Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more ➡
Standard view
Full view
of .
×

Financial Indices Appear to Be Stochastic Processes
1.1. Brownian motion is also called a Wiener process 3
1.1 Brownian motion is also called a Wiener process
1.2. Stochastic drift and volatility are unique 9
1.2 Stochastic drift and volatility are unique
1.3 Basic numerics simulate an SDE
1.3.1 The Euler method is the simplest
1.3.2 Convergence is relatively slow
1.4 A binomial lattice prices call option
1.4.1 Arbitrage value of forward contracts
1.4.2 A one step binomial model
1.4.3 Use a multiperiod binomial lattice for accuracy
1.5 Summary
Exercises
Ito’s Stochastic Calculus Introduced
2.1 Multiplicative noise reduces exponential growth . . . . . . . . 39
2.1 Multiplicative noise reduces exponential growth
2.2. Ito’s formula solves some SDEs 43
2.2 Ito’s formula solves some SDEs
2.3 The Black–Scholes equation prices options accurately
2.4 Summary
The Fokker–Planck Equation Describes the Probability Distribution
3.1. The probability distribution evolves forward in time 65
3.1 The probability distribution evolves forward in time
3.2 Stochastically solve deterministic differential equations
3.3 The Kolmogorov backward equation completes the picture
3.4 Summary
Stochastic Integration Proves Ito’s Formula
4.2 The Ito formula
4.3 Summary
B.1 Fokker–Planck equation
0 of .
Results for:
P. 1
Elementary Calculus of Financial Mathematics

# Elementary Calculus of Financial Mathematics

Ratings: 0|Views: 1,104|Likes:
author : A. J. Roberts
author : A. J. Roberts

### Availability:

See More
See less

08/26/2013

pdf

text

original

Pages 4 to 60 are not shown in this preview.
Pages 64 to 83 are not shown in this preview.
Pages 87 to 107 are not shown in this preview.
Pages 111 to 140 are not shown in this preview.

## Activity (12)

### Showing

AllMost RecentReviewsAll NotesLikes