Past exam of the mathematics course of the University of Cambridge / 2008 / iii / Paper 37 / 5 / b / Solution

Work on a common stochastic basis on which $B,B^{\prime }$ are independent Brownian motions and the solutions are adapted; independent weak solutions can be put on the product stochastic basis. Independence gives $[B,B^{\prime }]=0$. Put $S=Z+Z^{\prime }\ge 0$ and define the predictable weightsThey are bounded and satisfy $u_t^2+v_t^2=1$ everywhere. DefineThis is a zero-start continuous local martingale, and its quadratic variation is $[\beta {]}_t={\int }_0^t(u_s^2+v_s^2)ds=t$. By the Lévy characterization of Brownian motion, $\beta$ is a Brownian motion in the common filtration.

On $\{S_t>0\}$, $\sqrt{S_t}{u}_t=\sqrt{Z_t}$ and $\sqrt{S_t}{v}_t=\sqrt{Z_t^{\prime }}$. On $\{S_t=0\}$, nonnegativity forces both $Z_t,Z_t^{\prime }$ to be zero, so the same identities hold. Associativity of stochastic integration therefore givesThis proves the addition law for square-root branching diffusions: $Z+Z^{\prime }$ is a weak solution with initial value $z+z^{\prime }$. Specifying the weights at zero is necessary to keep $[\beta {]}_t=t$ after extinction; simply setting both weights to zero would fail to produce a Brownian driver.