Geometric Brownian Motion

This is really important for anyone interested in Finance Modelling. As what the movie Wolf on Wall Street says: They are referring to a geometric brownian motion. Firstly, we will begin with the [...]

Introduction to Brownian Motion

Lets look at brownian motion now. And yes, its the same as what our high school teachers taught about the particles moving in random motion. Here, we attempt to give it a proper structure and [...]

Review of Basic Probability

So I understand that I lost many readers for the Sampling uploads.It is a bit difficult to the intensive use of notations and also the need for statistics knowledge. So here I’ll review a [...]

Introduction to Martingales

This is a rather important topics for anyone interested in doing Finance. Lets look at their definition first. A Martingale is a random process with respect to the information filtration and the [...]

Multivariate Distributions

Let be an n-dimensional vector of random variables. For all , the joint cumulative distribution function of X satisfies Clearly it is straightforward to generalise the previous definition to join [...]

Conditional Expectations and Variances

Here we look at an important concept that is an extension from Bayes Theorem, which we discussed briefly. The condition expectation identity says The condition variance identity says Here both [...]

Continuous Random Variables

We look at the definitions first. A continuous random variable, X, has a probability density function (PDF), if and for all events A The CDF and PDF are related by It is good to know that we have [...]

Discrete Random Variables

As usual, definitions first. The cumulative distribution function (CDF), of a random variable, X, is defined by A discrete random variable, X, has probability mass function (PMF), , if and for [...]