Martingale Model

Giandomenico, Rossano (2006): Martingale Model.

Abstract

The model determines a stochastic continuous process as continuous limit of a stochastic discrete process so to show that the stochastic continuous process converges to the stochastic discrete process such that we can integrate it. Furthermore, the model determines the expected volatility and the expected mean so to show that the volatility and the mean are increasing function of the time.

• Item Type: MPRA Paper
• Language: English
• Keywords: Geometric Brown process, Wiener process
• Subjects: G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing

References

Bjòrk,T. : Arbitrage Theory in Continuous Time Oxford University Press (1998)

Øksendal,B. : Stochastic Differential Equations (4th edn) Springer Verlag,Berlin Heidelberg (1995)

Louis Bachelier Theory of Speculation (1900) Cootner: The Random Character of Stock Market Prices Cambridge, Mass, MIT. (1964)

Malliaris,A.G. : Ito’s Calculus in Financial Decision Making S.I.A.M. Review, Vol. 25 n° 4 (October1983)

Malliaris,Brock : Stochastic Methods in Economics and Finance North-Holland (1982)

Merton,R. : On the Mathematics and Economics Assumptions of Continuous-Time Models Massachusetts Institute of Technology (1982)