When does fractional Brownian motion not behave as a continuous function with bounded variation?

Ehsan Azmoodeh, Heikki Tikanmäki, Esko Valkeila

Published 2010-04-07, updated 2010-05-28Version 2

If we compose a smooth function g with fractional Brownian motion B with Hurst index H > 1/2, then the resulting change of variables formula [or It/^o- formula] has the same form as if fractional Brownian motion would be a continuous function with bounded variation. In this note we prove a new integral representation formula for the running maximum of a continuous function with bounded variation. Moreover we show that the analogue to fractional Brownian motion fails.