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What is stochastic calculus?

Updated: 4/27/2022
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13y ago

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The mathematical theory of stochastic integrals, i.e. integrals where the integrator function is over the path of a stochastic, or random, process. Brownian motion is the classical example of a stochastic process. It is widely used to model the prices of financial assets and is at the basis of Black and Scholes' theory of option pricing.

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Could you suggest some introductory books to stochastic calculus and derivative pricing?

A very simple introduction to stochastic calculus and to Black and Scholes' theory of option pricing is:Elementary Stochastic Calculus With Finance in View by Thomas MikoschIf you have a strong mathematical background and want a more sophisticated introduction, a very good choice would be:Stochastic Calculus and Financial Applications by J. Michael Steele


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Thomas Mikosch has written: 'Elementary stochastic calculus with finance in view' -- subject(s): Stochastic analysis


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What has the author Michel Emery written?

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When was Stochastic Models created?

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