- #1
the_dane
- 30
- 0
Homework Statement
I am asked to show that [tex] E[\exp(a*W_t)]=\exp(\frac{a^2t}{2}) [/tex]
Let's define: [tex] Z_t = \exp(a*W_t)[/tex]
W_t is a wiener process
Homework Equations
[tex] W_t \sim N(0,\sqrt{t}) [/tex]
The Attempt at a Solution
I want to use the following formula.
if Y has density f_Y and there's a ral function g then the following holds:
[tex] E[g(Y)] = \int_{-\infty}^{\infty} g(u)f_Y(u)du[/tex]
In my Case:
[tex] E(Z_t)= \int_{-\infty}^{\infty} \exp(a*u) \frac{1}{\sqrt{2\pi \sqrt{t}}} \exp(-(u)^2/ 2\sqrt{t})du[/tex]
[tex] \int_{-\infty}^{\infty} \frac{1}{\sqrt{2\pi \sqrt{t}}} \exp(a*u-(u)^2/ 2\sqrt{t})du[/tex].
Then I notice; IF [tex]= \exp(a*u-(u)^2/s\sqrt{t}) = \exp(-(u-\exp(\frac{a^2t}{2}))^2/ 2\sqrt{t}) [/tex].
Then Z_t must be normally distributed with mean [tex]\exp(\frac{a^2t}{2})[/tex]
Unfortunately my creativity ends here and I cannot show the last part. It should "just" simple "moving terms around" though, right?
Please confirm that my approach is correct and please help me finish. thx