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    Chapter 0

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    Vito Liu
    This document provides an overview of stochastic calculus. It discusses that stochastic calculus combines stochastic processes and calculus and originated from studying pollen movement in physics. Some key applications areas mentioned are biology, finance, and others. The document also notes that stochastic calculus is a powerful tool for describing physical worlds with uncertainty, and that it is used in fields like mathematics, physics, biology, and finance. It provides an outline of topics to be covered like Brownian motion, Ito's integration, and applications like option pricing in finance.

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    Chapter 0

    Uploaded by

    Vito Liu
    10 views8 pages
    This document provides an overview of stochastic calculus. It discusses that stochastic calculus combines stochastic processes and calculus and originated from studying pollen movement in physics. Some key applications areas mentioned are biology, finance, and others. The document also notes that stochastic calculus is a powerful tool for describing physical worlds with uncertainty, and that it is used in fields like mathematics, physics, biology, and finance. It provides an outline of topics to be covered like Brownian motion, Ito's integration, and applications like option pricing in finance.

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    MAFM 5010

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    chapter 0

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    This document provides an overview of stochastic calculus. It discusses that stochastic calculus combines stochastic processes and calculus and originated from studying pollen movement in physics. Some key applications areas mentioned are biology, finance, and others. The document also notes that stochastic calculus is a powerful tool for describing physical worlds with uncertainty, and that it is used in fields like mathematics, physics, biology, and finance. It provides an outline of topics to be covered like Brownian motion, Ito's integration, and applications like option pricing in finance.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    10 views8 pages

    Chapter 0

    Uploaded by

    Vito Liu
    This document provides an overview of stochastic calculus. It discusses that stochastic calculus combines stochastic processes and calculus and originated from studying pollen movement in physics. Some key applications areas mentioned are biology, finance, and others. The document also notes that stochastic calculus is a powerful tool for describing physical worlds with uncertainty, and that it is used in fields like mathematics, physics, biology, and finance. It provides an outline of topics to be covered like Brownian motion, Ito's integration, and applications like option pricing in finance.

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    of 8

    Bing-Yi JING

    Stochastic Calculus 荆炳义

    majing@ust.hk

    What?

    ❖ Stochastic Calculus = Stochastic Process + Calculus


    ❖ Origin: Pollen movement in Physic
    ❖ Applications in other areas: biology, nance, …

    fi

    Why?

    ❖ Calculus: powerful tool in describing physical


    worl
    ❖ Stochastic calculus: powerful tool in describing
    physical world with uncertainty
    d

    Where?

    ❖ Mathematic
    ❖ Physic
    ❖ Biolog
    ❖ Financ
    ❖ ….
    y

    Schedule

    ❖ Preparations in Probability: Brownian motion,


    Conditional exception, Martingal
    ❖ Main Tools: Ito’s integration, Ito’s lemma, Gasanov
    change of measure, Martingale representation
    Theorem, Feyman-Kac formul
    ❖ Applications: Option pricing in nance.
    a

    fi
    e

    Lecture time and evaluations

    ❖ Contact: majing@ust.hk
    ❖ Evaluation: Homeworks (30%) + Final Exam (70%)
    References

    ❖ Mikosch, M. Elementary Stochastic Calculus with Finance in View


    ❖ Klebaner, F. C. Introduction to Stochastic Calculus with Applications.

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