Stochastic Processes for Asset Price Modelling

Carl Chiarella, Xuezhong (Tony) He () and Christina Sklibosios Nikitopoulos
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Christina Sklibosios Nikitopoulos: University of Technology Sydney

Chapter Chapter 2 in Derivative Security Pricing, 2015, pp 7-36 from Springer

Abstract: Abstract This chapter gives an intuitive appreciation and review of many important aspects of the stochastic processes that have been used to model asset price processes. We will be interested in a probabilistic description of the time evolution of asset prices. After imposing some structure on the stochastic process for the return on the asset, this chapter introduces Markov processes, time evolution of conditional probabilities, continuous sample paths, and the Fokker–Planck and Kolmogorov equations.

Keywords: Asset Price; Option Price; Sample Path; Planck Equation; Current Price (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-662-45906-5_2

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DOI: 10.1007/978-3-662-45906-5_2

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