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Bill
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Joined: September 27th, 2002, 2:23 pm

Stochastic differentiation question

January 26th, 2006, 12:27 pm

How can I differentiate the following:when r follows the SDE:My first instinct was to apply a Taylor series expansion, but I guess this is not acceptable because r is stochastic. Can anyone help?
 
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actuaryalfred
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Joined: April 20th, 2005, 2:12 am

Stochastic differentiation question

January 26th, 2006, 4:07 pm

Use Ito's lemma.