Wong–Zakai approximations for quasilinear systems of Itô’s type stochastic differential equations

Alberto Lanconelli and Ramiro Scorolli

Stochastic Processes and their Applications, 2021, vol. 141, issue C, 57-78

Abstract: We extend to the multidimensional case a Wong–Zakai-type theorem proved by Hu and Øksendal (1996) for scalar quasi-linear Itô stochastic differential equations (SDEs). More precisely, with the aim of approximating the solution of a quasilinear system of Itô’s SDEs, we consider for any finite partition of the time interval [0,T] a system of differential equations, where the multidimensional Brownian motion is replaced by its polygonal approximation and the product between diffusion coefficients and smoothed white noise is interpreted as a Wick product. We remark that in the one dimensional case this type of equations can be reduced, by means of a transformation related to the method of characteristics, to the study of a random ordinary differential equation. Here, instead, one is naturally led to the investigation of a semilinear hyperbolic system of partial differential equations that we utilize for constructing a solution of the Wong–Zakai approximated systems. We show that the law of each element of the approximating sequence solves in the sense of distribution a Fokker–Planck equation and that the sequence converges to the solution of the Itô equation, as the mesh of the partition tends to zero.

Keywords: Stochastic differential equations; Wong–Zakai approximation; Wick product; Fokker–Planck equation (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.spa.2021.07.007

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