## Question

###### Exercise 2: An application of Ita's formula (3+4+5 Marks) Using the Ito $ forula with X, = W; and f(.1) = 2/2 prove the identity k WdM; Zw - 1 2 u By choosing appropriate functions Ito $ formula t0 show that W?dW %w- 6 Mds. +2u. ad WSaW; iw K wzds t 2 0 By taking expectation On hoth sicles ofthe (quatious in part (b). calculate E[WA] aud EWW,']. YOu ae USILg AHS fact from the lecture. state them and explain clearly why they can be applicxl this CaSC

Exercise 2: An application of Ita's formula (3+4+5 Marks) Using the Ito $ forula with X, = W; and f(.1) = 2/2 prove the identity k WdM; Zw - 1 2 u By choosing appropriate functions Ito $ formula t0 show that W?dW %w- 6 Mds. +2u. ad WSaW; iw K wzds t 2 0 By taking expectation On hoth sicles ofthe (quatious in part (b). calculate E[WA] aud EWW,']. YOu ae USILg AHS fact from the lecture. state them and explain clearly why they can be applicxl this CaSC

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