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Stochastic Calculus for a Time-changed Semimartingale and the Associated Stochastic Differential Equations

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      Abstract

      It is shown that under a certain condition on a semimartingale and a time-change, any stochastic integral driven by the time-changed semimartingale is a time-changed stochastic integral driven by the original semimartingale. As a direct consequence, a specialized form of the Ito formula is derived. When a standard Brownian motion is the original semimartingale, classical Ito stochastic differential equations driven by the Brownian motion with drift extend to a larger class of stochastic differential equations involving a time-change with continuous paths. A form of the general solution of linear equations in this new class is established, followed by consideration of some examples analogous to the classical equations. Through these examples, each coefficient of the stochastic differential equations in the new class is given meaning. The new feature is the coexistence of a usual drift term along with a term related to the time-change.

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      Fractional Calculus

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        Limit theorems for continuous-time random walks with infinite mean waiting times

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          Fractional Cauchy problems on bounded domains

          Fractional Cauchy problems replace the usual first-order time derivative by a fractional derivative. This paper develops classical solutions and stochastic analogues for fractional Cauchy problems in a bounded domain \(D\subset\mathbb{R}^d\) with Dirichlet boundary conditions. Stochastic solutions are constructed via an inverse stable subordinator whose scaling index corresponds to the order of the fractional time derivative. Dirichlet problems corresponding to iterated Brownian motion in a bounded domain are then solved by establishing a correspondence with the case of a half-derivative in time.
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            Author and article information

            Journal
            29 June 2009
            2010-10-25
            0906.5385
            10.1007/s10959-010-0320-9

            http://arxiv.org/licenses/nonexclusive-distrib/1.0/

            Custom metadata
            60H05, 60H10 (Primary), 35S10 (Secondary)
            27 pages; typos corrected
            math.PR

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