stochastic calculus and differential equations for physics and finance

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Stochastic Calculus And Differential Equations For Physics And Finance

Author : Joseph L. McCauley
ISBN : 9780521763400
Genre : Business & Economics
File Size : 36. 92 MB
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Provides graduate students and practitioners in physics and economics with a better understanding of stochastic processes.

Elementary Stochastic Calculus With Finance In View

Author : Thomas Mikosch
ISBN : 9810235437
Genre : Mathematics
File Size : 51. 99 MB
Format : PDF
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Modelling with the Ito integral or stochastic differential equations has become increasingly important in various applied fields, including physics, biology, chemistry and finance. However, stochastic calculus is based on a deep mathematical theory. This book is suitable for the reader without a deep mathematical background. It gives an elementary introduction to that area of probability theory, without burdening the reader with a great deal of measure theory. Applications are taken from stochastic finance. In particular, the Black -- Scholes option pricing formula is derived. The book can serve as a text for a course on stochastic calculus for non-mathematicians or as elementary reading material for anyone who wants to learn about Ito calculus and/or stochastic finance.

L Vy Processes And Stochastic Calculus

Author : David Applebaum
ISBN : 0521832632
Genre : Mathematics
File Size : 76. 42 MB
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Graduate text decsribing two of the main tools for modern mathematical finance.

An Introduction To Stochastic Differential Equations

Author : Lawrence C. Evans
ISBN : 9781470410544
Genre : Mathematics
File Size : 88. 21 MB
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These notes provide a concise introduction to stochastic differential equations and their application to the study of financial markets and as a basis for modeling diverse physical phenomena. They are accessible to non-specialists and make a valuable addition to the collection of texts on the topic. --Srinivasa Varadhan, New York University This is a handy and very useful text for studying stochastic differential equations. There is enough mathematical detail so that the reader can benefit from this introduction with only a basic background in mathematical analysis and probability. --George Papanicolaou, Stanford University This book covers the most important elementary facts regarding stochastic differential equations; it also describes some of the applications to partial differential equations, optimal stopping, and options pricing. The book's style is intuitive rather than formal, and emphasis is made on clarity. This book will be very helpful to starting graduate students and strong undergraduates as well as to others who want to gain knowledge of stochastic differential equations. I recommend this book enthusiastically. --Alexander Lipton, Mathematical Finance Executive, Bank of America Merrill Lynch This short book provides a quick, but very readable introduction to stochastic differential equations, that is, to differential equations subject to additive ``white noise'' and related random disturbances. The exposition is concise and strongly focused upon the interplay between probabilistic intuition and mathematical rigor. Topics include a quick survey of measure theoretic probability theory, followed by an introduction to Brownian motion and the Ito stochastic calculus, and finally the theory of stochastic differential equations. The text also includes applications to partial differential equations, optimal stopping problems and options pricing. This book can be used as a text for senior undergraduates or beginning graduate students in mathematics, applied mathematics, physics, financial mathematics, etc., who want to learn the basics of stochastic differential equations. The reader is assumed to be fairly familiar with measure theoretic mathematical analysis, but is not assumed to have any particular knowledge of probability theory (which is rapidly developed in Chapter 2 of the book).

Stochastic Calculus

Author : Richard Durrett
ISBN : 9781351413749
Genre : Mathematics
File Size : 86. 62 MB
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This compact yet thorough text zeros in on the parts of the theory that are particularly relevant to applications . It begins with a description of Brownian motion and the associated stochastic calculus, including their relationship to partial differential equations. It solves stochastic differential equations by a variety of methods and studies in detail the one-dimensional case. The book concludes with a treatment of semigroups and generators, applying the theory of Harris chains to diffusions, and presenting a quick course in weak convergence of Markov chains to diffusions. The presentation is unparalleled in its clarity and simplicity. Whether your students are interested in probability, analysis, differential geometry or applications in operations research, physics, finance, or the many other areas to which the subject applies, you'll find that this text brings together the material you need to effectively and efficiently impart the practical background they need.

Stochastic Calculus

Author : Mircea Grigoriu
ISBN : 0817642420
Genre : Mathematics
File Size : 36. 46 MB
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"This self-contained text may be used for several graduate courses and as an important reference resource for applied scientists interested in analytical and numerical methods for solving stochastic problems."--BOOK JACKET.

Stochastic Processes

Author : Wolfgang Paul
ISBN : 3540665609
Genre : Business & Economics
File Size : 63. 81 MB
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The book is an introduction to stochastic processes with applications from physics and finance. It introduces the basic notions of probability theory and the mathematics of stochastic processes. The applications that we discuss are chosen to show the interdisciplinary character of the concepts and methods and are taken from physics and finance. Due to its interdisciplinary character and choice of topics, the book can show students and researchers in physics how models and techniques used in their field can be translated into and applied in the field of finance and risk-management. On the other hand, a practitioner from the field of finance will find models and approaches recently developed in the emerging field of econophysics for understanding the stochastic price behavior of financial assets.

