Question 6 asks what a continuous stochastic process X_t is. I would have describe it as a stochastic process that has continous sample paths, as in the mapping t->X_t being continuous. If i really wanted to be precise i would use the epsilon delta definition of continuity... But, IoA says it is a process that can be represented as: dX_t = sigma_t dW_t + mu_t dt Does anyone else find this a bit odd...while this may be true for continuous stochastic processes, it is hardly the defining equations... sometimes this feels like a losing battle, the examiner asks one thing, but means something totally different.
Hi Gareth I would have answered the question the way you answered it - that's how it's defined in our Acted notes somewhere in the early chapters. The answer given is more specifically for an Ito process as it is defined in our gold tables. I have yet to go through the CID papers but when I did them before September's exam last year I found most solution papers with several errors or vague answers. As a side question how are you finding the CT8 notes? I've had a look at the them and have found them to be more advanced (and possibly better explained in some parts) than the old 109 notes. The standard seems much more similar to the current St6 notes?
the CT8 notes seem pretty good to me, but i don't like the way ST6 notes are simply a straight copy of CT8 - not very helpful imho. It would have been better not to provide notes and say read chapter x,y,z of Hull and Baxter. Same goes for the Q&A's and assignments for ST6 - the majority of questions are from CT8, so I felt I had wasted my time, by doing both - whereas exams questions in ST6 are very different to those of CT8. I am just looking at Hull and Baxter questions now, they seem more relevant.
I think that's why there will be a large change made to the ST6 notes for next years study year. I haven't looked much at Rennie but have done all the questions from Hull (of the chapters Acted indicated were appropriate) but find that I now have forgotten some small details in the ST6 notes that I must go back to and study. (Also have you noticed how little the examiners have been concentrating on interest rate derivative valuations?) I think that's one of the problems for me - there are several books from which I have studied and my brain is taking strain... One just doesn't know what the examiner will ask nor to what detail...
it's a very strange exam. if you were to go by the actual syllabus for ST6, i am sure you would fail, as the examiner seems to go by what's in Hull, not what's in ST6. bit of a shambles really.
