some estimates on exponentials of solutions to stochastic differential equations一些人估计解决随机微分方程的指数.pdfVIP

SOME ESTIMATES ON EXPONENTIALS OF SOLUTIONS TO STOCHASTIC DIFFERENTIAL EQUATIONS JIONGMIN YONG Received 26 March 2004 and in revised form 25 August 2004 Exponential of functionals of solutions to certain stochastic differential equations (SDEs) plays an interesting role in some mathematical finance problems. The purpose of this paper is to establish some estimates for these exponentials. 1. Introduction We begin with a couple of motivations. To this end, let (Ω, , { } , P) be a complete t t≥0 filtered probability space on which a d-dimensional standard Brownian motion W(·) is defined with { } being its natural filtration augmented by all the P-null sets. Con- t t≥0 sider the Black-Scholes market model (see [11, 13]) dP (t) = P (t)r (t)dt, 0 0 (1.1) dP (t) = P (t) b (t)dt + σ (t),dW (t) , 1 ≤ i ≤ n, i i i i where P (·) and P (·) are the price processes of the bond and the ith stock, respectively, 0 i r (·) is the interest rate of the bond, and b (·) and σ (·) are appreciation rate and the i i volatility (vector) of the ith stock, respectively. Suppose an investor has an initial wealth y and he/she is taking self-financing trading strategies. Then the wealth process Y (·) satisfies the following stochastic differential equation (SDE, for short) (see [18]): dY (t) = r (t)Y (t) + b(t) − r (t)1, π (t