the proof before. Then we an dene
T1 = inf ft  0 : B (t) 62 (U1 ; V1 )g
and obtain B (T1) = X1 in distribution and IEfT1 g = 1. By the strong Markov property
fB2(t) : t  0g = fB (T1 + t) B (T1 ) : t  0g
is again a Brownian motion and independent of F (T ) and, in parti ular, of (T1 ; B (T1 )). Hen e
we an dene a stopping time
T2 = T1 + inf ft  0 : B2 (t) 62 (U2 ; V2 )g
and observe that T2 T1 is independent of T1 with the same distribution and B (T2 ) B (T1) =
B2 (T2 T1 ) has the same distribution at X2 and is independent of X1 . Furthermore IEfT2 g = 2.
We an pro eed indu tively to get the orollary.

We have thus embedded the random walk fSn g into Brownian motion. In the next se tion we
use this to prove Donsker's Theorem.

A.BENHARI

138

11.4 The Donsker Invarian e Prin iple: Proof

We an now work with the sequen e

0 = T0  T1  T2  T3 < : : :
dened by the orollary to the Skorokhod embedding theorem, su h that Sn = B (Tn) is the
embedded random walk. We dene W n 2 C [0; 1 by
B (nt)
W n(t) = p for t 2 [0; 1 :
n

From the s aling property of Brownian motion we an see that all the random fun tions W n are
standard Brownian motions. We show that, for all " > 0,
lim IP kW n S nksup > "g = 0 :
(6.1)
n!1
Let us rst see why (6.1) implies the theorem. Suppose that K  C [0; 1 is losed and dene
K [" = ff 2 C [0; 1 : kf gksup  " for some g 2 K g:
Then
IPfS n 2 K g  IPfW n 2 K ["g + IPfkS n W n ksup > " :
By (6.1) the se ond term goes to 0 and the rst term is equal to IPfB 2 K ["g for a Brownian
motion B , independently of n. As K is losed we have
lim IPfB 2 K ["g = IP B 2 K [" = IPfB 2 K g:
"!0
n

">0

Altogether,

limsup
IPfS n 2 K g  IPfB 2 K g ;
n!1
whi h is ondition (iii) in the Portmanteau Theorem. It just remains to prove (6.1).
Let An be the event that there exists t 2 [0; 1 su h that jS n(t) W n(t)j > ". We have to show
IP(An ) ! 0. Let k = k (t) be the unique integer with (k 1)=n  t < k=n. Be ause S n is linear
on su h an interval we have
S
S
An  9t : pk W n (t) > " [ 9t : pk 1 W n (t) > " :
n
n




As Sk = B (Tk ) = pnW n(Tk =n), we obtain

An 

9t : W n Tnk

W n(t) > "

[ 9t : W n Tkn 1
n

For given 0 < < 1 the event on the right implies that either
9s; t 2 [0; 2 : js tj < ; jW n(s) W n(t)j > "
or
9t 2 [0; 1 : jTk =n tj _ jTk 1=n tj  :
n

A.BENHARI

139

W n (t) > " :

Note that the probability of the rst event does not depend on n. Choosing > 0 small, we an
make the rst probability as small as we wish, sin e Brownian motion is uniformly ontinuous
on [0; 2. It remains to show that for arbitrary, xed > 0,
lim IP 9t : jTk =n tj _ jTk 1=n tj  = 0 :
(6.2)
n!1
To prove this we use that
n
lim Tn = lim 1 (T T ) = 1 almost surely.
n

n!1

n!1 n

k=1

k 1

This is Kolmogorov's law of large numbers for the sequen e fTk Tk 1g of independent identi ally
distributed random variables with mean 1. Observe that for every sequen e fan g of reals one
has
lim an = 1 ) nlim
jak kj=n = 0 :
n!1 n
!1 0sup
kn
This is a matter of plain (deterministi ) arithmeti . Hen e we have,
lim IP sup jTk n kj  = 0 :
n!1
n

(6.3)

0kn

Now re all that t 2 [(k 1)=n; k=n and let n > 2=. Then
IP 9t : jTk =n tj _ jTk 1 =n tj 
 IP sup (Tk (k 1))n _ (k Tk 1) 
0kn
 IP sup Tk k  =2 + IP sup (k 1)
n

0kn

1kn

Tk 1

 =2 ;

whi h by (6.3) onverges to 0. Hen e (6.2) and Donsker's invarian e prin iple are proved.

