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Table Of Contents

2.1 Background
2.2 Definitions
2.3 A Simple Example: The Two State Tree
2.6 Geometric Brownian motion with drift
2.6.2 Some uses of Ito’s Lemma
2.6.3 Some more uses of Ito’s Lemma
2.7 The Black-Scholes Analysis
2.8 Hedging in Continuous Time
2.9 The option price
2.10 American early exercise
3 The Risk Neutral World
4 Monte Carlo Methods
4.1 Monte Carlo Error Estimators
4.2 Random Numbers and Monte Carlo
4.3 The Box-Muller Algorithm
4.3.1 An improved Box Muller
4.5 Estimating the mean and variance
4.6 Low Discrepancy Sequences
4.7 Correlated Random Numbers
4.8 Integration of Stochastic Differential Equations
4.8.1 The Brownian Bridge
4.8.2 Strong and Weak Convergence
5 The Binomial Model
5.1 A No-arbitrage Lattice
6 More on Ito’s Lemma
7 Derivative Contracts on non-traded Assets and Real Options
7.1 Derivative Contracts
7.2 A Forward Contract
7.2.1 Convenience Yield
8 Discrete Hedging
8.1 Delta Hedging
8.2 Gamma Hedging
8.3 Vega Hedging
9 Jump Diffusion
9.1 The Poisson Process
9.2 The Jump Diffusion Pricing Equation
10 Mean Variance Portfolio Optimization
10.1 Special Cases
10.2 The Portfolio Allocation Problem
10.3 Adding a Risk-free asset
10.4 Criticism
10.5 Individual Securities
11 Stocks for the Long Run?
12 Further Reading
12.1 General Interest
12.2 More Background
12.3 More Technical
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Brownian Motion[1]

Brownian Motion[1]

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Published by ggggyyy

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Published by: ggggyyy on Sep 30, 2010
Copyright:Attribution Non-commercial


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