- #1

danago

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[PLAIN]http://img17.imageshack.us/img17/1061/stochcalcq4.png [Broken]

I am currently taking a class in quantitative finance, part of which includes an introduction to stochastic calculus. This is the first time i have encountered stochastic differential equations, so it is all quite new to me. I am going ok with most of it, however i got stuck on the question shown above. I did part a without any issues by showing that dx<0 whenever x is greater than the long term value, that dx>0 when it is less, and dx=0 when it is equal to the long term value.

I am stuck, however, on part b; i am just not sure how to approach it. I thought about actually trying to solve it for X(t), but made no progress with that. A push in the right direction would be much appreciated :)

I am currently taking a class in quantitative finance, part of which includes an introduction to stochastic calculus. This is the first time i have encountered stochastic differential equations, so it is all quite new to me. I am going ok with most of it, however i got stuck on the question shown above. I did part a without any issues by showing that dx<0 whenever x is greater than the long term value, that dx>0 when it is less, and dx=0 when it is equal to the long term value.

I am stuck, however, on part b; i am just not sure how to approach it. I thought about actually trying to solve it for X(t), but made no progress with that. A push in the right direction would be much appreciated :)

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