Manipulating Stochastic Differential Equations and Stochastic Integrals

Carl Chiarella*, Xue Zhong He, Christina Sklibosios Nikitopoulos

*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceedingChapterpeer-review

Abstract

Many of the calculations of derivative security pricing involve formal manipulations of stochastic differential equations and stochastic integrals. This chapter derives those that are most frequently used. We also consider transformation of correlated Wiener processes to uncorrelated Wiener processes for higher dimensional stochastic differential equations.

Original languageEnglish
Title of host publicationDynamic Modeling and Econometrics in Economics and Finance
PublisherSpringer Science and Business Media Deutschland GmbH
Pages93-110
Number of pages18
DOIs
Publication statusPublished - 2015
Externally publishedYes

Publication series

NameDynamic Modeling and Econometrics in Economics and Finance
Volume21
ISSN (Print)1566-0419
ISSN (Electronic)2363-8370

Keywords

  • Stochastic Calculus
  • Stochastic Differential Equation
  • Stochastic Integral
  • Transition Probability Density
  • Wiener Process

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