Discrete Stochastic Integration


Abstract in English

We present in this article a game of chance (Saint Petersburg Paradox) and generalize it on a probability space as an example of a previsible (predictable) process, from which we get a discrete stochastic integration (DSI). Then we define a martingale and present it as a good integrator of a discrete stochastic integration ∫ , which is called the martingale transform of by such that is a previsible process. After that we present the most important properties of the DSI, which include that the DSI is also a martingale , the theorem of stability for it, the definition of the covariation of two given martingales and the proof that the DSI is centered with a specific given variance. Finally, we define Doob-decomposition and the quadratic variation and present Itȏformula as a certain sort of it.

References used

KLENKE, A. Wahrscheinlichkeitstheorie (Probability theory), Second edition, Springer, Berlin, 2000, 624
ETHERIDGE, A. A Course in financial calculus, Cambridge university press, Cambridge, 2002, 190
WILLIAMS, D. Probability with martingales, Statistical laboratory DPMMS, Cambridge University, Cambridge, 1991, 251

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