Solution

ID: past-exam-of-the-probability-statistics-and-options-ii-course-of-the-university-of-oxford/2007/f/2/solution

Differentiability at means that there is a linear map with
This map is the total derivative . In the Frobenius norm, , by the Cauchy-Schwarz inequality applied to matrix entries. Expanding with the order of all factors preserved gives
The remainder after the terms linear in has norm at most . Hence
For , the Neumann series converges absolutely in the finite-dimensional space of matrices. Multiplying its partial sums by and passing to the limit shows that it is . Its remainder after has norm at most , proving the required expansion.
If is an invertible matrix and , then is an invertible matrix. Thus the general linear group is an open subset of the matrix space. The preceding expansion also gives
Apply the chain rule to , using the cubic total derivative at and this total derivative of inversion:
The three terms generally cannot be combined by commuting and .

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