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I was having a look at Girsanov's theorem and some of its applications. One of them is the possibility of affirming the following theorem.

Given a probability space $(\Omega, \mathcal{F},P)$ equipped with a filtration $\{\mathcal{F_t} \}_{t\geq1}$, let $B^\mu$ be a Brownian motion with drift applied to said filtration. Also, let $T_\beta^\mu = \inf\{ t : B^\mu(t) = \beta\}$ be a random variable expressing the motion's first hitting time of a level $\beta$. Then

$$P(\max_{0<s<t}B^\mu(s)\geq\beta) = P(T_\beta^\mu\leq t)=\int_0^t\frac{|\beta|}{\sqrt{2\pi s^3}}\exp\left\{{-\frac{(\beta -\mu s)^2}{2s}}\right\}ds$$

I was reading an excerpt of a proof of this fact. The proof strategy consists of using the continuity theorem of Laplace transforms to show that the two distributions are almost certainly identical.

Two identities that were used and that I could not understand were the following.

$$(1) \quad \int_0^\infty \frac{e^{-\gamma t}}{\sqrt{2\pi t}} \exp\left\{{\frac{-x^2}{2t}}\right\}dt = \frac{e^{-|x|\sqrt{2\gamma}}}{\sqrt{2\gamma}}$$

$$(2) \quad \int_0^\infty \frac{e^{-\gamma t}}{\sqrt{2\pi t^3}} |\beta|\exp\left\{{\frac{-\beta^2}{2t}}\right\}dt = e^{-|\beta|\sqrt{2\gamma}}$$

How would I go about prooving these results? I have tried substitutions and integration by parts, but it seems to bring nowhere. Does anybody have a hint as to what direction/method would be most appropriate?

  • Are you sure that there is no typo in $(2)$...? I thought that the integral cannot be expressed by elementary functions (perhaps I'm confusing something; this might well be). – saz Oct 31 '18 at 14:51
  • @saz Seems all right! Furthermore, I have found certain related questions that go with a martingale approach. Not trivial at all. https://math.stackexchange.com/questions/2649340/laplace-transform-of-hitting-time-of-brownian-motion-with-drift https://math.stackexchange.com/questions/26258/the-laplace-transform-of-the-first-hitting-time-of-brownian-motion

    To moderators: sorry for possible duplicate!

    – Easymode44 Oct 31 '18 at 16:01
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    You can find a proof of the first identity in Schillings book on Brownian motion (it's Example 7.14). – saz Oct 31 '18 at 16:05
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    To get (2) from (1), replace $\beta$ with $x$ throughout, then differentiate each side of (2) with respect to $\gamma$. The two derivatives agree because of (1). Because both integrals in (2) tend to $0$ as $\gamma\to\infty$, the two sides of (2) must be equal. – John Dawkins Oct 31 '18 at 19:44
  • @saz Thank you for the reference. You are right, mistype on my part, edited. John Dawkins, thank you for the advice, I will try it myself and get back to answer the question when I have a comprehensive solution. – Easymode44 Nov 01 '18 at 09:59

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