A Generalization of Stochastic Calculus--A Conjecture

27 Pages Posted: 2 Jul 2018 Last revised: 1 Dec 2018

Date Written: November 29, 2018

Abstract

Existing models of calculus in finance, such as Ito calculus have an underlying assumption that the parameters are known. This paper relaxes that assumption. The paper proposes the creation of differentiable paths that do not require an expectation to exist. Further, the path minimizes the expected loss from using a predictive calculus and, under mild conditions, stochastically dominates any other path. Further, the path is assured to produce fair gambling odds if used in finance. This method maps to Ito and Stratonovich methods if the parameters are known and dominate them if they are not in the general case.

Keywords: Stochastic Calculus, Bayesian Decision Theory,Frequentist Decision Theory

JEL Classification: C02

Suggested Citation

Harris, David E., A Generalization of Stochastic Calculus--A Conjecture (November 29, 2018). Available at SSRN: https://ssrn.com/abstract=3197451 or http://dx.doi.org/10.2139/ssrn.3197451

David E. Harris (Contact Author)

University of Providence ( email )

1301 20th Street South
Great Falls, MT 59405
United States
4067915341 (Phone)
4067915990 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
95
Abstract Views
371
rank
282,309
PlumX Metrics