Lecture 5: Itos Calculus and Measure Change
1
Multi-Dimensional It
o Calculus (Continued)
(1)
(2)
Example: Consider the process dXt = X Xt dt + X,1 Xt dWt + X,2 Xt dWt , and the process
(1)
(2)
dYt =
Lecture 1: Probability Space, Stochastic Processes, and
Filtration
1
Why Continuous Time Finance?
In practise, agents are able to trade only at discrete time periods. However, there are the following
Lecture 2: Random Walk
1
Random Walk and Continuous time Finance
Last time, we have started introducing the discrete time basic building block of finance, namely
the random walk. Section 1.1 continues