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Stochastic Processes for Asset Price Modelling

In: Derivative Security Pricing

Author

Listed:
  • Carl Chiarella

    (University of Technology Sydney)

  • Xue-Zhong He

    (University of Technology Sydney)

  • Christina Sklibosios Nikitopoulos

    (University of Technology Sydney)

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.

Suggested Citation

  • Carl Chiarella & Xue-Zhong He & Christina Sklibosios Nikitopoulos, 2015. "Stochastic Processes for Asset Price Modelling," Dynamic Modeling and Econometrics in Economics and Finance, in: Derivative Security Pricing, edition 127, chapter 0, pages 7-36, Springer.
    • Handle: RePEc:spr:dymchp:978-3-662-45906-5_2
    DOI: 10.1007/978-3-662-45906-5_2
    as

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