Fractional smoothness of functionals of diffusion processes under a change of measure

preprint2012arXivOpen access

Abstract

Let v:[0,T]×Rd→Rv:[0,T]\times \R^d \to \R be the solution of the parabolic backward equation $ \partial_t v + (1/2) \sum_{i,l} [σσ^\perp]_{il} \partial_{x_i \partial_{x_l} v + \sum_{i} b_i \partial_{x_i}v + kv =0$ with terminal condition gg, where the coefficients are time- and state-dependent, and satisfy certain regularity assumptions. Let X=(Xt)t∈[0,T]X=(X_t)_{t\in [0,T]} be the associated Rd\R^d-valued diffusion process on some appropriate $(Ω,\cF,\Q)$. For p∈[2,∞)p\in [2,\infty) and a measure $d¶=λ_T d\Q$, where λTλ_T satisfies the Muckenhoupt condition AαA_α for α∈(1,p)α\in (1,p), we relate the behavior of $\|g(X_T)-\ept g(X_T) \|_{L_p(¶)}$, ∥∇v(t,Xt)∥Lp()\|\nabla v(t,X_t) \|_{L_p(¶)} and ∥D2v(t,Xt)∥Lp()\|D^2 v(t,X_t) \|_{L_p(¶)} to each other, where $D^2v:=(\partial_{x_i \partial_{x_l}v)_{i,l}$ is the Hessian matrix.

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