A.BENHARI

140

12.An outlook to stochastic integration

Looking ba k through the material of this ourse one an see that the emphasis was on ontinuous
time pro esses, and in parti ular Brownian motion, rather than dis rete time pro esses. The
only notable ex eption was the hapter on martingales, where we were dealing ex lusively with
dis rete time martingales (and, in fa t, some extra eort was needed to apply the results to
Brownian motion). It is quite easy to dene martingales also in ontinuous time.
Denition: Let (
; A; IP) be a probability spa e and fF (t) : t  0g a olle tion of sub--elds
with F (s)  F (t) for all s  t, in other words a ltration. A pro ess fX (t) : t  0g is alled a
martingale if
IE X (t) F (s) = X (s) almost surely, for all s  t:




Theorem12.1 Standard Brownian motion is a martingale.

Choose the ltration F (t) = F +(t) and use the weak Markov property, to see
IE X (t) F (s) = IEX (s) fB (t s)g = X (s) ;
for all s  t.
Proof:

The rst major step in the dis rete time martingale theory and the key step to all later theorems
was the You- an't-beat-the-system-Theorem. Finding a ontinuous time analogue of this is a
major problem for us. Re all that we were using a bounded, previsible pro ess fCn g, to dene
the martingale transform
n
(C  X )n = Ck (Xk Xk 1):
X

k=1

Cn , the stake at the game Xn Xn 1 , had to be measurable with respe t to F (n 1). All
major theorems about martingales were derived from the fa t that the martingale transform
again denes a martingale. Re all that (C  X )k an be interpreted as our total prot at time
k if Cn is the number of items of a good we possess at time n and fXn g is the pri e pro ess of
one item of the good. It is lear that su h a pro ess would be of great pra ti al and theoreti al
interest in a ontinuous time setting, however it is un lear how it ould be dened and also what
the appropriate ondition for the stake pro ess fC (t)g ould be.

A.BENHARI

141

Instead of solving this problem now, we rst try a pathwise approa h for integration with respe t
to a standard Brownian motion fB (t) : t 2 [0; 1g. The most natural idea would be to dene a
Stieltjes integral
t
f (s) dB (s):
0
This would mean we let, for n  2,

n = f0 = tn0 < tn1 < tn2 <


< tnn = 1g
be a olle tion of partitions with
n 
n+1 su h that the mesh of the partition
n n
n = max
(t tni 1)
i=1 i
Z

onverges to 0. One would then hope that

lim
n!1

k=1

f (tnk 1 )(B (tnk ) B (tnk 1))

onverges almost surely to a limit, whi h would be a reasonable generalization of the martingale
transform. However, we shall see that su h a limit may fail to exist.
Theorem12.2 Suppose f
n g is a sequen e of partitions as above with mesh n ! 0. Then,
almost surely, there exists a measurable, ontinuous fun tion f : [0; 1 ! [ 1; 1 su h that

limsup
n!1

k=1

f (tnk 1)(B (tnk ) B (tnk 1 )) = 1:

To prove this, we rst prove a positive result of independent interest. We show that Brownian
motion has nite quadrati variation.
Theorem12.3(Quadrati variation) Suppose f
n g is a sequen e of partitions

n = fs = tn0 < tn1 < tn2 <


< tnn = tg

with
n 
n+1 and mesh n ! 0. Then,
lim

n!1

k=1

(B (tnk)

B (tnk 1 ))2 = t s in the L2 -sense.

In parti ular, a subsequen e onverges almost surely.

