Stochastic Process

This is the last chapter of Part 1 of the book, where we discuss the component we directly deal with while modeling asset prices – the stochastic process. So far, probability, simulations, etc., were just building blocks of this one. In this chapter, we will learn how the stochastic process behaves with time and how its realizations relate to asset movements. The key focus of the learning would be how to apply Monte Carlo simulation in realizing any stochastic process; however, parameter estimation of the same will be covered in Part 2 while discussing the asset price models.