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Mathematical Foundations for Quant Finance
0 of 256 lessons
    1. PG5.1 A series is the limit of its partial sumsProof · 40 min
    2. PG5.2 The comparison and ratio tests, provedProof · 45 min
    3. PG5.3 Absolute and conditional convergenceProof · 40 min
    4. PG5.4 The series for eˣ converges for every xProof · 45 min
    5. PG5.5 Stage review: proving a series convergesProof · 40 min
Proof Gym overview →

Proof Gym PG5 Series and convergence Lesson 4 of 5

ProofLesson PG5.4 in the Proof Gym, stage PG5: Series and convergence. About 45 minutes.

The series for eˣ converges for every x

Simulate

Check the claim with numbers

Lesson 2.7.2 wrote exe^x as a series and said it works for every xx. Its partial sums are the Taylor polynomials

pn(x)=1+x+x22!+⋯+xnn!p_n(x) = 1 + x + \frac{x^2}{2!} + \cdots + \frac{x^n}{n!}

Far from 0 the terms first grow. The cell prints the term xkk!\frac{x^k}{k!} for x=10x = 10, then the ratio of the next term to it, xk+1\frac{x}{k+1}.

⌘/Ctrl + Enter runs the cell

The terms climb to 2755.7319 at k=9k = 9 and k=10k = 10, then fall: 41.1032 at k=20k = 20, 0.0038 at k=30k = 30. They turn round once the ratio xk+1\frac{x}{k+1} drops below 1, and the ratio keeps falling towards 0.

Now compare pn(x)p_n(x) with exe^x. The cell prints the error ∣ex−pn(x)∣|e^x - p_n(x)| next to the remainder bound of lesson 2.7.2, which the next section writes out.

⌘/Ctrl + Enter runs the cell

Every error is below its bound, and both shrink fast. At x=−5x = -5 the bound is loose, 1.385×10−31.385 \times 10^{-3} against a true error of 7.593×10−67.593 \times 10^{-6} for n=20n = 20, but it still heads to 0.

Conjecture

For every real number xx, the partial sums of the series for exe^x tend to exe^x:

pn(x)=∑k=0nxkk!→exas n→∞\begin{gathered} p_n(x) = \sum_{k=0}^{n} \frac{x^k}{k!} \to e^x \\ \text{as } n \to \infty \end{gathered}

Two values of xx, three degrees each. The claim is about every real xx, and the proof must also handle the terms that grow before they shrink.

The plan: a bound, then a limit

Every derivative of ete^t is ete^t (lesson 2.3.4). Between 0 and xx, tt is at most ∣x∣|x|, so et≤e∣x∣e^t \le e^{|x|}. The remainder bound of lesson 2.7.2, with M=e∣x∣M = e^{|x|}, becomes:

Rule: Remainder bound for the exponential

∣ex−pn(x)∣≤e∣x∣ ∣x∣n+1(n+1)!\big| e^x - p_n(x) \big| \le e^{|x|}\, \frac{|x|^{n+1}}{(n+1)!}

For every real xx and every n≥0n \ge 0. The first factor stays fixed as nn grows, so the proof only needs the second to tend to 0.

This lesson takes the remainder bound from lesson 2.7.2 as given. Its proof needs the mean value theorem, which this stage does not cover. Everything else is proved here.

Format 1

Reorder the steps

Here is the proof of the claim, with its lines shuffled. Put them in order with the arrows, or drag a line by its handle.

