Difference between revisions of "Itô formula"
(Importing text file) |
Ulf Rehmann (talk | contribs) m (moved Itô formula to Ito formula: ascii title) |
(No difference)
|
Revision as of 18:52, 24 March 2012
A formula by which one can compute the stochastic differential of a function of an Itô process. Let a (random) function be defined for all real
and
, be twice continuously differentiable in
and once continuously differentiable in
, and suppose that a process
has stochastic differential
![]() |
Then the stochastic differential of the process has the form
![]() |
![]() |
This formula was obtained by K. Itô [1]. An analogous formula holds for vectorial and
. Itô's formula can be generalized to certain classes of non-smooth functions [2] and semi-martingales (cf. Semi-martingale).
References
[1] | K. Itô, "On a formula concerning stochastic integration" Nagoya Math. J. , 3 (1951) pp. 55–65 |
[2] | N.N. Krylov, "On Itô's stochastic integral equation" Theor. Probab. Appl. , 14 : 2 (1969) pp. 330–336 Teor. Veroyatnost. i Primenen. , 14 : 2 (1969) pp. 340–348 |
Comments
Nowadays, Itô's formula is more generally the usual name given to the change of variable formula in a stochastic integral with respect to a semi-martingale. Either in its narrow or enlarged meaning, Itô's formula is one of the cornerstones of modern stochastic integral and differential calculus.
References
[a1] | K.L. Chung, R.J. Williams, "Introduction to stochastic integration" , Birkhäuser (1983) |
[a2] | A. Freedman, "Stochastic differential equations and applications" , 1 , Acad. Press (1975) |
[a3] | N. Ikeda, S. Watanabe, "Stochastic differential equations and diffusion processes" , North-Holland (1981) |
[a4] | K. Itô, H.P. McKean jr., "Diffusion processes and their sample paths" , Acad. Press (1964) |
[a5] | H.P. McKean jr., "Stochastic integrals" , Acad. Press (1969) |
[a6] | L.C.G. Rogers, D. Williams, "Diffusions, Markov processes, and martingales" , 2. Itô calculus , Wiley (1987) |
[a7] | T.G. Kurtz, "Markov processes" , Wiley (1986) |
Itô formula. Encyclopedia of Mathematics. URL: http://encyclopediaofmath.org/index.php?title=It%C3%B4_formula&oldid=16058