Solutions of Linear Stochastic Differential Equations for Economic Investments

Azor P. A.^1, , Nwobi F. N.² and Amadi I. U.³

¹Department of Mathematics & Statistics, Federal University, Otuoke, Nigeria

²Department of Statistics, Imo State University, Owerri, Nigeria

³Department of Mathematics and Statistics, Captain Elechi Amadi Polytechnics, Port Harcourt, Nigeria

Cite this paper

Azor P. A., Nwobi F. N. and Amadi I. U.. Solutions of Linear Stochastic Differential Equations for Economic Investments. American Journal of Applied Mathematics and Statistics. 2024; 12(2):28-34. doi: 10.12691/AJAMS-12-2-2

Abstract

The advantage of financial assets and their return rates lie in economic investments which accumulate wealth daily, monthly, yearly and probably periodically, etc. For that reason, this paper considered the problem of a system of Stochastic Differential Equations (SDEs) for economic investments whose rate of returns and asset valuation follow series price index, periodic additive effects and periodic multiplicative effects; which are used as major parameters in the model. The problems were accurately solved independently by adopting Ito’s theorem which presented closed-form diverse investment results for proper investment decisions. Finally, we presented graphical results which represented the behaviour of the economic investments and discussed the effect of the relevant parameters.

Keywords

stock price, rate of returns, stochastic analysis, series price effect, periodic additive effect, periodic multiplicative effect, ito’s lemma

Copyright

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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