Ito Calculus

Overview


The Ito Calculus gives meaning to the Ito Integral
{% \displaystyle \int dX(t,W(t)) = \int u(t) dt + \sigma(t) dW(t) %}
where {% dW(t) %} is a Brownian Motion.

The form of the integral is similar to that of th Riemann Stieltjes Integral.

The above integral is often just abbreviated as
{% dX(t,W(t)) = u(t) dt + \sigma(t) dW(t) %}

Definitions


The precise definition and analysis of stochastic integrals requires the use of measure theory.

  • Informal Definition
  • Formal Definition

Relevant Theorems


  • Itos Lemma
  • Girsanov Theorem
  • Ito Isometry