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Excerpt from course description

Stochastic Processes for Finance and Economics

Introduction

Stochastic processes play a fundamental role in modeling of uncertain phenomena in business and economics. They are today used in a great variety of models to both understand risk associated with investments and to make better decisions when faced with uncertain, or seemingly random, parameters.  Typical application areas include valuation of financial assets, pricing of insurance products, interest rate forecasting, business simulation analysis, optimization under uncertainty and control theory.

Course content

  1. Random Variables
  2. Conditional probability and conditional expectation
  3. Exponential distribution and Poisson processes
  4. Markov chains
  5. Discrete random walks
  6. Brownian motion (continuous random walk)
  7. Applications in finance and economics
  8. Simulations

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.