Question: Economics question Problem 3. 1. Prove the multidimensional Ito's formula, along the lines discussed in class for the one-dimensional case; 2. Let A E R2X2,

Economics question

Problem 3. 1. Prove the multidimensional Ito's formula, along the lines discussed in class for the one-dimensional case; 2. Let A E R2X2, 2 , x= (x , x2) a column vector, f(t, x) = ex] Ax (1) where dx(t) = udt + odw(t) (2) where o E Risa, and W(t) a d-dimensional Wiener process with independent components. 3. Apply your formula to (1) and (2) to find af

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