Introduction to stochastic analysis : integrals and differential equations / Vigirdas Mackevičius.

By: Mackevičius, VigirdasMaterial type: TextTextSeries: ISTEPublication details: London : Wiley, 2013Description: 1 online resource (278 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9781118603338; 1118603338Subject(s): Stochastic analysis | Stochastic analysisGenre/Form: Electronic books.Additional physical formats: Print version:: Introduction to Stochastic Analysis : Integrals and Differential Equations.DDC classification: 519.2/2 | 519.22 LOC classification: QA274.2 .M33 2011Online resources: Wiley Online Library
Contents:
Cover; Title Page; Copyright Page; Table of Contents; Preface; Notation; Chapter 1. Introduction: Basic Notions of Probability Theory; 1.1. Probability space; 1.2. Random variables; 1.3. Characteristics of a random variable; 1.4. Types of random variables; 1.5. Conditional probabilities and distributions; 1.6. Conditional expectations as random variables; 1.7. Independent events and random variables; 1.8. Convergence of random variables; 1.9. Cauchy criterion; 1.10. Series of random variables; 1.11. Lebesgue theorem; 1.12. Fubini theorem; 1.13. Random processes; 1.14. Kolmogorov theorem.
Chapter 2. Brownian Motion2.1. Definition and properties; 2.2. White noise and Brownian motion; 2.3. Exercises; Chapter 3. Stochastic Models with Brownian Motion and White Noise; 3.1. Discrete time; 3.2. Continuous time; Chapter 4. Stochastic Integral with Respect to Brownian Motion; 4.1. Preliminaries. Stochastic integral with respect to a step process; 4.2. Definition and properties; 4.3. Extensions; 4.4. Exercises; Chapter 5. Itô's Formula; 5.1. Exercises; Chapter 6. Stochastic Differential Equations; 6.1. Exercises; Chapter 7. Itô Processes; 7.1. Exercises.
Chapter 8. Stratonovich Integral and Equations8.1. Exercises; Chapter 9. Linear Stochastic Differential Equations; 9.1. Explicit solution of a linear SDE; 9.2. Expectation and variance of a solution of an LSDE; 9.3. Other explicitly solvable equations; 9.4. Stochastic exponential equation; 9.5. Exercises; Chapter 10. Solutions of SDEs as Markov Diffusion Processes; 10.1. Introduction; 10.2. Backward and forward Kolmogorov equations; 10.3. Stationary density of a diffusion process; 10.4. Exercises; Chapter 11. Examples; 11.1. Additive noise: Langevin equation.
11.2. Additive noise: general case11.3. Multiplicative noise: general remarks; 11.4. Multiplicative noise: Verhulst equation; 11.5. Multiplicative noise: genetic model; Chapter 12. Example in Finance: Black-Scholes Model; 12.1. Introduction: what is an option?; 12.2. Self-financing strategies; 12.2.1. Portfolio and its trading strategy; 12.2.2. Self-financing strategies; 12.2.3. Stock discount; 12.3. Option pricing problem: the Black-Scholes model; 12.4. Black-Scholes formula; 12.5. Risk-neutral probabilities: alternative derivation of Black-Scholes formula; 12.6. Exercises.
Chapter 13. Numerical Solution of Stochastic Differential Equations13.1. Memories of approximations of ordinary differential equations; 13.2. Euler approximation; 13.3. Higher-order strong approximations; 13.4. First-order weak approximations; 13.5. Higher-order weak approximations; 13.6. Example: Milstein-type approximations; 13.7. Example: Runge-Kutta approximations; 13.8. Exercises; Chapter 14. Elements of Multidimensional Stochastic Analysis; 14.1. Multidimensional Brownian motion; 14.2. Itô's formula for a multidimensional Brownian motion; 14.3. Stochastic differential equations.
Summary: This is an introduction to stochastic integration and stochastic differential equations written in an understandable way for a wide audience, from students of mathematics to practitioners in biology, chemistry, physics, and finances. The presentation is based on the naïve stochastic integration, rather than on abstract theories of measure and stochastic processes. The proofs are rather simple for practitioners and, at the same time, rather rigorous for mathematicians.
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Cover; Title Page; Copyright Page; Table of Contents; Preface; Notation; Chapter 1. Introduction: Basic Notions of Probability Theory; 1.1. Probability space; 1.2. Random variables; 1.3. Characteristics of a random variable; 1.4. Types of random variables; 1.5. Conditional probabilities and distributions; 1.6. Conditional expectations as random variables; 1.7. Independent events and random variables; 1.8. Convergence of random variables; 1.9. Cauchy criterion; 1.10. Series of random variables; 1.11. Lebesgue theorem; 1.12. Fubini theorem; 1.13. Random processes; 1.14. Kolmogorov theorem.

Chapter 2. Brownian Motion2.1. Definition and properties; 2.2. White noise and Brownian motion; 2.3. Exercises; Chapter 3. Stochastic Models with Brownian Motion and White Noise; 3.1. Discrete time; 3.2. Continuous time; Chapter 4. Stochastic Integral with Respect to Brownian Motion; 4.1. Preliminaries. Stochastic integral with respect to a step process; 4.2. Definition and properties; 4.3. Extensions; 4.4. Exercises; Chapter 5. Itô's Formula; 5.1. Exercises; Chapter 6. Stochastic Differential Equations; 6.1. Exercises; Chapter 7. Itô Processes; 7.1. Exercises.

Chapter 8. Stratonovich Integral and Equations8.1. Exercises; Chapter 9. Linear Stochastic Differential Equations; 9.1. Explicit solution of a linear SDE; 9.2. Expectation and variance of a solution of an LSDE; 9.3. Other explicitly solvable equations; 9.4. Stochastic exponential equation; 9.5. Exercises; Chapter 10. Solutions of SDEs as Markov Diffusion Processes; 10.1. Introduction; 10.2. Backward and forward Kolmogorov equations; 10.3. Stationary density of a diffusion process; 10.4. Exercises; Chapter 11. Examples; 11.1. Additive noise: Langevin equation.

11.2. Additive noise: general case11.3. Multiplicative noise: general remarks; 11.4. Multiplicative noise: Verhulst equation; 11.5. Multiplicative noise: genetic model; Chapter 12. Example in Finance: Black-Scholes Model; 12.1. Introduction: what is an option?; 12.2. Self-financing strategies; 12.2.1. Portfolio and its trading strategy; 12.2.2. Self-financing strategies; 12.2.3. Stock discount; 12.3. Option pricing problem: the Black-Scholes model; 12.4. Black-Scholes formula; 12.5. Risk-neutral probabilities: alternative derivation of Black-Scholes formula; 12.6. Exercises.

Chapter 13. Numerical Solution of Stochastic Differential Equations13.1. Memories of approximations of ordinary differential equations; 13.2. Euler approximation; 13.3. Higher-order strong approximations; 13.4. First-order weak approximations; 13.5. Higher-order weak approximations; 13.6. Example: Milstein-type approximations; 13.7. Example: Runge-Kutta approximations; 13.8. Exercises; Chapter 14. Elements of Multidimensional Stochastic Analysis; 14.1. Multidimensional Brownian motion; 14.2. Itô's formula for a multidimensional Brownian motion; 14.3. Stochastic differential equations.

14.4. Itô processes.

This is an introduction to stochastic integration and stochastic differential equations written in an understandable way for a wide audience, from students of mathematics to practitioners in biology, chemistry, physics, and finances. The presentation is based on the naïve stochastic integration, rather than on abstract theories of measure and stochastic processes. The proofs are rather simple for practitioners and, at the same time, rather rigorous for mathematicians.

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