Suppose the Wti, i =1, 2 are two Wiener processes. Use Itos Lemma in obtaining appropriate stochastic

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Suppose the Wti, i =1, 2 are two Wiener processes. Use Ito’s Lemma in obtaining appropriate stochastic differential equations for the following transformations.
(a) Xt = (Wt1)4
(b) Xt = (Wt1 + Wt2)2
(c) Xt = t2 + eWt2
(d) Xt = et2+Wt2

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An Introduction to the Mathematics of financial Derivatives

ISBN: 978-0123846822

2nd Edition

Authors: Salih N. Neftci

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Question Posted: Aug 17, 2011 10:42 AM

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Suppose the Wti, i =1, 2 are two Wiener processes. Use Itos Lemma in obtaining appropriate stochastic

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An Introduction to the Mathematics of financial Derivatives

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