Stochastic Differential Equations and Their Application in Finance. An Overview

Term Paper , 2019 , 42 Pages , Grade: A

Mathematics - Stochastics

The following work tries to examine and provide soultions to an array of equations, most notably the Brownian motion, the Ito-integral and their application to finance.

In the context of this work chapter one deals with the introduction, unique terms and notation and the usefulness in the project work. Chapter two deals with Brownian motion and the Ito integral, whereas chapter three deals with stochastic differential equations. Chapter four handles the application of stochastic differential equations to finance, and, finally, chapter five concludes the project.

TABLE OF CONTENTS

CERTIFICATION

DEDICATION

ACKNOWLEDGEMENT

CHAPTER ONE
1.1 INTRODUCTION
1.2 SCOPE OF WORK
1.3 OBJECTIVE
1.4 IMPORTANT DEFINITIONS AND NOTATION USED IN THIS WORK
1.5 Limitations
1.5 USEFULNESS OF STOCHASTIC DIFFERENTIAL EQUATIONS
1.6 Conclusion

CHAPTER TWO
2.1. BROWNIAN MOTION
2.2 Martingale Theorem
2.3 Quadratic Variation of Brownian Motion
2.4 ITO PRODUCT RULE
2.5 Properties of Ito Integral

CHAPTER THREE
3.1 STOCHASTIC DIFFERENTIAL EQUATIONS
3.2 STRONG AND WEAK SOLUTIONS

CHAPTER FOUR

APPLICATION TO MATHEMATICAL FINANCE

CHAPTER FIVE
5.1. SUMMARY
5.2. CONCLUSION

References

• College: University of Benin
• Grade: A
• Author: Erhabor Moses (Author)
• Publication Year: 2019
• Pages: 42
• Catalog Number: V513307
• ISBN (eBook): 9783346113177
• ISBN (Book): 9783346113184
• Language: English
• Tags: stochastic, differential, equations, their, application, finance, overview