An Application of Stochastic Systems on Asset Price Changes for Capital Markets

Amadi I.u, Anyamele B.a, Anele T. C and Nnoka L.c
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Amadi I.u: Department of Mathematics & Statistics, Captain Elechi Amadi Polytechnics, Port Harcourt, Nigeria.
Anyamele B.a: Department of Mathematics & Statistics, Ignatius Ajuru University of Education, Rumuolumeni, Port Harcourt, Nigeria.
Anele T. C: Department of Statistics, Federal Polytechnic, Ukana, Akwa Ibom State, Nigeria.
Nnoka L.c: Department of Mathematics & Statistics, Captain Elechi Amadi Polytechnics, Port Harcourt, Nigeria.

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Abstract: Applications of Constant Elasticity of Variance (CEV) Equations were considered in assessing the wealth of two different corporate investors and describing the behavior of a security's volatility over time. The methods of Ito's were explored and a précised condition of obtaining wealth of each corporate investor is given to illustrate the effectiveness of the systems. Each investment solutions suggest distinctive perceptions on CEV dynamics of assessing wealth of corporate investors. From the stochastic approximation of graphical solutions portrays as follows: the relationship between the wealth and the returns is not perfectly linear; the wealth of investor is directly proportional to the returns of the investment; the wealth is growing at an increasing rate over time; the wealth of the investment is decreasing at steady rate over time. Finally, probability parameter quantified the likelihood of different outcomes such as positive or negative returns on investments. The simulation results presented graphically with the use of MATLAB and discussions of these graphical solutions with relevant parameters were addressed effectively all in this paper.

Date: 2025-05-24
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Published in Asian Journal of Economics, Finance and Management , 2025, 7 (1), pp.339-346. ⟨10.56557/ajefm/2025/v7i1277⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05084423

DOI: 10.56557/ajefm/2025/v7i1277

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