ACT460H1 Lecture 10: PS3
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F18 stochastic methods for actuarial science: homework 3. Instruction for submission: submit your solution as a hardcopy. Please write your full name and student number on the front page, and keep a copy of your homework in case it gets lost. Homework after thursday noon will not be accepted. This homework is worth 4. 5% of your nal grade. In all of the following problems, w denotes a brownian motion: let tm be the rst passage time of w to level m. use re ection principle to compute the following quantities. If the statement is false, also explain why. A correct explanation is required. (b) a geometric brownian motion that starts out being positive can eventually become negative. 0 t dwt is just another word for its variance. Use it o"s formula to write x as an it o process, that is,
