Pinned diffusions and Markov bridges

Abstract

In this article we consider a family of real-valued diffusion processes on the time interval $[0,1]$ indexed by their prescribed initial value $x\in \mathbb{R}$ and another point in space, $y\in \mathbb{R}$. We first present an easy-to-check condition on their drift and diffusion coefficients ensuring that the diffusion is pinned in $y$ at time $t=1$. Our main result then concerns the following question: can this family of pinned diffusions be obtained as the bridges either of a Gaussian Markov process or of an Itô diffusion? We eventually illustrate our precise answer with several examples.

12 pages