Description
Book SynopsisThis book focuses specifically on the key results in stochastic processes that have become essential for finance practitioners to understand. The authors study the Wiener process and Ità integrals in some detail, with a focus on results needed for the BlackâScholes option pricing model. After developing the required martingale properties of this process, the construction of the integral and the Ità formula (proved in detail) become the centrepiece, both for theory and applications, and to provide concrete examples of stochastic differential equations used in finance. Finally, proofs of the existence, uniqueness and the Markov property of solutions of (general) stochastic equations complete the book. Using careful exposition and detailed proofs, this book is a far more accessible introduction to Ità calculus than most texts. Students, practitioners and researchers will benefit from its rigorous, but unfussy, approach to technical issues. Solutions to the exercises are available online.
Trade Review'… a very accessible and comprehensive introduction.' Robert Stelzer, Mathematical Reviews
Table of ContentsPreface; 1. Discrete time processes; 2. Wiener process; 3. Stochastic integrals; 4. Itô formula; 5. Stochastic differential equations; Index.
