Applied Stochastic Processes

Course No.: SMI1121002    Credit(s): 2

Course Description

The study of stochastic processes is a random phenomenon that changes over time that means the random variable that's changing over time. It is often seen as a dynamic part of the probability theory. Probability theory and stochastic process is widely used in quantitative analysis of the economic law, is the theory of modern financial theory tool, is also frequently used mathematical tools in financial analysis, it plays an important role on modern finance and its derivative market, in particular, the emergence of the option pricing model makes the options derivative instrument in the rules. This course mainly deals with the basic theory of stochastic process and introduces the stochastic processes commonly used in finance: Poisson process, Markov process, martingale, Brownian motion, and stochastic integration. Some financial models are introduced to highlight the basic concepts of stochastic processes in finance and the description of financial phenomena.

Course Learning Outcomes

Through learning of this course, students should be able to understand the basic idea of random mathematics, master basic concepts, theory and analysis method of several commonly used processes, wiener process, improve the students' mathematical quality, strengthen students' ability to carry out scientific research and solve practical problems by using the thinking method of stochastic process.

Relationship to Other Courses

The prerequisite for this course is Linear Algebra, Calculus, Probability Theory and Mathematical Statistics or Probability Theory.

Textbook and Reading Lists

Textbook:

Bo Zhang, Hao Shang, Applied Stochastic Processes (3rd edition). China Renmin University Press, 2015. ISBN number：9787300185699.

Suggested reading lists:

(America)S.M. Routh, Stochastic Processes. Trans, Shengwu He, Shengrong Xie, Yiming Chen, China Statistics Press, 1997.

Mingping Qian, Guanglu Gong, Applied Stochastic Processes. Peking University press, 1998.

Zhaoben Fang, Boqi Miu, Stochastic Processes. China Science and Technology University Press, 1993.

Shouren Wang, The Basis of Probability Theory and Stochastic Process. Beijing Science Press, 1997.

Course Assessment