question archive The stochastic differential equation for x is dx = 3a(x1/3 − x) dt + 3√ax2/3 dW
The stochastic differential equation for x is dx = 3a(x1/3 − x) dt + 3√ax2/3 dW
Subject:MathPrice: Bought3
The stochastic differential equation for x is
dx = 3a(x1/3 − x) dt + 3√ax2/3 dW.
(i) Transform variables to y = x1/3, so as to get the stochastic equation for y.
(ii) Solve the equation for y.
(iii) Use the solution for y(t) to get x(t), making sure that you write x(t) in terms of x0 = x(0).