Proof:

We have to show that

lim IE
n!1

A.BENHARI

n X

k=1

(B (tnk)

B (tnk 1))2

(t

142

 o

s)

= 0:

Using the independen e of the in rements of Brownian motion, one an get that,
IE

n X

(B (tnk)

k=1

=
=
=


IE

n X

B (tnk 1))2

(B (tnk)

k=1 l=1
n n
X
IE
k=1
n n
X
IE
k=1

s)

B (tnk 1))2

k=1
n n
IE

(B (tnk)

XX

 o

(t

 o

2(t

s)IE

nX

(B (tnk)

k=1

B (tnk 1))2 (B (tnl ) B (tnl 1 ))2

o

(B (tnk)

B (tnk 1 ))4

(B (tnk)

B (tnk 1 ))4 :

XX

k=1 ll6==1k

(tnk

tnk 1)(tnl

B (tnk 1 ))2

(t
tnl 1 )

+ (t

s)2

s)2

(t

s)2

For every normally distributed random variable X with  = 0 we have, by partial integration,
2 1 x4 exp( x2=22 ) dx
IEfX 4 g = p
22 01
= p 2 2 0 3x2 2 exp( x2=22 ) dx
2
= 32 IEfX 2 g = 3IEfX 2 g2 :
We infer that
Z

k=1

IE

(B ( )
tnk

B(

)) = 3 (tnk

tnk 1 4

k=1

tnk 1 )2  3n (t s) ! 0 ;

whi h proves the L2 - onvergen e. It is lear that this implies the existen e of an almost surely
onvergent subsequen e.
f
ng is a sequen e of partitions

n = fs = tn0 < tn1 < tn2 <


< tnn = tg
of a nondegenerate interval [s; t with
n 
n+1 and mesh n ! 0. Then, almost surely,
Corollary12.4(Unbounded variation) Suppose

limsup
n!1

k=1

jB (tnk) B (tnk 1)j = 1.

Proof: By the Holder property we an nd, for any  2 (0; 1=2), an n su h that jB (a) B (b)j 
ja bj for all a; b 2 [s; t with ja bj  n . Using the quadrati variation of Brownian motion

in the penultimate step, almost surely,

limsup
n!1

A.BENHARI

k=1

1
jB (tnk) B (tnk 1)j  limsup
n!1 

(B (tnk)

n k=1

143

(t s)
B (tnk 1))2  nlim
!1 n

= 1:

Proof of Theorem 12.2: Given

f
ng we observe that the set of partition points

n=1
n is
ountable and let
1 
be a set with IP(
1 ) = 1 su h that the statement of the orollary
holds simultaneously for the partitions indu ed by
n on all intervals bounded by a xed pair
of partition points. We have to onstru t the fun tion f so that

limsup
n!1

l=1

f (tnl 1)(B (tnl ) B (tnl 1 )) = 1 :

By the previous orollary we rst nd a large n = n(0) su h that

nX1
l=1

jB (tnl) B (tnl 1)j > 3=2;

and jB (tnn) B (tnn 1)j < 1=2. Then dene f to be onstant 1 or 1 on [tnl 1; tnl ), a ording to
the sign of the in rement B (tnl) B (tnl 1). Then
n

l=1

nX1

f (tnl 1 )(B (tnl ) B (tnl 1)) =

l=1

jB (tnl) B (tnl 1)j + f (tnn 1)(B (tnn) B (tnn 1)) > 1;

if jf (tnn 1)j  1. Now hoose n = n(1) so large that, in the remaining interval I = [tnn(0)
(0)
n

l=m

n(0)
1 ; tn(0) ,

jB (tnl) B (tnl 1)j > 2 + 1=2;

n
n
where m is the index with tnm 1 = tnn(0)
(0) 1 , and jB (tn ) B (tn 1 )j < 1=2. On ea h interval
[tnl 1 ; tnl), for m  l < n, hoose f onstant equal to 1=2 or 1=2 a ording to the sign of the
in rement. Pro eed like this indu tively, always rening until the variation in the remaining
interval ex eeds 2k + 1=2 and hoosing the value of f on the partition sets from 2 k . This
denes a measurable fun tion f , bounded by 1, be ause after k steps the values of f are all
determined up to distan e 2 k in the sup-norm. Also, for every k the sum
n

l=1

f (tnl 1 )(B (tnl ) B (tnl 1 )) ;

with n = n(k) is at least k. This proves Theorem 7.2.

