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Course Format

A development of stochastic processes with substantial emphasis on the processes, concepts, and methods useful in mathematical finance. Relevant concepts from probability theory, particularly conditional probability and conditional expection, will be briefly reviewed. Important concepts in stochastic processes will be introduced in the simpler setting of discrete-time processes, including random walks, Markov chains, and discrete-time martingales, then used to motivate more advanced material. Most of the course will concentrate on continuous-time stochastic processes, particularly martingales, Brownian motion, diffusions, and basic tools of stochastic calculus. Examples will focus on applications in finance, economics, business, and actuarial science.