Projections of scaled Bessel processes

Abstract

Let $X$ and $Y$ denote two independent squared Bessel processes of dimension $m$ and $n-m$, respectively, with $n\ge 2$ and $m\in [0,n)$, making $X+Y$ a squared Bessel process of dimension $n$. For appropriately chosen function $s$, the process $s(X+Y)$ is a local martingale. We study the representation and the dynamics of $s(X+Y)$, projected on the filtration generated by $X$. This projection is a strict supermartingale if, and only if, $m<2$. The finite-variation term in its Doob-Meyer decomposition only charges the support of the Markov local time of $X$ at zero.