Altogether, we have seen that this pathwise approa h does not lead to a satisfa tory notion of an
integral with respe t to Brownian motion. We have arried out the expli it onstru tion of the
bad fun tion f in order to demonstrate one point: f was hosen dependently on the Brownian
motion and, moreover, the onstru tion of f on an interval (0; t) required knowledge about the
Brownian motion at times s > t. As we are interested in integrands whi h, in a suitable sense,
do not look in the future, there might be other ways of dening an integral. Starting point of
su h an approa h would be to dene exa tly the lass of integrands we will onsider.
The on ept of sto hasti integration is a solution to this problem and permits a powerful extension of martingale theory to a ontinuous setting. It will turn out that the fa t that Brownian

A.BENHARI

144

motion is of unbounded variation destroys many typi al properties of the integral | most notably the hange of variables formula. But they are repla ed by new ones, so that the sto hasti
integrals provides a new type of al ulus, the sto hasti al ulus. In the next ourse we shall
present the ornerstones of this theory. Sto hasti al ulus will enable us to obtain deeper
insight in the properties of Brownian motion and also dene interesting new pro esses, the diffusions. Sto hasti al ulus allows elegant proofs of nontrivial probabilisti theorems and opens
the door to some nontrivial appli ations, for example in the mathemati s of nan ial markets
or sto hasti dierential equations.

A.BENHARI

145

13.Exercises

An ele tri al ir uit onsists of a series of n identi al elements. The lifetimes

of these elements are independent and with parameter  exponentially distributed, i.e. for
the lifetime of the nth element we have a distribution fun tion Fn with Fn(t) = 1 e t .
Suppose that we have one reserve element of the same type whi h an instantly repla e
ea h element in the series in ase of a breakdown.
(a) Show that the distribution fun tion F of the total lifetime of this system satises
nt for t > 0.
F (t) = 10 (nt + 1)e
for t  0.
(b) What is the expe ted lifetime of the system?
Question: We hoose a random hord on a ir le of radius r in the plane and let X
be its length. Find an appropriate probability spa e for the situation and al ulate the
probability that X is larger than the sidelength of the unilateral triangle ins ribed in the
ir le if
(a) the two endpoints of the hord are hosen independently and uniformly on the ir umferen e of the ir le,
(b) the distan e of the hord to the origin is uniformly hosen from (0; r),
( ) the entre of the hord is uniformly hosen from the disk?

1st Question:

2nd

3rd Question:

(a) Give an example of a measurable spa e (

; A) and two dierent probability measures
P1 ; P2 , whi h agree on a generator of A.
(b) Suppose that (
; A) and (
0 ; A0) are measurable spa es and X :
!
0 a mapping.
Show that if the -eld A0 is generated by a olle tion B  A0 and X 1(B ) 2 A for
all B 2 B, then X is measurable.
4th Question: Suppose
 IR2 is a Borel set with `2 (
) = 1 and onsider on the probability
spa e (
; B(
); `2 j
) the random variables
X : (x; y) 7! x; Y : (x; y) 7! y:

A.BENHARI

146

5th

6th

Chara terize
(a) those sets
, for whi h X and Y are independent,
(b) those sets
, for whi h X and Y are independent and identi ally distributed.
Question: Suppose that X : (
1 
2 ; A1
A2 ) ! (
0 ; A0 ) is measurable. Then, for all
!1 2
1 , the mappings
X! : (
2 ; A2 ) ! (
0 ; A0 );
X! (!2 ) = X (!1 ; !2 ) ;
and, for all !2 2
2, the mappings
X ! : (
1 ; A1 ) ! (
0 ; A0 );
X ! (!1 ) = X (!1 ; !2 ) ;
are measurable.
Hint: First redu e the problem to the ase that X is the indi ator fun tion of E 2 A1
A2.
Question: Suppose that X is a random point uniformly hosen from the sphere
S 2 (r) = f(x; y; z ) 2 IR3 : x2 + y2 + z 2 = r2 g
and P 2 IR3 n S 2(r) a xed point. Dene a random variable Z as the inverse of the
Eu lidean distan e of P and X . Find IEZ and limP !1 kP kIEZ and interpret the results.
Hint: By rotation one an assume that P = (0; 0; p) for p 6= r. Re all from higher dimensional al ulus that the ontribution of the upper hemisphere S+2 (r) parametrized by some
f : A ! S+2 (r) is given by
d`(y)
1 dIPX (x) = 1
det
Df (y)T Df (y)
2
4r A
kP f (y)k :
f (A) kP xk
1

