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A. Neumaier said:Finally, in the paragraph containing (22), the system is described on the third level as a classical stochastic piecewise determinstic (drift and jump) process for the wave function in which the jumps depend stochastically on the measurement results. This is the quantum jump process discussed in post #1. The arguments in this section serve to demonstate that the three descriptions are in some sense equivalent, though the higher the level the more precise the description. In paticular, on the third level, the complete (reduced) quantum measurement process is fully described by the classical PDP, and hence has a fully classical ontology.
Thanks for the replies above, I read those too. I'm going back here to your comment on their other paper, the overview http://arxiv.org/abs/quant-ph/0302047. In their discussion around Eq 22, they do say:
"Physically, ##\psi(t)## represents the state of the reduced system which is conditioned on a specific readout of the measurement carried out on the environment. Consequently, the stochastic evolution depends on the measurement scheme used to monitor the environment."
So if that section applies to their derivation of the Chapman-Kolmogorov equation in http://omnibus.uni-freiburg.de/~breuer/paper/p4041.pdf, then I would expect the measurement of the environment somehow enters one of the assumptions they make, though at this point I am not sure where.