Modeling via Stochastic Processes

Eckhard Platen () and David Heath ()
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Eckhard Platen: University of Technology
David Heath: Australian National University

Chapter 3 in A Benchmark Approach to Quantitative Finance, 2006, pp 99-132 from Springer

Abstract: Abstract In this chapter the fundamental concept of a stochastic process is introduced. We show how stochastic processes can be applied in the context of asset price modeling. The notions of processes with independent increments, stationary processes and Markov processes are explained. Essentially, stochastic processes provide the mathematical framework that allows us to model financial quantities as families of random variables that evolve over time.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-540-47856-0_3

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DOI: 10.1007/978-3-540-47856-0_3

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