Solution

ID: past-exam-of-the-probability-statistics-and-options-ii-course-of-the-university-of-oxford/2010/u/u2/b/i/solution

For scalar minimization, apply Newton's root-finding method to the stationarity equation . Linearize at the current point to obtain
The iteration requires . Near a nondegenerate local minimum, where , , suitable smoothness and a sufficiently close starting value give local convergence. A stationary limit must still be checked to be a minimum. This undamped method is not globally convergent and need not decrease at every step.

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