-
+
+{% include proof/start.html id="proof-kolmogorov" -%}
We define a new process $$Y_t \equiv h(X_t)$$, and then apply Itō's lemma, leading to:
$$\begin{aligned}
@@ -84,9 +81,8 @@ $$\begin{aligned}
\hat{L}\{h(X_0)\}
\approx \frac{1}{t} \mathbf{E}[Y_t - Y_0| X_0]
\end{aligned}$$
+{% include proof/end.html id="proof-kolmogorov" %}
-
-
The general definition of resembles that of a classical derivative,
and indeed, the generator $$\hat{A}$$ can be thought of as a differential operator.
@@ -104,11 +100,8 @@ $$\begin{aligned}
}
\end{aligned}$$
-
-
-
-
-
+
+{% include proof/start.html id="proof-dynkin" -%}
The proof is similar to the one above.
Define $$Y_t = h(X_t)$$ and use Itō’s lemma:
@@ -136,9 +129,9 @@ $$\begin{aligned}
= \mathbf{E}\bigg[ Y_\tau - Y_0 - \int_0^\tau \hat{L}\{h(X_t)\} \dd{t} \bigg| X_0 \bigg]
\end{aligned}$$
-Isolating this equation for $$\mathbf{E}[Y_\tau | X_0]$$ then gives Dynkin's formula.
-
-
+Isolating this equation for $$\mathbf{E}[Y_\tau \!\mid\! X_0]$$ then gives Dynkin's formula.
+{% include proof/end.html id="proof-dynkin" %}
+
A common application of Dynkin's formula is predicting
when the stopping time $$\tau$$ occurs, and in what state $$X_\tau$$ this happens.
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