Solution

ID: past-exam-of-the-probability-statistics-and-options-i-course-of-the-university-of-oxford/2008/g/1/solution

With fixed endpoint values, the Euler-Lagrange equation is . If has no explicit dependence, differentiation gives
Thus the Beltrami identity is .
For this integrand, and , so . The extremals are
where the two fixed endpoint values determine . The Beltrami constant is , consistent with this solution.
For a nonzero smooth perturbation vanishing at the endpoints, expand the quadratic functional. The first variation vanishes at an extremal, while
The linear term depends only on the fixed endpoints. Consequently the extremal is a strict minimum and cannot be a maximum.

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