A Comparison of the Ito and Stratonovich Formulations of Problems in Finance

A comparison of and the relationship between the Ito and Stratonovich formulations of stochastic integration is given. It is argued that generally the Ito formulation is appropriate for problems of finance and economics. The Black-Scholes option pricing problem is discussed in both frameworks with the Ito formulation being shown to be clearly superior. A finance example in which the Stratonovich approach is simplest is also presented

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Year of publication:	[2014]
Authors:	Sethi, Suresh
Other Persons:	Lehoczky, John P. (contributor)
Publisher:	[2014]: [S.l.] : SSRN

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Extent:	1 Online-Ressource (8 p)
Type of publication:	Book / Working Paper
Notes:	In: Journal of Economic Dynamics and Control,Vol. 3, pp. 343-356, November 1981 Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 1981 erstellt
Classification:	C00 - Mathematical and Quantitative Methods. General ; M21 - Business Economics ; G00 - Financial Economics. General
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012751670