Stochastic calculus for finance
Linked to this page will be lecture notes and
problem sheets. As they are corrected/extended I shall update
the files. If you have difficulty downloading the files, please
e-mail me. Thanks to Dan Lunn for assistance with creating pdf files
and to those who have pointed out misprints.
Click here for the synopsis
and reading list,
or here for the ps file
If you have never done a probability course, then here are
some lecture notes on elementary probability
that introduce some of the basic concepts.
Click here for sections 1 and 2, Basic examples of financial
derivatives and Discrete time models I, as a ps
file and here for a pdf file
Click here for section 3, Discrete time models II,
as a ps
file and here for a pdf file
Click here for sections 4 and 5, Brownian motion and
The reflection principle and hitting times,
as a ps
file and here for a pdf file
Click here for sections 6 and 7, Martingales in continuous time and
Stochastic integration and Ito's formula, as a ps
file and here for a pdf file
Click here for sections 8 and 9, The Black-Scholes model and
Black-Scholes prices for European options, as a ps
file and here for a pdf file
Click here for the problem sheets (html
format), here for a pdf file
or here if you prefer a ps file
Assignment 1: problems 1-4
Assignment 2: problems 5-8
Assignment 3: probelms 9-12
Assignment 4: probelms 13-16 (note misprint in question 14(c))
Assignment 5: probelms 17-20
Assignment 6: probelms 21-25
Assignment 7: probelms 26, 29, 30
Misprints: There is a square root of t missing from the
integrand in question 14(c). All other misprints of which I am aware
have been corrected.
Last updated 26th November 1998.
If you spot mistakes, or points that need clarification
then please e-mail me. Alison
Etheridge