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When solving a SDE by Ito's formula, we have to find a function $f(t, X_t)$ of index $t$ and the process $X$ to be solved for.

  1. I was wondering what is the criterion of choosing $f$? Is it to make the integrands not contain $X$?
  2. How is $f$ chosen in principle?

Thanks and regards!

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1 Answer 1

I think the following note will be helpful for you, it shows us how to solve most of SDEs which are solvable. If you just want to know how to solve SDE, start with section 14.

http://mplab.ucsd.edu/tutorials/sde.pdf

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