Path Integrals In Quantum Mechanics Statistics Polymer Physics And Financial Markets

Author : Hagen Kleinert
ISBN : 9789814365260
Genre :
File Size : 60. 90 MB
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This is the fifth, expanded edition of the comprehensive textbook published in 1990 on the theory and applications of path integrals. It is the first book to explicitly solve path integrals of a wide variety of nontrivial quantum-mechanical systems, in particular the hydrogen atom. The solutions have been made possible by two major advances. The first is a "new euclidean path integral formula" which increases the restricted range of applicability of Feynman's time-sliced formula to include singular attractive 1/"r"- and 1/"r"2-potentials. The second is a "new nonholonomic mapping principle" carrying physical laws in flat spacetime to spacetimes with curvature and torsion, which leads to time-sliced path integrals that are manifestly invariant under coordinate transformations. In addition to the time-sliced definition, the author gives a perturbative, coordinate-independent definition of path integrals, which makes them invariant under coordinate transformations. A consistent implementation of this property leads to an extension of the theory of generalized functions by defining uniquely products of distributions. The powerful Feynman-Kleinert variational approach is explained and developed systematically into a "variational perturbation theory" which, in contrast to ordinary perturbation theory, produces convergent results. The convergence is uniform from weak to strong couplings, opening a way to precise evaluations of analytically unsolvable path integrals in the strong-coupling regime where they describe critical phenomena. Tunneling processes are treated in detail, with applications to the lifetimes of supercurrents, the stability of metastable thermodynamic phases, and the large-order behavior of perturbation expansions. A variational treatment extends the range of validity to small barriers. A corresponding extension of the large-order perturbation theory now also applies to small orders. Special attention is devoted to path integrals with topological restrictions needed to understand the statistical properties of elementary particles and the entanglement phenomena in polymer physics and biophysics. The Chern?Simons theory of particles with fractional statistics "(anyons)" is introduced and applied to explain the fractional quantum Hall effect. The relevance of path integrals to financial markets is discussed, and improvements of the famous Black?Scholes formula for option prices are developed which account for the fact, recently experienced in the world markets, that large fluctuations occur much more frequently than in Gaussian distributions.Contents: FundamentalsPath Integrals ? Elementary Properties and Simple SolutionsExternal Sources, Correlations, and Perturbation TheorySemiclassical Time Evolution AmplitudeVariational Perturbation TheoryPath Integrals with Topological ConstraintsMany Particle Orbits ? Statistics and Second QuantizationPath Integrals in Polar and Spherical CoordinatesWave FunctionsSpaces with Curvature and TorsionSchr”dinger Equation in General Metric-Affine SpacesNew Path Integral Formula for Singular PotentialsPath Integral of Coulomb SystemSolution of Further Path Integrals by Duru-Kleinert MethodPath Integrals in Polymer PhysicsPolymers and Particle Orbits in Multiply Connected SpacesTunnelingNonequilibrium Quantum StatisticsRelativistic Particle OrbitsPath Integrals and Financial Markets Readership: Students and researchers in theoretical physics.

Stochastic Analysis

Author : Hiroyuki Matsumoto
ISBN : 9781108107884
Genre : Mathematics
File Size : 22. 76 MB
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Thanks to the driving forces of the Itô calculus and the Malliavin calculus, stochastic analysis has expanded into numerous fields including partial differential equations, physics, and mathematical finance. This book is a compact, graduate-level text that develops the two calculi in tandem, laying out a balanced toolbox for researchers and students in mathematics and mathematical finance. The book explores foundations and applications of the two calculi, including stochastic integrals and differential equations, and the distribution theory on Wiener space developed by the Japanese school of probability. Uniquely, the book then delves into the possibilities that arise by using the two flavors of calculus together. Taking a distinctive, path-space-oriented approach, this book crystallizes modern day stochastic analysis into a single volume.

Stochastic Differential Equations Backward Sdes Partial Differential Equations

Author : Etienne Pardoux
ISBN : 9783319057149
Genre : Mathematics
File Size : 38. 39 MB
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This research monograph presents results to researchers in stochastic calculus, forward and backward stochastic differential equations, connections between diffusion processes and second order partial differential equations (PDEs), and financial mathematics. It pays special attention to the relations between SDEs/BSDEs and second order PDEs under minimal regularity assumptions, and also extends those results to equations with multivalued coefficients. The authors present in particular the theory of reflected SDEs in the above mentioned framework and include exercises at the end of each chapter. Stochastic calculus and stochastic differential equations (SDEs) were first introduced by K. Itô in the 1940s, in order to construct the path of diffusion processes (which are continuous time Markov processes with continuous trajectories taking their values in a finite dimensional vector space or manifold), which had been studied from a more analytic point of view by Kolmogorov in the 1930s. Since then, this topic has become an important subject of Mathematics and Applied Mathematics, because of its mathematical richness and its importance for applications in many areas of Physics, Biology, Economics and Finance, where random processes play an increasingly important role. One important aspect is the connection between diffusion processes and linear partial differential equations of second order, which is in particular the basis for Monte Carlo numerical methods for linear PDEs. Since the pioneering work of Peng and Pardoux in the early 1990s, a new type of SDEs called backward stochastic differential equations (BSDEs) has emerged. The two main reasons why this new class of equations is important are the connection between BSDEs and semilinear PDEs, and the fact that BSDEs constitute a natural generalization of the famous Black and Scholes model from Mathematical Finance, and thus offer a natural mathematical framework for the formulation of many new models in Finance.

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