Time Series and Stochastic Processes

Definition


A process is a function that takes on possibly different values at different times. That is, it is a function
{% X(t) : t \rightarrow X_t %}
{% t %} may either take on values from a discrete set such as {% {0,1,2,3,4,5...} %} or from an interval {% [a,b] %}.

A stochastic (or random process) is one where there are a collection of functions, indexed by {% \omega \in \Omega %}
{% X(\omega) = t \rightarrow X_t(\omega) %}

Notions of Equality


There are several notions of equality between two processes.

  • Modification:
    {% Y %} is a modification of {% X %} if {% \mathbb{P}[Y_t = X_t] = 1 %} for all {% t %}
  • Indistinguishable: - two processes are indistinguishable if the all paths are equal, except for a set of paths with measure zero.

Definitions, Theorems and Additional Topics


  • Brownian Motion
    • Ito Process
  • Martingales:
    • Representation:
  • Change of Measure and Girsanov: