Date of Award

5-1-2011

Degree Name

Doctor of Philosophy

Department

Mathematics

First Advisor

Mohammed, Salah

Abstract

In this paper, we obtain convergence of solutions of stochastic differential systems with memory gap to those with full finite memory. More specifically, solutions of stochastic differential systems with memory gap are processes in which the intrinsic dependence of the state on its history goes only up to a specific time in the past. As a consequence of this convergence, we obtain a new existence proof and approximation scheme for stochastic functional differential equations (SFDEs) whose coefficients have linear growth. In mathematical finance, an option pricing formula with full finite memory is obtained through convergence of stock dynamics with memory gap to stock dynamics with full finite memory.

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