An Invitation to Stochastic Differential Equations in Healthcare

Dimitri Breda (), Jung Kyu Canci () and Raffaele D’Ambrosio ()
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Dimitri Breda: University of Udine
Jung Kyu Canci: Lucerne University of Applied Sciences and Arts
Raffaele D’Ambrosio: University of L’Aquila

A chapter in Quantitative Models in Life Science Business, 2023, pp 97-110 from Springer

Abstract: Abstract An important problem in finance is the evaluation of the value in the future of assets (e.g., shares in company, currencies, derivatives, patents). The change of the values can be modeled with differential equations. Roughly speaking, a typical differential equation in finance has two components, one deterministic (e.g., rate of interest of bank accounts) and one stochastic (e.g., values of stocks) that is often related to the notion of Brownian motions. The solution of such a differential equation needs the evaluation of Riemann–Stieltjes’s integrals for the deterministic part and Ito’s integrals for the stochastic part. For A few types of such differential equations, it is possible to determine an exact solution, e.g., a geometric Brownian motion. On the other side for almost all stochastic differential equations we can only provide approximations of a solution. We present some numerical methods for solving stochastic differential equations.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbchp:978-3-031-11814-2_6

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DOI: 10.1007/978-3-031-11814-2_6

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