ITO -The other way round

lingo · March 3rd, 2005, 5:51 pm

Hello ,I have to express this SDE in terms of S:dSt=mu*dt+s*StdWtmu and s are constants, Wt~N(0,1). dSt some stockpriceprocess.I guess the solution is St=mu*t+exp(-s^2*t*1/2+sWt).Is this correct?Thank You

taotaol · March 3rd, 2005, 10:36 pm

hi, it seems that your solution is not right. you can use ito's formula to check it directly.

taotaol · March 3rd, 2005, 10:43 pm

suppose X_t = log(S_t), the best form i get for the process of X_t isdX_t = (mu/exp(X_t) - s^2/2)dt + sdW_tI don't know how to solve this eq yet.

lingo · March 5th, 2005, 8:52 am

You are right, my solution is wrong. I was not able to get to the original SDE using ITO.Who can help me out?