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Stochastic optimization without Ito's lemma: applications to the portfolio model

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  • Moawia Alghalith

    (UWI, St Augustine)

Abstract

We show that the key results of the stochastic models (that use stochastic calculus) can be easily derived using classical calculus and without restrictive assumptions. We apply our method to two major areas in stochastic analysis: optimization and partial differential equations. For example, we apply the method to the portfolio model and the Black-Scholes partial differential equations.

Suggested Citation

  • Moawia Alghalith, 2017. "Stochastic optimization without Ito's lemma: applications to the portfolio model," Economics Bulletin, AccessEcon, vol. 37(4), pages 2533-2536.
    • Handle: RePEc:ebl:ecbull:eb-17-00634
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    References listed on IDEAS

    as
    1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    2. Jérôme Detemple, 2014. "Portfolio Selection: A Review," Journal of Optimization Theory and Applications, Springer, vol. 161(1), pages 1-21, April.
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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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