Itô's Calculus in Financial Decision Making
Copyright policy )Itô's Calculus in Financial Decision Making
This paper presents an introduction to Ito’s stochastic calculus by stating some basic definitions, theorems and mathematical examples. Afterwards, the use of Ito’s calculus in modern financial theory is illustrated by expositing a few representative applications. The main observation of this paper is that Ito’s calculus which was developed from purely mathematical questions originating in Wiener’s work has found unexpectedly important applicability in the theory of finance from the perspective of continuous time.
Economic growth models, financial economics, stochastic differentials, Itō's calculus, stochastic integration, stochastic differential equations, Stochastic ordinary differential equations (aspects of stochastic analysis)
Economic growth models, financial economics, stochastic differentials, Itō's calculus, stochastic integration, stochastic differential equations, Stochastic ordinary differential equations (aspects of stochastic analysis)
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