Bessel process

In mathematics, a Bessel process, named after Friedrich Bessel, is a type of stochastic process.

Formal definition

Three realizations of Bessel Processes.

The Bessel process of order n is the real-valued process X given by

where ||·|| denotes the Euclidean norm in Rn and W is an n-dimensional Wiener process (Brownian motion) started from the origin. The n-dimensional Bessel process is the solution to the stochastic differential equation

where Z is a 1-dimensional Wiener process (Brownian motion). Note that this SDE makes sense for any real parameter (although the drift term is singular at zero). Since W was assumed to have started from the origin the initial condition is X0 = 0.

Notation

A notation for the Bessel process of dimension n' started at zero is BES0(n).

In specific dimensions

For n  2, the n-dimensional Wiener process is transient from its starting point: with probability one, i.e., Xt > 0 for all t > 0. It is, however, neighbourhood-recurrent for n = 2, meaning that with probability 1, for any r > 0, there are arbitrarily large t with Xt < r; on the other hand, it is truly transient for n > 2, meaning that Xt  r for all t sufficiently large.

For n  0, the Bessel process is usually started at points other than 0, since the drift to 0 so strong that the process becomes stuck at 0 as soon as it hits 0.

Relationship with Brownian motion

0- and 2-dimensional Bessel processes are related to local times of Brownian motion via the Ray-Knight theorems.[1]

The law of a Brownian motion near x-extrema is the law of a 3-dimensional Bessel process (theorem of Tanaka).

References

  1. Revuz, D.; Yor, M. (1999). Continuous Martingales and Brownian Motion. Berlin: Springer. ISBN 3-540-52167-4.
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