7th Question: Let f; g : IR

variables X ,

! IR be bounded in reasing fun tions. Prove that, for all random

(f (X )g(X ))  IE(f (X )) IE(g(X )):

In other words, f (X ) and g(X ) are positively orrelated. Interpret this result.
IE

Suppose X1 ; X2 ; : : : is a sequen e of independent random variables with real

values, dened on a probability spa e (
; A; IP): Dene
Fn = fXi 1 (Bi) : Bi 2 B; 1  i  ng
and
Gn = fXi 1 (Bi) : Bi 2 B; i  ng;

8th Question:

and let G =

n=1

Gn: G is the -eld of tail events.

(a) Give (nontrivial) examples of tail events.

A.BENHARI

147

(b) Show that the -elds Fn and Gn+1 are independent.

Hint: Dene suitable \-stable generators E of Fn and E 0 of Gn+1 and rst show that
for A 2 E the measure PA dened by PA(B ) = P P(A(A\B) ) agrees with P on E 0 and hen e
on Gn+1.
( ) Use (b) to prove Kolmogorov's Zero-One-Law:
Every A 2 G satises P (A) = 0 or P (A) = 1:
9th Question: A sequen e X1 ; X2 ; : : : of random variables Xj : (
; A; IP) ! (
j ; Aj ) is alled
independent if for all A1 ; A2 ; : : : with Aj 2 Aj and n 2 IN,
n

IP

X1 2 A1 ; : : : ; Xn 2 An

j =1

IP

Xj 2 Aj :

(a) Show
that on a produ t spa e
= 1
i equipped with a produ t measure IP =
1 Pi the sequen e of proje tions Xji=1
(!1; !2; : : :) = !j is independent.
i=1
(b) For all disjoint sets A  IN and B  IN dene the random variables XA = (Xa : a 2 A)
and XB = (Xb : b 2 B ) with values in the produ t spa es (
A; AA) and (
B ; AB ),
where
A = a2A
a and AA = a2A Aa . Show that XA and XB are independent.
( ) Give an example of a sequen e X1; X2 ; : : : su h that for ea h i 6= j the random
variables Xi and Xj are independent, but the sequen e is not independent.
10th Question: Suppose fXn g is a Galton-Watson pro ess with ospring distribution given by
the sequen e (p0; p1 ; : : :). Dene a fun tion
Q

G : [0; 1 ! [0; 1 ;

G(x) =

n=0

pn xn :

Show that the extin tion probability

 := IP there is n 2 IN su h that Xn = 0
is the smallest xed point of the mapping G.
Hint: Show that IPfXn = 0g = G(IPfXn 1 = 0g).
b) Show that the extin tion probability  = 1 if 1
n=0 npn  1 and  < 1 otherwise.
11th Question: Suppose U is uniformly distributed on [0; 1 and dene sto hasti pro esses
fXt g by
if t = U (!) ;
Xt (!) = 01 otherwise,
and Yt by Yt (!) = 0 for all ! 2
. Show that the aso iated random fun tions X and Y on
the spa e F = ff : [0; 1 ! IRg with the -eld F generated by the sets ff 2 F : f (t) 2 Ag
for A 2 IR Borel and t 2 [0; 1 have the same distribution. Infer from this that the set
ff 2 F : f is ontinuous g is not in the -eld F .
12th Question: Give an example of a sequen e of random variables X1 ; X2 ; : : : su h that
lim X = 0 almost surely, but nlim
n!1 n
!1 IEXn = 1 :
a)

