Arctangent transform of a two-noise affine diffusion

ID: arctangent-transform-of-a-two-noise-affine-diffusion

For independent Brownian motions , the Itô formula cancels the drift after the arctangent transform. Normalizing the two noise coefficients gives a continuous local martingale with quadratic variation , hence another Brownian motion by the Lévy characterization of Brownian motion.

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