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Let $W$ be a standard Brownian Motion. Let $\epsilon>0$ be given. Let $X^\epsilon$ be the process which diffuses like $W$ on $(-\epsilon,\infty)$, but when $X^\epsilon$ reaches the level $-\epsilon$, it is immediately brought back to the value zero. It then diffuses again according to $W$ until hitting $-\epsilon$, and then is brought back to zero, and so forth. Let $X^0$ be a reflected Brownian Motion (reflected at zero). Then, as $\epsilon \rightarrow 0$, in what sense does $X^\epsilon \rightarrow X^0$ Are there any references for this? I'm also interested in when $W$ is a diffusion.

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  • $\begingroup$ I'd be interested in knowing some (easily) readable references on this sort of thing too. One "classic" paper on diffusions with boundary conditions is Stroock and Varadhan's "Diffusions with boundary conditions." $\endgroup$
    – ShawnD
    Oct 23, 2011 at 5:48
  • $\begingroup$ One thought: the reflected BM is a standard BM plus a local time term at zero. Using the interpretation of local time in terms of downcrossings should possibly do the trick. $\endgroup$
    – weakstar
    Oct 23, 2011 at 14:28
  • $\begingroup$ You're saying that it's the value of the Brownian motion plus the minimal value attained rounded up to the nearest multiple of $\epsilon$. That really makes me want to take the limit by deleting the "rounded up" bit. Is that a thing? $\endgroup$
    – Will Sawin
    Oct 23, 2011 at 18:49
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    $\begingroup$ The comments above have the correct idea. We have $X^\epsilon_t=W_t+\epsilon\lfloor\epsilon^{-1}\max\_{s\le t}(-W_s)\rfloor$ which converges uniformly to $W_t-\min\_{s\le t}W_s$. Convergence for this particular process is especially simple. $\endgroup$ Oct 23, 2011 at 21:02

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It looks like it should converge in distribution in Skorokhod space D. Martingale problem approach (see the book by Ethier & Kurtz on Markov processes) should work.

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