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2023/11/14 18:37

Forward and Backward Kolmogorov equations

Consider the following SDE:

We provide only the ideas of the proofs. Additional assumptions are necessary to justify the use of all the tools.

In what follows, we consider and we let be the density of starting from .

Forward Kolmogorov equation

The Forward Kolmogorov equation writes

Set where is with bounded support. By Itô's Formula, Hence, where the last equality is obtained from integration by parts. Differentiating both sides of the equation wrt yields

Backward Kolmogorov equation

The Backward Kolmogorov equation writes

Recall that Now, define for , .

Set . By Itô's Formula,

Note that and . Hence, Dividing by and letting , we get Since , we finally obtain which completes the proof.