  1. The series ∑k≥0∣x∣kk!\sum_{k \ge 0} \frac{|x|^k}{k!} has positive terms, and the ratio of each term to the one before it is ∣x∣k+1\frac{|x|}{k+1}, which tends to 0.
  2. So pn(x)→exp_n(x) \to e^x: the series for exe^x converges to exe^x, for every real xx.
  3. By the term test (lesson PG5.1), its terms tend to 0. In particular ∣x∣n+1(n+1)!→0\frac{|x|^{n+1}}{(n+1)!} \to 0 as n→∞n \to \infty.
  4. By the ratio test (lesson PG5.2), with L=0<1L = 0 < 1, the series ∑k≥0∣x∣kk!\sum_{k \ge 0} \frac{|x|^k}{k!} converges.
  5. Let ε>0\varepsilon > 0, and choose NN with ∣x∣n+1(n+1)!<ε e−∣x∣\frac{|x|^{n+1}}{(n+1)!} < \varepsilon\, e^{-|x|} for every n≥Nn \ge N. Then ∣ex−pn(x)∣<ε|e^x - p_n(x)| < \varepsilon for every n≥Nn \ge N.
  6. Fix x≠0x \ne 0; at x=0x = 0 every pn(0)=1=e0p_n(0) = 1 = e^0. By the remainder bound, ∣ex−pn(x)∣≤e∣x∣∣x∣n+1(n+1)!|e^x - p_n(x)| \le e^{|x|} \frac{|x|^{n+1}}{(n+1)!} for every nn.

An NN you can compute

The ratio test shows that ∣x∣nn!→0\frac{|x|^n}{n!} \to 0, but it does not say from where the terms are small. A direct proof names NN. It waits until every new factor ∣x∣j\frac{|x|}{j} is below 12\frac{1}{2}, then halves.

Try it

For x=10x = 10, take the first whole number mm with m≥2∣x∣m \ge 2|x|, so m=20m = 20. The cell prints C=102020!C = \frac{10^{20}}{20!} and log⁡2Cε\log_2 \frac{C}{\varepsilon} for ε=10−6\varepsilon = 10^{-6}, both used in the proof below.

The last line finds where the terms 10nn!\frac{10^n}{n!} really drop below 10−610^{-6} for good.

⌘/Ctrl + Enter runs the cell

Format 2

Fill the gap

The direct proof that ∣x∣nn!→0\frac{|x|^n}{n!} \to 0, with its key steps left out. Type each missing piece as you would a quick answer, such as n+m or 1/3, then check.

Split the product. Fix xx, pick a whole number m≥2∣x∣m \ge 2|x|, and write C=∣x∣mm!C = \frac{|x|^m}{m!}. For n>mn > m,

∣x∣nn!=C⋅∣x∣m+1⋅∣x∣m+2⋯∣x∣n\begin{gathered} \frac{|x|^n}{n!} = C \cdot \frac{|x|}{m+1} \\ \cdot \frac{|x|}{m+2} \cdots \frac{|x|}{n} \end{gathered}

The bottoms run from m+1m + 1 to nn, so there are factors after CC.

Bound each factor. Each bottom jj is at least m+1m + 1, which is above 2∣x∣2|x|. So every factor ∣x∣j\frac{|x|}{j} is less than , and

0≤∣x∣nn!≤C(12)n−m=C 2m2n\begin{gathered} 0 \le \frac{|x|^n}{n!} \le C \left(\frac{1}{2}\right)^{n-m} \\ = \frac{C\,2^m}{2^n} \end{gathered}

Choose NN. Given ε>0\varepsilon > 0, choose a whole number N≥mN \ge m with 2N>C 2mε2^N > \frac{C\,2^m}{\varepsilon}. For every n≥Nn \ge N, ∣x∣nn!≤C 2m2n≤C 2m2N<ε\frac{|x|^n}{n!} \le \frac{C\,2^m}{2^n} \le \frac{C\,2^m}{2^N} < \varepsilon. So ∣x∣nn!→0\frac{|x|^n}{n!} \to 0.

With numbers. For x=10x = 10 and m=20m = 20, the cell gave C=41.1032C = 41.1032. For ε=10−6\varepsilon = 10^{-6} the condition is 2N−20>Cε2^{N - 20} > \frac{C}{\varepsilon}, and log⁡2Cε=25.29\log_2 \frac{C}{\varepsilon} = 25.29. So N−20N - 20 must be at least , and N=N = works.

