Stochastic Foundations for Finance

This is a foundations course, which is designed as a prerequisite to FIN 539, Mathematical Finance. It is therefore mainly designed for students in the Masters in Finance program who aim at quantitative positions in investment banks, hedge funds and consulting firms. While financial examples will be given, the primary focus will be on stochastic process and stochastic calculus theory. Students interested in applications of the theory are expected to take follow-on courses. Topics to be covered include: general probability theory; Brownian motion and diffusion processes; martingales; stochastic calculus including Ito's lemma; and jump processes.