Methodol Comput Appl Probab (2010) 12:261270

DOI 10.1007/s11009-009-9145-3

Exact Solutions of Stochastic Differential Equations:

Gompertz, Generalized Logistic
and Revised Exponential
Christos H. Skiadas

Received: 10 June 2009 / Accepted: 16 June 2009 / Published online: 30 June 2009
Springer Science + Business Media, LLC 2009

Abstract Exact analytic solutions of some stochastic differential equations are given
along with characteristic futures of these models as the Mean and Variance. The
procedure is based on the Ito calculus and a brief description is given. Classical
stochastic models and also new models are provided along with a related bibliography. Stochastic models included are the Gompertz, Linear models with multiplicative
noise term, the Revised Exponential and the Generalized Logistic. Emphasis is given
in the presentation of stochastic models with a sigmoid form for the mean value.
These models are of particular interest when dealing with the innovation diffusion
into a specific population, including the spread of epidemics, diffusion of information
and new product adoption.
Keywords Stochastic simulation Analytic solutions Stochastic modeling
Stochastic Gompertz model Stochastic generalized Logistic model
Revised exponential Stochastic simulation
AMS 2000 Subject Classification 37H10 37L55 60H05 60H07 60H10 60H35
65C30 91B70

1 Introduction
The Stochastic Differential Equations (SDE) play an important role in numerous
physical phenomena. The numerical methods for solving these equations show low
accuracy especially for the cases with high non-linear drift terms. It is therefore very
important to search and present exact solutions for SDE. The resulting solutions are
also important to check for the accuracy of existing numerical methods.

C. H. Skiadas (B)
Technical University of Crete, Chania, Crete, Greece
e-mail: skiadas@asmda.net

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The first attempts for solving SDEs where based on proposing an integrating
factor that could transform a SDE to a linear form that could be solved explicitly.
A systematic method for reducing a non-linear SDE to a linear one was due to
Kloeden and Platen (1999) and Kloeden et al. (1992, 2003). They proposed a suitable
transformation function for the reduction of a particular SDE. This method is
suitable for the cases presented here. The main theoretical issues are given in the
following.
1.1 Ito Stochastic Differential Equations
A stochastic process x(t) confirms an Ito stochastic differential equation of the
form if:
dx(t) = a(x, t) dt + b (x, t) dw(t)
if for all t and t0 the following stands (Gardiner 1990),
 t
 t
a(x, s) ds +
b (x, s) dw(s)
x(t) = x(t0 ) +
t0

(1)

(2)

t0

1.2 Solution Methods of Stochastic Differential Equations

The method that will be presented and applied further down is based on the Ito norm
(Ito 1951, 1944) and is used for the reduction of an autonomous nonlinear stochastic
differential equation in the form of (Kloeden and Platen 1999):
dy(t) = a(y(t)) dt + b (y(t)) dw(t)

(3)

into a linear for x(t) stochastic differential equation,

dx(t) = (a1 x(t) + a2 ) dt + (b 1 x(t) + b 2 ) dw(t)

(4)

Then the solution of this last equation is given by



 t
 t
1
1
t ds + b 2
t dws
xt = t x0 + (a2 b 1 b 2 )
0

where



1
t = exp a1 t b 21 t + b 1 wt
2

The mean and the variance are computed by the following forms
dmt
= a1 mt + a2
dt
for the Mean and
dVt
= (2a1 + b 21 )Vt + 2mt (a2 + b 1 b 2 ) + b 22
dt
for the Variance.
By the use of a suitable transformation function x(t) = U(y(t)) the reduction
method was initially presented by Gihman and Skorokhod (1972) both for autonomous and for non-autonomous stochastic differential equations. In this case,

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263

only the reduction method for autonomous stochastic differential equations will be
presented.
In applying this formula to Ito in the transformation function U(y) the following
results:
dU(y) =

U(y)
1 2 U(y)
(dy)2
dy +
y
2
y2

The above method will be used for the solution of some nonlinear stochastic
diffusion equations which are presented in the following providing closed form
solutions.

2 The Gompertzian Stochastic Model

The deterministic Gompertzian Model (Gompertz 1825) has the form:
dxt
= b xt ln xt
dt
where b is a constant. This a growth model and the maximum growth rate is achieved
when xin f = exp(1). This Gompertz function was proposed as a model to express
the law of human mortality and can be used for population estimates. It is a sigmoid
(S-shaped) model as regards the form xt plotted against t. The Gompertz model
is also applied in innovation diffusion modeling and in new product forecasting.
In these cases the fluctuations are related to the magnitude xt of the measurable
characteristic part of the system and it is assumed that the noise term could be
expressed by a multiplicative 1-dimensional white noise process. Thus the S.D.E.
model resulting from the above deterministic one must have the form (see Skiadas
et al. 1994):
dxt = b xt ln xt dt + cxt dwt
where xt is the unknown stochastic process, b and c are constants and wt is 1dimensional Wiener process.
2.1 First Method
The solution of the last stochastic differential equation is obtained by applying the
Ito formula to the transformation function yt = ln xt so that,
1 2
x (dxt )2
2
By substituting xt from the above Gompertz stochastic differential equation and
rearranging yields:
dyt = d ln xt = x1
t dxt

