2013/07/12 by Sottinen, Tommi, Viitasaari, Lauri
#60G15 #60H05 #91G20 #FOS: Mathematics #Probability (math.PR)
paper · doi:10.48550/arxiv.1307.3578
We prove the Ito-Tanaka formula and the existence of pathwise stochastic integrals for a wide class of Gaussian processes. Motivated by financial applications, we define the stochastic integrals as forward-type pathwise integrals introduced by Föllmer and as pathwise generalized Lebesgue-Stieltjes integrals introduced by Zähle. As an application, we illustrate the importance of Ito-Tanaka formula for pricing and hedging of financial derivatives.