Interview Question: Ito’s Lemma

Sample Question #20 (applied math – stochastic calculus)

What is Ito’s Lemma? What is its significance in studying stochastic processes? How is it used in finance? Can you write out the equation?

When used to model financial derivatives, what assumptions must be made of the properties of the derivatives for Ito’s Lemma to be applied correctly?

(Comment: Ito’s Lemma is an important concept in modern finance. If you don’t fully understand the math behind it, it’s still okay, as long as you know what it is and what it does.)

Advertisements
This entry was posted in Sample Qs. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s