From minimal embeddings to minimal diffusions

Alexander Matthew Gordon Cox (University of Bath)
Martin Klimmek (Mathematical Institute, University of Oxford)

Abstract


We show that there is a one-to-one correspondence between diffusions and the solutions of the Skorokhod Embedding Problem due to Bertoin and Le-Jan. In particular, the minimal embedding corresponds to a "minimal local martingale diffusion", which is a notion we introduce in this article. Minimality is closely related to the martingale property. A diffusion is minimal if it minimises the expected local time at every point among all diffusions with a given distribution at an exponential time. Our approach makes explicit the connection between the boundary behaviour, the martingale property and the local time characteristics of time-homogeneous diffusions.

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Pages: 1-13

Publication Date: June 11, 2014

DOI: 10.1214/ECP.v19-2889

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