Solving SDE with Let f(x) and Showing (f^{-1})',(f^{-1})

Thread starter secuK
Start date Jun 12, 2014

In summary, an SDE (Stochastic Differential Equation) is a mathematical equation that describes the evolution of a system over time, taking into account both deterministic and random factors. Solving an SDE involves finding a function that describes the evolution of the system over time, using various mathematical techniques. The drift function f(x) represents the deterministic part of the equation and (f^{-1})' refers to the derivative of the inverse function of f(x), which is important in transforming the equation into a more manageable form for solving. To show (f^{-1})' in an SDE solution, mathematical techniques are used to transform the equation into a form where the inverse function can be easily identified and its derivative can be included in the solution.

Jun 12, 2014

secuK

SDE
##d_t=\frac{1}{2}\sigma(X_t)\sigma'(X_t)d_t+\sigma(X_t)dW_t##
##X_0=x_0##
i) Let ##f(x)=\int^x_{x_0}\frac{dy}{\sigma(y)}##
and show ##(f^{-1})',(f^{-1})''##.
ii) Use i) and solve SDE.

Last edited: Jun 12, 2014

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Jun 12, 2014

adjacent

Gold Member

Use # # and # # around the latex code to render it(Remove the spaces)
Examples, using # and #, ##F=ma##
Using $ and $ , $$F=ma$$

1. What is an SDE?

An SDE (Stochastic Differential Equation) is a mathematical equation that describes the evolution of a system over time, taking into account both deterministic and random factors.

2. How do you solve an SDE?

Solving an SDE involves finding a function that describes the evolution of the system over time. This can be done using various mathematical techniques, such as numerical methods or analytical solutions, depending on the complexity of the SDE.

3. What is f(x) in the context of solving an SDE?

f(x) refers to the drift function in an SDE, which represents the deterministic part of the equation. It describes how the system evolves in a predictable manner over time. In order to solve an SDE, we need to determine the form of f(x).

4. What is (f^{-1})' in the context of solving an SDE?

(f^{-1})' refers to the derivative of the inverse function of f(x), which is used in some methods for solving SDEs. It is important in order to transform the equation into a more manageable form for solving.

5. How do you show (f^{-1})' in an SDE solution?

Showing (f^{-1})' involves using mathematical techniques to transform the SDE into a form where the inverse function can be easily identified. This can then be used to find the derivative and include it in the solution to the SDE.