Past exam of the mathematics course of the University of Cambridge / 2005 / iii / Paper 38 / 2 / d

For the integrable terminal bracket criterion, assume $M_0=0$, or more generally $M_0\in L^2$. This initial-value assumption is necessary if it is not already part of the notation: an integrable but non-square-integrable random constant process has zero quadratic variation and still fails square-integrability.

For the zero-starting case, choose a localizing sequence ${\tau }_n$ bounding both $|M|$ and its quadratic variation. The stopped processes are true square-integrable martingales, and the Itô isometry givesFor each fixed time these variables are uniformly integrable by their bounded second moments. Almost sure convergence as $n\to \infty$ is therefore convergence in $L^1$. Passing to the limit in the stopped conditional-expectation identity gives $\mathbb{E}[M_t\mid {\mathcal{F}}_s]=M_s$: the local martingale is a true martingale. The Fatou lemma also givesso $M$ belongs to the global ${\mathcal{M}}_c^2$ space. For general square-integrable $M_0$, apply this argument to $M-M_0$ and use $|M_t{|}^2\le 2|M_0{|}^2+2|M_t-M_0{|}^2$.