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M564 - Tutorial Set 2 - 2025

The document outlines a tutorial set for a course on Stochastic Differential Equations at The Copperbelt University. It includes various problems related to random variables and stochastic processes, such as proving properties of σ-algebras, independence of random variables, and deriving densities related to geometric Brownian motion. The tutorial aims to deepen understanding of key concepts in stochastic processes for the academic year 2024/25.

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Alex Siame
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9 views

M564 - Tutorial Set 2 - 2025

The document outlines a tutorial set for a course on Stochastic Differential Equations at The Copperbelt University. It includes various problems related to random variables and stochastic processes, such as proving properties of σ-algebras, independence of random variables, and deriving densities related to geometric Brownian motion. The tutorial aims to deepen understanding of key concepts in stochastic processes for the academic year 2024/25.

Uploaded by

Alex Siame
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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THE COPPERBELT UNIVERSITY

SCHOOL OF GRADUATE STUDIES


DEPARTMENT OF MATHEMATICS
M564 – STOCHASTIC DIFFERENTIAL EQUATIONS
2024/25 ACADEMIC YEAR

Tutorial Set 2: Random Variables and Stochastic Processes


1. Prove that σX is a σ-algebra.
2. Show that when X, Y are independent random variables, then σX  σY
consists of trivial events only. Show that two deterministic constants are
always
independent. Finally assume Y  gX and show that in this case the two
random
variables are independent if and only if Y is a deterministic constant.
3. Prove Theorem 2.1.5 for the case N  2.
4. Let a random variable X have the form
M
X  bkIB , k
k1

for some non-zero b 1 , , b M   and B 1 , , B M  F. Show that there exists


a 1 , , a N   distinct and disjoint sets A 1 , , A N  F such that
N
X  akIa . k
k1

5. Show that
Pa  X  b  F X b  F X a.

Show also that F X is (1) right-continuous, (2) increasing and (3) lim x F X x  1.
6. Let X  N0, 1 and Y  X 2 . Show that Y  χ 2 1.
7. LetX  N0, 1 and Y  1 be independent. Compute PX  Y.
8. Derive the density of the geometric Brownian motion (2.14) and use the result to
show that PSt  0  0, i.e., a stock whose price is described by a geometric
Brownian motion cannot default.

© THE COPPERBELT UNIVERSITY 2025

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