Stochastic Processes for Asset Price Modelling

Carl Chiarella*, Xue Zhong He, Christina Sklibosios Nikitopoulos

*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceedingChapterpeer-review

1 Citation (Scopus)

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.

Original languageEnglish
Title of host publicationDynamic Modeling and Econometrics in Economics and Finance
PublisherSpringer Science and Business Media Deutschland GmbH
Pages7-36
Number of pages30
DOIs
Publication statusPublished - 2015
Externally publishedYes

Publication series

NameDynamic Modeling and Econometrics in Economics and Finance
Volume21
ISSN (Print)1566-0419
ISSN (Electronic)2363-8370

Keywords

  • Asset Price
  • Current Price
  • Option Price
  • Planck Equation
  • Sample Path

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