1
dyt = d ln xt = (b yt c2 )dt + cdwt
2
The last equation is a stochastic linear differential equation and it is solved using
the previous formulas to give
 t
c2
exp(b s)dws
(1 exp(b t)) + c exp(b t)
yt = ln xt = ln x0 exp(b t)
2b
0

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and the solution for xt is



 t
c2
exp(b s)dws
xt = exp ln x0 exp(b t)
(1 exp(b t)) + c exp(b t)
2b
0
2.2 Second Method
This second method of solution of the Gompertz stochastic differential equation is
obtained by applying the Ito formula to the transformation function:
yt = g(xt , t) = exp(b t) ln xt
So that,
dyt = b exp(bt) ln xt dt + exp(bt)

1
1
1
dxt exp(bt) 2 (dxt )2
xt
2
xt

By substituting xt from the above Gompertz stochastic differential equation and

rearranging yields:
1
d(exp(bt) ln xt ) = c exp(bt)dwt c2 exp(bt)dt
2
Thus
1
d(exp(bt) ln xt ) = c exp(bt)dwt c2 exp(bt)dt
2
By integrating the last formula from 0 to t and rearranging the solution of the
Gompertz stochastic differential equation results:


 t
c2
exp(bs)dws
xt = exp exp(bt) ln x0 + c exp(bt)
(1 exp(bt))
2b
0
This is precisely the same as the form computed by the first method.

3 Stochastic Models with Multiplicative Error Term

A stochastic model with multiplicative error term is expressed by the stochastic
differential equation
dxt = bt xt dt + cxt dwt
By using the transformation y(t, xt ) = ln xt and by applying ITOs rule results:
1
d(ln xt ) = bt dt + cdwt c2 dt
2
Integrating the last equation from t0 to t and taking antilogarithms, the following
analytic solution for xt is obtained:
 t

1
bs ds c2 (t t0 ) + c(wt wt0 )
xt = xt0 exp
2
t0

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265

The mean value of xt is expressed by


E{xt } = xt0 exp

bs ds
t0

The Variance is expressed by

  t



bs ds exp (c2 (t t0 )) 1
Var{xt } = x2t0 exp 2
t0

3.1 Special Cases

3.1.1 The Case: b t = b /t
Then
dxt =
and

b
xt dt + cxt dwt
t



1
xt = x0 exp b ln (t/t0 ) c2 (t t0 ) + c(wt wt0 )
2

3.1.2 The Case: b t = b /t2

Then
dxt =
and

b
xt dt + cxt dwt
t2



1
xt = x0 exp b (1/t 1/t0 ) c2 (t t0 ) + c(wt wt0 )
2

This is stochastic process providing paths with a sigmoid form mean value (see
Skiadas et al. 1993).
The mean value of xt is expressed by
E{xt } = xt0 exp{b (1/t 1/t0 )}
The Variance is expressed by


Var{xt } = x2t0 exp{2b (1/t 1/t0 )} exp (c2 (t t0 )) 1

4 The Generalized Logistic Stochastic Model

A deterministic version of this model was developed by Richards (1959) based
on a previous simpler model proposed by Von-Bertalanffy for the description of
the increase of weight as a function of the metabolism process of animals. Other
deterministic forms of Generalized models can be found in Skiadas (1985, 1986,
1987).

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4.1 The Deterministic Model

The deterministic Generalized Logistic model model is expressed by the differential
equation

x
m

t
dxt = b xt 1
dt
F
where b , m and F are parameters.
By dividing both sides of the last equation by F and placing yt = xt /F results


dyt = b yt 1 (yt )m dt
To solve this differential equation the method of change of variables is needed by
using zt = ym
t .
Then the last differential equation reduces to the linear differential equation
dzt = bm(zt 1)dt

(5)

ln(zt 1) = ln(z0 1) = bmt

(6)

which is easily solved to give

where z0 = z(t = 0) = ym
= (x0 /F)m
0
Finally by transforming to yt and then to xt the solution of the deterministic
Generalized Logistic model results
yt = [1 + (ym
1) exp(bmt)]1/m
0

(7)


1/m
xt = F 1 + ((x0 /F)m 1) exp(bmt)

(8)

