#Stochastic calculus with infinitesimals professional#

This started in fact right at the beginning of the century, in 1900, when a young French mathe- matician, Louis Bachelier, defended a thesis at the Sorbonne in Paris, France, on a probabilistic model of the French bourse. Already in the first half of the 20-th century researchers began to realize that a statistical approach to fi- nancial markets might be the best one. Although many people have dreamed (and still do dream) of all-encompassing deterministic models for, for example, stock prices, the number of potentially influencing factors seems to high to realis- tically hope for such a thing.

#Stochastic calculus with infinitesimals professional#

Introduction Market prices of liquidly traded financial assets depend on a huge number of factors: macro-economic ones like interest rates, inflation, balanced or unbalanced budgets, micro-economic and business-specific factors like flexibility of labor markets, sale numbers, investments, and also on more elusive psychological factors like the aggregate expec- tations, illusions and disillusions of the various market players, both professional ones (stock brokers, market makers, fund managers, banks and institutional investors like pension funds), and humble private in- vestors (like professors of finance, seeking to complement their modest revenue).

MATHEMATICAL METHODS I MSC FINANCIAL ENGINEERING RAYMOND BRUMMELHUIS School of Economics, Mathematics and Statistics Birkbeck College Autumn Term 2004-2005 1.