Stochastic Financial Mathematics

Ralf Korn () and Bernd Luderer ()
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Ralf Korn: TU Kaiserslautern
Bernd Luderer: TU Chemnitz

Chapter 66 in Money and Mathematics, 2021, pp 295-308 from Springer

Abstract: Abstract We give an overview of basic notions from probability theory including discrete probability distribution and probability distributions with density. We explain the Law of Large Numbers, the central Limit Theorem as well as the Theorem of de Moivre-Laplace. Moreover, stochastic modeling of stock prices is described with a special focus on geometric Brownian motion. Further, we give an insight into mathematical foundations of option pricing (e.g. the risk-neutral market model and the Black-Scholes formula).

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-658-34677-5_66

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DOI: 10.1007/978-3-658-34677-5_66

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