Stochastic Calculus
Quadratic Variation for Dummies
Add up the squared steps of a Brownian path and you get exactly t: the fact that breaks the ordinary chain rule.
What to remember
- Quadratic variation of Brownian motion: [W]_t = t.
- Box rules: dW·dW = dt, the other products are 0.
Read the lessonQuadratic Variation, with a checkpoint at the end.