The process followed by a variable X is dX = mX dt+sX dz
What is the coefficient of dt in the process for the square of X.
A) 2mX2+s2X2
B) 2mX2
C) mX2+2s2X2
D) mX2+s2X2

Name: The process followed by a variable X is dX = mX dt+sX dz What is the coefficient of dt in the process for the square of X. A) 2mX2+s2X2 B) 2mX2 C) mX2+2s2X2 D) mX2+s2X2
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Question

Quizplus · Accepted Answer

The process for the square of X, using Itô's lemma, involves calculating the drift term for X^2. The drift term is 2mX^2 + s^2X^2.

The Process Followed by a Variable X Is DX =