Past exam of the mathematics course of the University of Cambridge / 2004 / iii / Paper 30 / 3 / b / Solution

Define the stochastic integralIt is adapted to ${\mathcal{G}}_t$, starts at zero and has continuous paths. Integrals over disjoint clock intervals are centered Gaussian and independent, and an increment from $s$ to $t$ is independent of ${\mathcal{G}}_s$. The Itô isometry gives its varianceThese are precisely the defining properties of a ${\mathcal{G}}_t$-Brownian motion; in particular its future increments are independent of ${\mathcal{G}}_0={\mathcal{F}}_1$.

Deterministic substitution in the stochastic integral, first for step integrands and then by the Itô isometry, gives $d{X}_s=\sqrt{2\lambda }{e}^{\lambda s}d{W}_s$. HenceThe initial term is essential: a stochastic integral from time zero alone cannot equal $X$, since $X_0=B_1$. This is the unscaled part of the exponential Brownian time change to a stationary Ornstein-Uhlenbeck process.