This is a sigmoid form model with saturation level achieved at the upper limit F.
The parameter b accounts for the speed of the product adoption process.
The inflection point is achieved at xin f = (1/(m + 1))1/m .
4.2 The Stochastic Model
The stochastic Generalized Logistic model with a multiplicative noise term is given
by the stochastic differential equation

x
m

t
dt + cxt dwt
dxt = b xt 1
F
As for the deterministic model above by dividing both sides of the last equation
by F and placing yt = xt /F results


dyt = b yt 1 (yt )m dt + cyt dwt
For the solution of the last stochastic differential equation the reduction method
will be used. The change of variables is achieved by using the same integration factor
as for the deterministic case zt = ym
t .
Then the following Ito formula is applied to the transformation function zt :
dzt =

yt
1 2 yt
(dyt )2
dyt +
y
2 y2

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267

By introducing in the last form the values for yt and dyt from the previous
forms and rearranging the following form of the transformed stochastic differential
equation results:
 2


c
dzt =
m(m + 1) b m zt + b m dt cmzt dwt
2
This is a linear autonomous stochastic differential equation. The solution arises after using the following general form for the solution of a linear stochastic differential
equation of the type:
drt = (a1 rt + a2 )dt + (b 1 rt )dwt
where a1 , a2 and b1 are parameters. The solution is given by:


 t
t1 ds
rt = t r0 + a2
0

where


t = exp (a1 b 21 /2)t + b 1 wt
Considering that in our case a1 = c2 m(m + 1)/2 b m, a2 = b m and b 1 = cm;
t is given by:
t = exp{(b m + c2 m/2)t cmwt )}
Then the resulting solution for zt is


 t
s1 ds
zt = t z0 + b m
0

  2

 

 t
c
zt = exp m
z0 + b m (exp((c2 m/2 + b m)s + cmws ))ds
b t cwt
2
0
Finally, the solution of the Generalized Logistic stochastic differential equation
1/m
and xt = Fyt
arises after the application of the reversal transformations yt = zt
and is in the form of:

1/m
 t
1/m
1
ym
+
b
m

ds
yt = t
s
0
0

1/m

xt = Ft

(x0 /F)m + b m


0

s1 ds

1/m

The resulting mean value for zero noise c = 0 is


1/m
xt = F 1 + ((x0 /F)m 1) exp(b mt)
That is precisely the solution of the deterministic case.

(9)

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4.3 The Stochastic Logistic Model

The Logistic model, a model with very many applications in several fields, results
as a special case of the Generalized Logistic model when the parameter m = 1. The
stochastic version of this model is given by:

x

t
dxt = b xt 1
dt
F
(See analytic solution and related applications in Giovanis and Skiadas (1995) and
for a more general model in Skiadas and Giovanis (1997) Then from the solution for
the Generalized Logistic model the formula the the solution of the Logistic model
results immediately by introducing m = 1.

1
 t
1
1
1
xt = Ft
s ds
(x0 /F) + b
0

where


t = exp (b + c2 /2)t cwt

xt = F exp (b c /2)t + cwt

2


(x0 /F)

+b



exp (b c2 /2)s + cws ds

1

The resulting value for zero noise c = 0 is


1
 t
xt = F exp(b t) (x0 /F)1 + b
exp(b s)ds
0


1
xt = F 1 + ((x0 /F)1 1) exp(b t)

(10)

4.4 The Mean Value

To find the mean value of the Logistic stochastic model first we observe that the
following relation holds for the expectation of a stochastic process g(w)
E{exp(g(w))} = exp

E(g(w))2
2

Thus the following two relations result

 
 2
E c2 t
c t
E(cw)2
E{exp(cwt )} = exp
= exp
= exp
2
2
2
and



 t
 t
 t


E (cws )2 /2 ds = exp (c2 s/2)ds
E exp (cws )ds = exp
0

We thus obtain
E{t } = exp(b t)

Methodol Comput Appl Probab (2010) 12:261270

269

Fig. 1 The stochastic logistic

model

and



  t


  t
1
2
t ds
= E exp b
((b c /2)s + cws )ds
E exp b
0


  t
(b s)ds = exp(b t) 1
= exp b
0

Finally the mean value of the stochastic Logistic model is:



E{xt } = F/ (x0 /F)1 exp(b t) + (1 exp(b t)

E{xt } =

F


1 + (x0 /F)1 1 exp(b t)

4.5 The Variance

To calculate the Variance of the stochastic Logistic model first we estimate the
autocorrelation function that is

2
E{xt xt } = F 2 exp(2b t) (x0 /F)1 + exp(b t) 1
The Variance is calculated by the following form
Var{xt } = E{xt xt } (E{xt })2
Thus

2
Var{xt } = F 2 exp(2b t) (x0 /F)1 + exp(b t) 1
(exp(c2 t) 1)
We can now give an illustrative example of the Stochastic Logistic Model including
several stochastic paths presented in Fig. 1. The parameters selected are: c = 0.0025,
x0 = 2, F = 100, b = 0.2.

5 Conclusion
Exact solutions of several stochastic models are given along with the related analysis.
The solution methods are based on the Ito theory for the solution of stochastic

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differential equations. Some sigmoid form models are given in the deterministic and
the stochastic form and an illustrative example of the stochastic Logistic model is
presented. The provided exact analytic forms could be very useful for testing the
existing and new approximate methods for the solution of stochastic differential
equations.

References
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