Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2006/iii/paper-35/4/b/solution

The Itô product rule with a deterministic integrating factor gives
Integrating from zero proves
Both coefficients are globally Lipschitz, so part (a) proves that this is the pathwise unique solution. Under a measure where is a Brownian motion, the solution is centered Gaussian with variance . The positive drift sign gives an unstable linear diffusion rather than a mean-reverting one.

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