Aims and Fit of Module This module aims to cement a solid foundation in the theories of stochastic processes and their applications in finance. It provides both a user-friendly introduction to stochastic calculus and practical applications of Ito calculus in financial markets. The module equips students with analytical skills learnt from stochastic processes and the comprehensive understanding about their implementations in financial practice.
Learning Outcomes A Demonstrate and explain random walks with its applications in finance B Analyze and interpret discrete/continuous-time Markov Chain C Apply martingale theory in finance D Familiarize Brownian motion and stochastic calculus and apply Ito's formula for calculations E Conduct quantitative analysis on financial applications with stochastic processes F Solve simple Stochastic Differential Equations (SDEs)
Method of Teaching and Learning This module will be delivered by a combination of formal lectures and tutorials.