State Price Density Integration - Related to Ito's lemma

74 Views Asked by At

I want to derive the original state price density from its dynamics by using Ito's lemma.

The dynamics of state price density $H$ is:

$$dH = -rH\,dt - \theta H\,dW(t)$$

The lecturer's solution to this is:

$$H(T) = H(0)\exp\left[(-r-0.5 \,\theta^2)T - \theta\,dW(T)\right]$$

But every time I compute it, my solution is always:

$$H(T) = H(0)\exp\left[(-r+0.5 \, \theta^2)T - θdW(T)\right]$$

The way I used to compute it is set its log function and apply Ito's lemma to the log function, which is the same as in the website Use Ito's Lemma to compute $d(\log S(t)$ and use this to find the closed form solution of S(t)

Is the lecturer's solution wrong? Or the method I used is problematic?

Thank you for your help.