IEORE4701 Stochastic Models (Financial Engineering)

Instructor: Daniel Lacker

Additional Information: IEOR_E4701_Fall_2015_Syllabus.pdf

3 pts. Lect: 3. Probability and Statistics at the level of SIEO 4150, or instructor permission. This course is for graduate students in FE only. Introduction to stochastic processes/modeling with an emphasis on those topics relevent to Financial Engineering applications. Topics covered include discrete-time Markov chains; Gambler's ruin problem, Binomial Lattice Model for stock and derivative pricing; exponential distribution and the Poisson process; other Point processes; Renewal processes, Renewal reward theorem; continuous-time Markov chains; introduction to martingales and applications of the optional stopping theorem; introduction to Brownian motion; geometric Brownian motion; black-Scholes option pricing formula.

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