Stochastic Pricing

Wiener processes, Ito's lemma, lognormality, Black-Scholes-Merton and the Black model for futures options.

What this track covers

1. 01
   The Wiener process
   Continuous-time noise, formalised.
   12 min
2. 02
   Ito's lemma
   The chain rule that knows about variance.
   13 min
3. 03
   Lognormal asset prices
   Why prices live on a log scale, not a linear one.
   11 min
4. 04
   The Black-Scholes derivation
   From dynamic hedging to a closed-form formula.
   16 min
5. 05
   Black-Scholes-Merton
   Dividends and the European call/put.
   12 min
6. 06
   Black model for futures
   Replacing spot with forwards, same machinery.
   11 min
7. 07
   Markov & fractional Brownian motion
   Memory in the path, the Hurst exponent and rough volatility.
   14 min
8. Quiz
   Quiz · Stochastic pricing check
   10 questions on Wiener processes, Markov, Ito's lemma, lognormality, Black-Scholes and the Hurst exponent.
   8 min

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