Ito calculus and Ito's Lemma. Suppose dZ is the increment of a Wiener process and dX...
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Ito calculus and Ito's Lemma. Suppose dZ is the increment of a Wiener process and dX = µ(X(t), t)dt + o(X(t), t)dZ. (a) If F(X,t) = e"X³, what is dF(X,t) (interpreted in the sense of Ito calculus)? (b) Using dX as defined above, and expanding, simplify (ax) as much as possible. The integral is to be interpreted in the Ito calculus sense. Note that o(X(t), t) is a function of t, not a constant. Ito calculus and Ito's Lemma. Suppose dZ is the increment of a Wiener process and dX = µ(X(t), t)dt + o(X(t), t)dZ. (a) If F(X,t) = e"X³, what is dF(X,t) (interpreted in the sense of Ito calculus)? (b) Using dX as defined above, and expanding, simplify (ax) as much as possible. The integral is to be interpreted in the Ito calculus sense. Note that o(X(t), t) is a function of t, not a constant.
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