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Stochastic Calculus / Brownian Motion: Construction and Properties

Derivation — Quadratic Variation of Brownian Motion

This derivation sub-note carries the L2L^2 computation underpinning Theorem 2.8.2 from the main lesson: that the partition sums Q(t;Πn)=∑j(Wtj−Wtj−1)2Q(t; \Pi_n) = \sum_j (W_{t_j} - W_{t_{j-1}})^2 converge in probability to tt (and a.s. under the summability condition). The main lesson Quadratic Variation and Non-Differentiable Paths gives the interpretation; here we do the algebra.

In this lesson

  1. Purpose of this note
  2. Setup
  3. Step 1: Mean of QQ
  4. Step 2: Variance of QQ
  5. Step 3: Fourth Moment of N(0,1)\mathcal{N}(0,1)
  6. Step 4: L2L^2 and In-Probability Convergence
  7. Step 5: Almost-Sure Convergence
  8. Step 6: BM with Drift

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