Bernt Oksendal Stochastic Differential Equations An Introduction with Applications Sixth Edition With 14 Figures & SpringerBernt Oksendal Department of Mathematics University of Oslo Box 1053, Blindern 0316 Oslo, Norway e-mail: oksendal@math.uio.no ‘Cover Art: ‘The front cover shows five sample paths X;(w1), Xe(wa), Xe(ws), Xe(wa) and X+(ws) of a geometric Brownian motion X;(w), ie. of the solution of a (1- dimensional) stochastic differential equation of the form Dt ota WOX £20; Xo=e where z,r and a are constants and W; = W(w) is white noise, This process is often used to model “exponential growth under uncertainty”, See Chapters 5, 10, 11 and 12. ‘The figure is a computer simulation for the case = value of Xe, B[X¢] = exp(t), is also drawn. Courtesy of Jan Ubse, Norwegian School of Economics and Business Administra- tion, Bergen. Library of Congress Cataloging in-Publiation Data ‘@rsendal,B. K. (Bernt Karsten), 1945- cist ite qutn an intron wit apo / Bart Ohana — hed. pcm ~ (Universite) Includes bibliographical reforences and index. ISBN 3-540-04758-1 (softcover: alk paper) 1, Stochastic differential equations, I Tile. 0.6. The mean (Q4274.23.047 2003 5192-8621 2003052637 ISBN 3-540-04758-1 Springer-Verlag Berlin Heidelberg New York Mathematics Subject Classification (2000): 60H10, 60635, 60640, 60644, 93E20, 60145, 60]25 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broedcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use mast always be obtained from Springer-Verlag. Violations are liable for prosecution ‘under the German Copyright Law. ‘Springer-Verlag Berlin Heidelberg New York ‘a member of BertelsmannSpringer Science+Business Media GmbH butpuhwwespringer de © Springer-Verlag Berlin Heidelberg 1985, 989, 1992, 995, 1998, 2003 Printed in Germany ‘The use of general descriptive names, registered names, trademarks, etc. inthis publication oes not imply, even inthe absence ofa specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: design & production GmbH, Heidelberg ‘Typeset by the authors using a BIRX macro package Printed on acid-free paper ausuick 54921To My Family Eva, Elise, Anders and Karina