STOCHASTIC CALCULUS AND

APPLICATIONS IN FINANCE
University of Tasmania Staff Seminars
SOME LITERATURE

Mikosch,T., Elementary Stochastic Calculus with Finance in View, World Scientific 1998. Based on his notes
from Stcohastic Calculus course he was teaching at Victoria University in Wellington.

Fries, C.P., Mathematical Finance: Theory, Modeling and Implementation, 2006?.

van Handel, R., Stochastic Calculus, Filtering, and Stochastic Control, Lecture notes, 2007.

Shreve, S., Stochastic Calculus and Finance, Lecture notes, 1997.

Steele, J.M., Stochastic Calculus and Financial Applications,, Springer 2000.

Kuo, H.-H., Introduction to Stochastic Integration, Springer 2006.

Quastel,J., Notes for Stochastic calculus for Mathematical Finance, University of Toronto

Kuo, H.-H., Introduction to Stochastic Integration, Springer 2006. (Thank you Jet)

The Mathematics of Finance, Lecture notes. (Thank you Shane)

Varadhan,S.R.S., Stochastic Processes, Lecture notes, AMS 2007. (Thank you Mardi)

Bass,R., Lecture notes for Stochastic calculus, with applications to finance.

PRELIMINARIES
ILLUSTRATION OF MEASURABILITY
MARTINGALES
LEBESGUE INTEGRAL (VS. RIEMANN)
NON-INTEGRABLE UNDER RIEMANN
(DIRICHLET FN)
BROWNIAN MOTION
BROWNIAN MOTION

Three different views of Brownian motion, with 32 steps, 256 steps, and 2048 steps denoted by progressively lighter
colors
GEOMETRIC BROWNIAN MOTION (GBM)
ITO LEMMA
ITO LEMMA (GENERAL)
GIRSANOV THEOREM

Visualisation of the Girsanov theorem The left side shows a Wiener

process with negative drift under a canonical measure P; on the right side
each path of the process is colored according to its likelihood under the
martingale measure Q. The density transformation from P to Q is given by
the Girsanov theorem.