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Stopping Times Solutions

1. The document provides solutions to exercises showing that certain functions of stopping times are also stopping times. 2. It is shown that a positive constant c is a stopping time, the maximum and minimum of two stopping times are stopping times, the sum of two stopping times is a stopping time, and the first time a Brownian motion exceeds a constant is a stopping time. 3. The solutions involve showing that the preimage of the sets {ω; τ ≤ t} under the functions of the stopping times are in the filtration Ft.

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Lilia Xa
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74 views

Stopping Times Solutions

1. The document provides solutions to exercises showing that certain functions of stopping times are also stopping times. 2. It is shown that a positive constant c is a stopping time, the maximum and minimum of two stopping times are stopping times, the sum of two stopping times is a stopping time, and the first time a Brownian motion exceeds a constant is a stopping time. 3. The solutions involve showing that the preimage of the sets {ω; τ ≤ t} under the functions of the stopping times are in the filtration Ft.

Uploaded by

Lilia Xa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Stopping times

Solutions
Thomas Dacourt

1 Solutions
1.1 Exercise 1
Show that any positive constant, τ = c, is a stopping time with respect to any
filtration.

Solution
We have 
Ω, if c ≤ t
{ω; τ (ω) ≤ t} =
∅, if c > t
and use that ∅, Ω ∈ Ft .

1.2 Exercise 2
Let τ1 and τ2 be two stopping times with respect to the filtration Ft . Show that

τ = τ1 ∨ τ2

is a stopping time.

Solution
We have
{ω; τ1 ∨ τ2 ≤ t} = {ω; τ1 ≤ t} ∩ {ω; τ2 ≤ t} ∈ Ft ,
since {ω; τ1 ≤ t} ∈ Ft and {ω; τ2 ≤ t} ∈ Ft . So τ1 ∨ τ2 is a stopping time.

1.3 Exercise 3
Let τ1 and τ2 be two stopping times with respect to the filtration Ft . Show that

τ = τ1 ∧ τ2

is a stopping time.

1
Solution
The event {ω; τ1 ∧ τ2 ≤ t} ∈ Ft if and only if {ω; τ1 ∧ τ2 > t} ∈ Ft .

{ω; τ1 ∧ τ2 > t} = {ω; τ1 > t} ∩ {ω; τ2 > t} ∈ Ft ,

since {ω; τ1 > t} ∈ Ft and {ω; τ2 > t} ∈ Ft ( the σ -algebra Ft is closed to


complements).

1.4 Exercise 4
Let τ1 and τ2 be two stopping times with respect to the filtration Ft . Show that

τ = τ1 + τ2

is a stopping time.

Solution
We note that τ1 + τ2 ≤ t if there is a c ∈ (0, t) such that

τ1 ≤ c, τ2 ≤ t − c.

Using that the rational numbers are dense in R, we can write


[
{ω; τ1 + τ2 ≤ t} = ({ω; τ1 ≤ c} ∩ {ω; τ2 ≤ t − c}) ∈ Ft
0<c<t,c∈Q

since
{ω; τ1 ≤ c} ∈ Fc ⊂ Ft , {ω; τ2 ≤ t − c} ∈ Ft−c ⊂ Ft

1.5 Exercise 5
Let τ (ω) = inf {t > 0; |Wt (ω)| > K}, with K > 0 constant. Show that τ is a
stopping time with respect to the filtration Ft = σ (Ws ; s ≤ t) . (Hint- write
the set as a continuous union and then a countable union using the Brownian
motion continuity)

Solution
First we note that
[
{ω; τ (ω) < t} = {ω; |Ws (ω)| > K}
0<s<t

This can be shown by double inclusion. Let As = {ω; |Ws (ω)| > K}.
” ⊂ ” Let ω ∈ {ω; τ (ω) < t}, so inf {s > 0; |Ws (ω)| > K} < t. Then exists
τ < u < t such that |Wu (ω)| > K, and hence ω ∈ Au .

2
S
” ⊃ ” Let ω ∈ 0<s<t {ω; |Ws (ω)| > K} . Then there is 0 < s < t such that
|Ws (ω)| > K. This implies τ (ω) < s and since s < t it follows that τ (ω) < t.
Since Wt is continuous, we can also write
[
{ω; τ (ω) < t} = {ω; |Wr (ω)| > K}
0<r<t,r∈Q

which implies {ω; τ (ω) < t} ∈ Ft since {ω; |Wr (ω)| > K} ∈ Ft , for 0 < r < t.

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