A Useful Extension of Ito's Formula with Applications to Optimal Stopping |
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作者姓名: | Gerold ALSMEYER Markus JAEGER |
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作者单位: | Einsteinstraβe 62, D-48149 Münster, Germany |
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基金项目: | Partially supported by the Deutsche Forschungsgemeinschaft (DFG) under Grant SCHM 677/7-1. |
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摘 要: | Given a continuous semimartingale M = (Mt)t≥〉0 and a d-dimensional continuous process of locally bounded variation V = (V^1,……, V^d), the multidimensional Ito Formula states that f(Mt, Vt) - f(M0, V0) = ∫[0, t] Dx0f(Ms, Vs)dMs+∑i=1^d∫[0, t] Dxi F(Ms, Vs)dVs^i+1/2∫[0, t] Dx0^2 f(Ms, Vs)d 〈M〉s if f(x0,……,xd) is of C^2-type with respect to x0 and of C^1-type with respect to the other arguments This formula is very useful when solving various optimal stopping problems based on Brownian motion. However, in such application the function f typically fails to satisfy the stated conditions in that its first partial derivative with respect to x0 is only absolutely continuous. We prove that the formula remains true for such functions and demonstrate its use with two examples from Mathematical Finance.
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关 键 词: | 最佳停止 光滑适合法则 连续性 有限变化 |
收稿时间: | 2003-09-19 |
修稿时间: | 2003-09-192004-07-06 |
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