Mathematical Modeling in Finance with Stochastic Processes

INDEX 279

Liapunov’s Theorem, 139
Central Limit Theorem
Lindeberg’s Theorem, 139
Central Limit Theorem, 138
chain rule, 202
Chebyshev’s Inequality, 125
Chicago Board Options Exchange, 12,
19
coin flip, 50, 58
mechanical, 51
collateralized debt obligation, 65
collateralized debt obligations, 68
Commodity Futures Trading Commis-
sion, 14
compound Poisson process, 60
continuity correction,seehalf-integer
correction
convenience price, 34
convergence
in distribution, 135
in probability, 136
pointwise, 136
counter-permittivity, 270
Cox-Ross-Rubenstein, 81, 83
credit-default swap, 10
cycle of modeling, 39

de Moivre, Abraham, 139
degenerate probability distribution, 131
Delta, 259
derivative, 74
derivatives, 8, 10
unregulated, 14
difference equations, 96
general solution, 97
non-homogeneous, 108
diffusion, 11
diffusion equation, 160

diffusions, 160

Dol`ean’s exponential, 205

dynamic hedging, 260

dynamic portfolio, 12

economic agents, 9

efficient market, 32

efficient market hypothesis, 217, 246

efficient markets hypothesis, 11

Einstein, Albert, 11

Einstein, Albert, 162

Enron, 14

equation of state

van der Waals, 46

equation of state, 46

Euler equidimensional equation, 226

Euler-Maruyama method, 199

excess heads, 149, 150

exchanges, 10

expiry date, 18

expiry date, 18, 20

FASB,seeFinancial Accounting Stan-

dards Board

fat tails, 265

Federal reserve requirement, see re-

serve requirement

finance, 9

finance theory, 8

Financial Accounting Standards Board,

14

first-passage probabilities, 95

Fokker-Planck equation, 160

foreign exchange, 28

forwards, 8, 9

fractal, 178

frequentist approach, 50

Fundamental Theorem of Calculus, 202