A.BENHARI

148

Suppose that fX (t) : t  0g is a sto hasti pro ess modelling the number of
ustomers in a shop. fX (t)g should satisfy the following assumptions:
 The number of ustomers arriving during one time interval does not ae t the number
of ustomers arriving in another disjoint time interval. Mathemati ally, this means
that the pro ess has independent in rements.
 The rate at whi h ustomers arrive should be onstant, more pre isely, there is some
  0 su h that IE[X (t) = t.
 Customers arrive one at a time. To make this pre ise we assume that X (t) takes
values in IN, is in reasing, and we have
IPfX (t + h) = X (t) + 1g = h + o(h);
IPfX (t + h)  X (t) + 2g = o(h):

13th Question:

Show that for every t > s the in rements of the pro ess X (t) X (s) are Poisson distributed
with parameter (t s), i.e.
IPfX

14th

15th
16th

(t)

((t s))k :
X (s) = kg = e (t s)
k!

Infer that the pro ess is uniquely determined up to equivalen e.

Hint: One ould use the Poisson approximation of the binomial distribution.
Question: Show that a pro ess fX (t) : t  0g with the properties of Question 13 exists.
Pro eed as follows:
Let S be a Poisson distributed random variable with parameter  and Y1; Y2 ; Y3; : : : independent random variables with uniform distribution on [0; 1. For 0  t  1 let
X (t) = #fYi : Yi  t and i  S g :
Show that X satises the assumptions of Question 13 on the interval [0; 1) and extend X
to [0; 1) by glueing together independent opies of X .
Question: Let X be Poisson distributed and Y the number of su esses in X Bernoulli
trials with su ess probability p 2 (0; 1). Show that Y and Z = X Y are independent
and Poisson distributed with parameters p resp. (1 p).
Question: Let fX (t) : t  0g be a Poisson pro ess with intensity  modelling the
number of ars arriving at a petrol station up to time t. Ea h ar independently requires
Diesel with probability p and petrol otherwise. Let Y (t) be the number of ars requiring
Diesel and Z (t) the number of ars requiring petrol up to time t.
(a) Constru t a probability spa e on whi h the pro esses fY (t) : t  0g and fZ (t) : t 
0g an be dened.
(b) Show that fY (t) : t  0g and fZ (t) : t  0g are independent Poisson pro esses with
intensity p resp. (1 p).

A.BENHARI

149

At a bus stop the waiting times T1; T2 ; : : : between

two onse utive busses are independent and exponentially distributed with expe tation
1=.
(a) Show that the exponential distribution has the la k of memory property, i.e. for all
s; t  0,
IPfTi  s + t j Ti  sg = IPfTi  tg :
(b) Compute the density of the distribution of the partial sums Sn = T1 +


+ Tn .
( ) Mr. Hi kleby arrives at time t. What is the expe tation IEW (t) of his personal waiting
time W (t) for the next bus? Two ontradi tory answers stand to reason:
 The la k of memory property implies that the distribution of W (t) should not
depend on the time of Mr. Hi kleby's arrival. So IEW (t) = 1=.
 The time of Mr. Hi kleby's arrival is hosen \at random" in the interval between
two onse utive arrivals. For reasons of symmetry the expe ted time should be
half the expe ted time between two arrivals, that is IEW (t) = 1=2.
Interpret your result.
18th Question: Show that every Brownian motion with drift  and varian e parameter 2 is
a Gaussian pro ess, i.e. given times t1  : : :  tn nd a matrix A and a ve tor b su h for
a standard Gaussian ve tor X , we have
(B (t1); : : : ; B (tn)) = AX + b :

17th Question (Waiting time paradox):

19th Question: Suppose that B is a standard Brownian motion.

IPfB has a zero in (0; ")g > 0.

20th Question: Let  > 1=2. Show that,

su h that jB (t + h) B (t)j > h .

Show that, for every " > 0,

almost surely, for every t > 0, there exists h > 0

Let (
; A; IP) be a probability spa e, F  A a sub--eld and X a random
variable with IEjX j < 1. Then every onditional probability IEfX jFg has the following
properties.
Positivity If X  0 almost surely, then IEfX jFg  0 almost surely.
Monotone Convergen e If 0  Xn " X , then IEfXn jFg " IEfX jFg almost surely.
Fatou If 0  Xn and IEfXn jFg < 1, then
IEfliminf Xn j Fg  liminf IEfXn j Fg almost surely.
n!1
n!1

21st Question:

Dominated Convergen e If there is

jXn j  Z for all n, and if Xn ! X

surely.

a random variable Z su h that IEZ < 1 and

almost surely, then IEfXnjFg ! IEfX jFg almost

We investigate onditional expe tations in the situation when two real valued
random variables X and Z have a jont density f (x; z).

