STOCHASTIC INTEGRATION AND DIFFERENTIAL EQUATIONS

This edition has several significant changes, most prominently the addition of exercises for solution. These are intended to supplement the text, but lemmas needed in a proof are never relegated to the exercises! Many of the exercises have been tested by graduate students at Purdue and Cornell Universities. Chap. 3 has been nearly completely redone, with a new, more intuitive and simultaneously elementary proof of the fundamental Doob-Meyer decomposition theorem, the more general version of the Girsanov theorem due to Lenglart, the Kazamaki-Novikov criteria for exponential local martingales to be martingales, and a modern treatment of compensators. Chap. 4 treats sigma martingales (important in finance theory) and gives a more comprehensive treatment of martingale representation, including both the Jacod-Yor theory and Emery's examples of martingales that actually have martingale representation (thus going beyond the standard cases of Brownian motion and the compensated Poisson process). New topics added include an introduction to the theory of the expansion of filtrations, and an elementary treatment of the Burkholder-Gundy-Fefferman martingale inequalities. Last, there are of course small changes throughout the book.