Ito’s product and quotient rules as described by a trader

Fermat's Last Spreadsheet

Ito’s product and quotient rules are a corollary of the Ito lemma, and are one of the  most important parts of the stochastic-calculus toolkit.

When I first started working as a quant I managed to find an alternative form for the rules which sits well in a Black-Scholes type of world and corresponds more closely to a trader’s way of describing a trade.

My versions were often useful to me in terms of developing an intuitive understanding of the risk positions in the derivatives trading book (eg for quanto-ed or payment-delay trades).

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About isomorphismes

Argonaut: someone engaged in a dangerous but potentially rewarding adventure.
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