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Definition

Filtration and Adapted Process

Stochastic Calculus · bm.tex
A filtration on $(\Omega, \mathcal{F}, \mathbb{P})$ (Definition~Probability Space) is an increasing family $(\mathcal{F}_t)_{t \geq 0}$ of sub-$\sigma$-algebras of $\mathcal{F}$: \[ s \leq t \implies \mathcal{F}_s \subseteq \mathcal{F}_t \subseteq \mathcal{F}. \] A filtration is right-continuous if $\mathcal{F}_t = \bigcap_{s > t} \mathcal{F}_s$ for all $t$. A process $\{X_t\}$ (Definition~Stochastic Process) is adapted to $(\mathcal{F}_t)$ if $X_t$ is $\mathcal{F}_t$-measurable for every $t \geq 0$. The natural filtration of $\{X_t\}$ is $\mathcal{F}_t^X := \sigma(X_s : s \leq t)$.
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