22nd Question:

A.BENHARI

150

a) Show that fX : x 7! f (x; z) dz is a density of X . Then, learly, the fun tion

fZ : z 7! f (x; z ) dx is a density of Z .
b) Assume that
R

= jxjfX (x) dx = jxj f (x; z) dz dx < 1 :

One an dene a fun tion
if fZ (z) 6= 0 ;
fX jZ (xjz ) = 0f (x; z )=fZ (z ) otherwise
.
With this fun tion dene a random variable
Y (!) = xfX jZ (xjZ (!)) dx :
Show that Y is a onditional expe tation of X given Z .
Question: Suppose that B is a standard Brownian motion. Show that, almost surely,
p
limsup
jB (t)= tj = 1 :
t!1
IEjX j

23rd

24th Question: Let p  1. If fXn g is a sequen e of random variables on a probability spa e

(
; A; IP) su h that IEjXn jp < 1 for all n and

lim sup IEjXn

k!1 n;mk

25th

Xm jp = 0 ;

then there is a random variable X on (

; A; IP) su h that
lim IEjXn X jp = 0 :
n!1
Hint: Show that a subsequen e of fXn g onverges almost surely.
Question: Suppose that X : (
; A; IP) ! (
0 ; A0 ) is a random variable and G ; H  A
are sub--elds, su h that H and G _ X 1 (A0) are independent. Then, almost surely,
IEfX jG _ Hg = IEfX jGg :
Suppose that fXi g is a sequen e of independent and identi ally distributed
random variables with IEjX1 j < 1 and denote Sn = X1 +


+ Xn.
a) Show that, for ea h n,

26th Question:

IEfX1 jSn g

= : : : = IEfXn jSng = Snn :

b) Use the answer to the 25th question to show that this implies
IEfX1 jSn ; Sn+1 ; : : :g

A.BENHARI

151

= Snn :

27th Question (Kolmogorov-01-law for Brownian motion): Dene G (t) to be the -eld

dened by the random variables
B (s) for t  s. G (t) des ribes the future at time t of the
T
Brownian motion. Let T = t0 G (t) be the -eld of all tail events.

a) Give nontrivial examples of tail events.

b) Show that, for all x 2 IR and A 2 T , IPxfAg 2 f0; 1g.
) Use this statement to show that Brownian motion is re urrent, i.e. that, almost
surely, for every large n there is a time t > n su h that B (t) = 0.
28th Question: Let fB (t) : t  0g be a Brownian motion. Show that for a stopping time T ,
the random variable B (T ) is F (T )-measurable.
Hint: Approximate T from above by stopping times Tn taking values in the set fk=2n :
k  1g.
29th Question: Show that, almost surely, the Brownian sample path t 7! B (t) is monotone
in no interval.
30th Question: For every a  0 we dene
T (a) = inf ft  0 : B (t) = ag :
a) Show that T (a) is an almost surely nite stopping time.
b) Show that the pro ess fT (a) : a  0g has stationary, independent in rements.
) Show that, for all  > 0, the pro ess f2 T (a=) : a  0g has the same distribution
as the pro ess fT (a) : a  0g.
An in reasing pro ess fT (a) : a  0g with the properties des ribed in b) and ) is alled
a stable subordinator of index 1=2.
31st Question: Suppose that fXn g is a simple random walk started at x 2 f0; : : : ; N g and
dene
T := inf fn  0 : Xn = 0 or Xn = N g :
Show that IEfT g = x(N x).
Hint: Use indu tion with respe t to N and some form of the optional stopping theorem.
32nd Question: Suppose that fXn g is a martingale with jXn+1 Xn j  1 for all n. Show
that, with probability one,
 either fXn g onverges to a nite limit,
 or limsupn!1 Xn = 1 and liminfn!1 Xn = 1.
33th Question: (An improved Borel-Cantelli-Lemma) Let fF (n)g be a ltration with
F (0) = f;;
g and An 2 F (n) a sequen e of events. Show that innitely many of the
events An take pla e if and only if
1
IPfAn j F (n 1)g = 1 :
X

n=1
n
m=1 Am

(1
Hint: Show that Xn =
IPfAm jF (m 1)g) is a martingale satisfying the
requirement of Question 32. Then look at the two ases separately.
P

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152

Suppose a box ontains initially one bla k and one white ball. At ea h step
we pi k a ball at random from the box and return it together with another ball of the same
olour. After n steps the box ontains n + 2 balls and we denote by Mn the proportion of
white balls in the box.
a) Show that fMn : n 2 INg is a martingale.
b) Show that Mn onverges almost surely and determine the distribution of the limiting
random variable.
Question (Optional Sampling Theorem): Suppose that fXn g is a uniformly integrable martingale and T an almost surely nite stopping time with IEjXT j < 1. Show that
IEfXT g = IEfX0 g.
Question (Hitting probabilities for biased random walks): Let X1 ; X2 ; : : : be a
sequen e of independent, identi ally distributed random variables with
IPfXn = 1g = p and IPfXn = 1g = 1 p ;
for some 0 < p < 1=2. Let N be a positive integer and a 2 f0; : : : ; N g. Dene the biased
random walk with start in a as
n
Sn = a + Xk :

34th Question:

35th
36th

k=1

37th

Let T be the rst time that fSng rea hes either 0 or N .

(a) Let Mn = [(1 p)=pSn . Show that fMn^T g is a uniformly integrable martingale.
(b) Use the optional sampling theorem to ompute the probabilities IPfST = 0g and
IPfST = N g.
Question (Wald's equation): Let X1 ; X2 ; : : : be a sequen e of independent, identi ally
distributed, integrable random variables with mean . Let F (n) be the natural ltration
for fXn g and T be a stopping time with respe t to this ltration with IEfT g < 1.
(a) Let Y = Tn=1 jXnj. Show that IEjY j < 1.
(b) Let Tn = T ^ n and dene Mn = X1 +


+ XTn Tn :
Prove that fMn g is a uniformly integrable martingale.
( ) Prove Wald's equation
T
IE
Xn = IEfT g :
P

nX

n=1

38th Question (Doob de omposition): Let fXn g be an adapted pro ess with IEjXn j < 1
for all n. Then there is a martingale fMn g and a previsible pro ess fCn g su h that
Xn = Mn + Cn .
39th Question:

Let fMng be a martingale with IEfMn2 g < 1 for all n. Show that if
1

n=1

(Mn

IEf

Mn 1 )2 g < 1;

2
there is a random variable M su h that nlim
!1 Mn = M almost surely and in L .

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153

40th Question: Suppose that fXk g

IEfXk g = 0 and nite varian e k2
1

is a sequen e of independent random variables with

for all k.
1

(a) Show that k2 < 1 implies that the random series Xk onverges almost surely.
k=1
k=1
(b) Suppose that 1there is a K > 0 su h that jXn j  K 1for all n.
Show that if Xk onverges almost surely, then k2 < 1.
k=1
k=1
Hint: Show that Nn = ( nk=1 Xk )2 nk=1 k2 denes a martingale.
Question: Suppose that fB (t) : t  0g is a standard Brownian motion.
(a) For a < 0 < b dene the stopping time T = inf ft  0 : B (t) 62 (a; b)g and show that
IEfT g = ab.
(b) For a > 0 dene the stopping time T = inf ft  0 : B (t) > ag and show that
IEfT g = 1.
Question: For two probability distributions P and Q on IR with the asso iated distribtuion fun tions F and G dene the Levy distan e as
d(P; Q) = inf f > 0 : F (x )   G(x)  F (x + ) +  for all xg:
(a) Show that d denes a metri on the set Prob(IR).
(b) Show that nlim
!1 d(Pn ; P ) = 0 if and only if fPn g onverges weakly to P .
X

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