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Table Of Contents

1.2 Fundamental Relations
2 DISCRETE-TIME STATE PRICING WITH FINITE STATE SPACE 6
2 Discrete-time State Pricing with Finite State
2.1 Single-period Model
2.1.1 Description of the Model
2.1.2 Arrow-Debreu Securities
2.1.3 Deflator
2.1.4 Risk-neutral Measure
2.1.5 Summary
2.2 Multi-period Model
2.2.1 Modeling Information Flow
2.2.2 Description of the Multi-period Model
2.2.3 Some Basic Definitions Revisited
2.2.4 Assumptions
2.2.5 Main Results
2.2.6 Summary
3 Introduction to Stochastic Calculus
3.1 Motivation
3.1.1 Why Stochastic Calculus?
3.1.2 What is a Reasonable Model for Stock Dynamics?
3.2 On Stochastic Processes
3.2.1 Cadlag and Caglad
3.2.2 Modification, Indistinguishability, Measurability
3.2.3 Stopping Times
3.3 Prominent Examples of Stochastic Processes
3.4 Martingales
3.5 Completition, Augmentation, Usual Conditions
3.6 Ito-Integral
3.7 Ito’s Formula
4 Continuous-time Market Model and Option Pric-
4.1 Description of the Model
4.2 Black-Scholes Approach: Pricing by Replication
4.3 Pricing with Deflators
4.4 Pricing with Risk-neutral Measures
5 Continuous-time Portfolio Optimization
5.1 Motivation
5.2 Martingale Approach
5.3 Stochastic Optimal Control Approach
5.3.1 Heuristic Derivation of the HJB
5.3.2 Solving the HJB
5.3.3 Verification
5.4 Intermediate Consumption
5.5 Infinite Horizon
References
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blatt11

blatt11

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Published by Shobhit Aggarwal

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Published by: Shobhit Aggarwal on Aug 10, 2011
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