Stochastic Calculus in Financial Engineering

4 Credits

Introduces students to the basic ideas and methods of stochastic calculus and its applications in finance, which are essential for the practice of quantitative finance and risk management. Covers arbitrage and risk-neutral pricing in a discrete-time setting, continuous-time models using Brownian motion, Markov processes, stochastic integral, stochastic differential equations, Ito's formula, change of measure, martingales, and applications to option pricing.