Stochastic Processes


Recent Informations:

2015-12-28
Update of Chapter 4. Upload of Homework Sheets 12 and 13.
2015-12-08
Update of Chapter 4 up to Ito’s formula.
2015-12-02
Beginning of Chapter 4 is online and there is an remark concerning conditional density and stochastic kernel in the first chapter in the Fubini section.
2015-11-30
Homework Sheet 10 is online
2015-11-26
Chapter 3 on Markov process – be aware of possible typos! – Update Chapter 1 and 2 for small typos

When/Where

From 2015.09.14 to 2016.01.04

Monday: 14-15:40
Wednesday: 10-12
Place: Chen Ruiqiu Building, room 107

Office hour: Wednesday from 13:00 to 15:30
Office: Math building, room 2.105

Teaching Assistant: Zhang Yaoyuan volwc@sjtu.edu.cn

Course Description

This lecture is an introduction to the theory of stochastic processes, with a special focus on Martingale Theory. The discrete time framework is first addressed and then the continuous time with the construction of Ito’s integral. One finally address with the help of Ito’s Formula some Stochastic differential equations. Throughout the whole course we illustrate the theory by means of examples within financial mathematics.

Lecture Organization

Prerequisites

Measure theory, topology, some basics of functional analysis, and probability theory.

Literature

The course won’t follow any textbook however you might find some interesting/alternative approaches in

For measure and integration theory:

[1] “Measure and Integration Theory”, H. Bauer, 2001 (very complete)

For stochastic processes:

[2] “Foundation of Modern Probability”, O. Kallenberg, 2nd Edition 2002 (very general but complete)

[3] “Stochastic Calculus and Financial Applications”, J.M. Steel, 2000 (easy but complete introduction with applications to finance)

[4] “Probability and Potentials B”, P. Dellacherie, P.A. Meyer, 1982 (the most general reference, very hard and build upon Probability and Potentials A)

Lecture Material

Disclaimer: The following lecture notes are meant to be a script for the students attending the lecture. Since they are written on the fly, they change quite often are prone to typos or some mistakes that are corrected as the lecture advance. So if you are not a student of my class, I suggest that you take it with precaution or wait until the lecture is finished so that the lecture notes converges to an acceptable steady state.