An Introduction to Stochastic Calculus with Applications to Finance

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Based on stochastic curvilinear integrals in the Cairoli-Walsh sense and in the It\^{o}-Udri\c{s}te sense, we develop an original theory regarding the multitime stochastic differential systems. The first group of the original results refer to the complete integrable stochastic differential systems, the path independent stochastic curvilinear integral, the It\^{o}-Udri\c{s}te stochastic calculus rules, examples of path independent processes, and volumetric processes. The second group of original results include the multitime It\^{o}-Udri\c{s}te product formula, first stochastic integrals and adjoint multitime stochastic Pfaff systems. Thirdly, we formulate and we prove a multitime maximum principle for optimal control problems based on stochastic curvilinear integral actions subject to multitime It\^{o}-Udri\c{s}te process constraints. Our theory requires the Lagrangian and the Hamiltonian as stochastic 1-forms.

2014 •

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