Question
(a) Use the Ito formula to nd the mean and the variance of ekW(t), where k is a constant and W(t) is a standard Brownian
(a) Use the Ito formula to nd the mean and the variance of ekW(t), where
k is a constant and W(t) is a standard Brownian motion.
(b) The price of a stock S(t) at time t (with drift and volatility ) satises the stochastic
dierential equation
dS(t) = S(t)dt + S(t)dW(t)
Find the stochastic dierential equation associated with the processes: 1) 1
S(t) ; 2) Sn(t).
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Introductory Real Analysis
Authors: A N Kolmogorov, S V Fomin, Richard A Silverman
1st Edition
0486134741, 9780486134741
