On Itô's formula for elliptic diffusion processes

Abstract

Bardina and Jolis [Stochastic process. Appl. 69 (1997) 83--109] prove an extension of Itô's formula for $F(X_t,t)$, where $F(x,t)$ has a locally square-integrable derivative in $x$ that satisfies a mild continuity condition in $t$ and $X$ is a one-dimensional diffusion process such that the law of $X_t$ has a density satisfying certain properties. This formula was expressed using quadratic covariation. Following the ideas of Eisenbaum [Potential Anal. 13 (2000) 303--328] concerning Brownian motion, we show that one can re-express this formula using integration over space and time with respect to local times in place of quadratic covariation. We also show that when the function $F$ has a locally integrable derivative in $t$, we can avoid the mild continuity condition in $t$ for the derivative of $F$ in $x$.

Published at http://dx.doi.org/10.3150/07-BEJ6049 in the Bernoulli (http://isi.cbs.nl/bernoulli/) by the International Statistical Institute/Bernoulli Society (http://isi.cbs.nl/BS/bshome.htm)