How to type answers
  • Powers with ^, brackets round a power that is a sum: r^k, r^(k+1).
  • Fractions with / and brackets: (1-r)/(1+r). Multiply with * or side by side: 2k+1.
  • Press Enter in any box to check them all.

The terms really drop below 10−610^{-6} for good from n=37n = 37, so 46 is not the smallest place. A proof needs an NN that works, not the best one.

Simulate

One N for every x?

The proof finds an NN for each xx. Does one NN serve every xx at once?

For x>0x > 0 every term left out is positive, so the error only shrinks as nn grows. The cell finds the first nn with error below 10−610^{-6}, using 60-digit decimals so rounding cannot fake an answer.

⌘/Ctrl + Enter runs the cell

The degree needed grows with xx: n=9n = 9 at x=1x = 1, 36 at x=10x = 10 and 119 at x=40x = 40. With n=20n = 20 fixed, the error is 34.984 at x=10x = 10 and 2.353×10172.353 \times 10^{17} at x=40x = 40.

Conjecture

For each ε>0\varepsilon > 0, no single NN makes ∣ex−pn(x)∣<ε|e^x - p_n(x)| < \varepsilon for every n≥Nn \ge N and every real xx at once.

Five values of xx and a pattern. The next proof claims the opposite, and gets one line wrong.

Format 3

Find the error

A proof that one NN serves every real xx at once, which the simulation contradicts. One line does not follow. Select it.

Uniform convergence, lightly

On a bounded interval the trouble disappears. Take R>0R > 0. For every xx in [−R,R][-R, R], the remainder bound gives ∣ex−pn(x)∣≤eRRn+1(n+1)!|e^x - p_n(x)| \le e^R \frac{R^{n+1}}{(n+1)!}, a number that does not depend on xx.

That number tends to 0, by the proof above with x=Rx = R. So one NN makes it below ε\varepsilon, and that NN works for every xx in [−R,R][-R, R] at once.

Rule: Uniform convergence

pn→f uniformly on a set I:for every ε>0 there is one Nwith ∣f(x)−pn(x)∣<εfor every n≥Nand every x∈I\begin{gathered} p_n \to f \text{ uniformly on a set } I: \\ \text{for every } \varepsilon > 0 \text{ there is one } N \\ \text{with } |f(x) - p_n(x)| < \varepsilon \\ \text{for every } n \ge N \\ \text{and every } x \in I \end{gathered}

The series for exe^x converges uniformly on every interval [−R,R][-R, R], but not on the whole real line.

Try it

For R=5R = 5, the cell prints the bound e55n+1(n+1)!e^5 \frac{5^{n+1}}{(n+1)!} that serves every xx in [−5,5][-5, 5].

It is 1.815×1021.815 \times 10^{2} at n=10n = 10, but 1.385×10−31.385 \times 10^{-3} at n=20n = 20 and 8.405×10−118.405 \times 10^{-11} at n=30n = 30.

⌘/Ctrl + Enter runs the cell

Uniform convergence is what lets you integrate or differentiate a series term by term, a topic for a full analysis course. Lebl's Basic Analysis, in the further reading below, treats it in chapter 6.

Summary card

  • The remainder bound gives ∣ex−pn(x)∣≤e∣x∣∣x∣n+1(n+1)!|e^x - p_n(x)| \le e^{|x|} \frac{|x|^{n+1}}{(n+1)!} for every xx.
  • ∣x∣nn!→0\frac{|x|^n}{n!} \to 0 for every xx: by the ratio test and the term test, or directly, once every new factor ∣x∣j\frac{|x|}{j} is below 12\frac{1}{2}.
  • So the series for exe^x converges to exe^x for every real xx.
  • The NN needed grows with ∣x∣|x|. One NN works for all of [−R,R][-R, R] (uniform convergence there), but none works for the whole line.

Free further reading

Optional. This lesson covers what you need; these add more examples and practice. All are free to read.