Stochastic Process for Finance

Catalog description

This is a course in mathematical models in finance, centered around the problem of building mathematical models for the stock market and its applications in pricing and hedging derivative securities. Due to the uncertainty inherent in the evolution of the stock market, the theory naturally involves probabilistic tools and structures such as conditioning, martingales, and Markov processes. To focus on the main idea, the course works with a simple model so-called binomial asset pricing model for the discrete cases, and the geometric Brownian motion model for the continuous cases, for most of the time. In addition, some finance theories behind and application to empirical data will be discussed. 001996