ABSTRACT

Financial engineering has been proven to be a useful tool for risk management, but using the theory in practice requires a thorough understanding of the risks and ethical standards involved. Stochastic Processes with Applications to Finance, Second Edition presents the mathematical theory of financial engineering using only basic mathematical tools

chapter Chapter 1|18 pages

Elementary Calculus

Toward Ito’s Formula

chapter Chapter 2|24 pages

Elements in Probability

chapter Chapter 3|22 pages

Useful Distributions in Finance

chapter Chapter 4|14 pages

Derivative Securities

chapter Chapter 7|16 pages

Random Walks

chapter Chapter 8|16 pages

The Binomial Model

chapter Chapter 10|16 pages

Markov Chains

chapter Chapter 11|18 pages

Monte Carlo Simulation

chapter Chapter 12|20 pages

From Discrete to Continuous

Toward the Black—Scholes