Does anyone have any tips on Chapter 7? For me, the chapter is minefield, beyond the initial points about brownian motion being non-differentiable, I am really struggling to make sense of it. Some of the notation is confusing for me, and the main result of Ito's Lemma on page 19 doesn't even make sense.
I had some serious issues on the chapter as well. My suggestion would be to focus on Taylors Theorem and how that is modified to Ito's lemma and then how that's used. The second thing I'd look at is how you change an equation into differential notation equation. If you can master that, the rest might fall into place for you. Best of luck.
This is going to sound bad on me, but I just skipped all the drama and focused on Taylors theorem and how (dZ)ˆ2 = dt Wait till you get to chapter 13... more theorem!
Chapter 7 tips Take a top-down approach, look at all the following questions: 103 A02 Q2, 103 S02 Q4, S07 Q3, 103 S04 Q6, 103 S00 Q4, X2.4, A07 Q7 (i), 103 S04 Q4 (ii), 109 S04 Q6, 103 A04 Q1, 103 A00 Q10 (ii), A05 Q5, A06 Q4, S05 Q8, X4.7 Pick the bits out of Chapter 7 that help you answer these questions. Focus in particular on CT8 questions and compare the marks per minute studied with that of Chapter 1 say. Of course every single line of Core Reading can be tested. The fact that, historically, it hasn't may help you tailor your revision plans
