Detail explainatory solution required We know a closed form solution ofY₁=adt + bdW₁, for a, b € R isY = Yo exp ((a - b²/2) t+bW₂)where Yo is Y, at time t = 0. Using the probability density for ~ N (0, 1) show that the expected valueof Y, at time t > 0, given Yo, isE[Ye Yo] = Yoet

From the given information, The closed form of dYtYt=adt+bdWt is, Yt=Y0ea-b22t+bWt

Answered: We know a closed form solution of =adt…

Calculus For The Life Sciences

2nd Edition

ISBN:9780321964038

Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Chapter13: Probability And Calculus

Section13.1: Continuous Probability Models

Problem 28E

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We know a closed form solution of =adt + bdWe, for a, b E R is Y₁ Y Yo exp ((a-b²/2) t+bW₁) =