Stochastic Models and Processes · 19. novembre 2023

Multiplying a Wiener process W_t by its integral creates a complex stochastic process, combining an instantaneous, "memoryless" state with its cumulative history. This nonlinear product, needing tools like Itô's lemma for analysis, reveals interactions between the current state and past values, crucial in financial mathematics for pricing path-dependent options. #StochasticProcesses #ItôsLemma #StochasticCalculus #QuadraticCovariation #BrownianMotion