A primer on probability theory in financial modeling
نویسنده
چکیده
The objective of finance theory is to predict the future evolution of financial quantities, such as the price of a single asset or broad market movements. Uncertainty as to the future evolution of prices is a fundamental tenet of modern finance theory. The paradigm of choice for modeling uncertainty in finance is the probability theory. This tutorial presents the formal probabilistic concepts behind today’s financial modeling.
منابع مشابه
Probability Modeling of Synthetic Theories in Economics
Economic theories seek a scientific explanation or prediction of economic phenomena using a set of axiom, defined expressions, and theorems. Mathematically explicit economic models are one of these theories. Due to the unknown structure of each model, the existence of measurement error in economic committees and failure of Ceteris Paribus; the Synthetic of any economic theory requires probabili...
متن کاملInvestigating the Theory of Survival Analysis in Credit Risk Management of Facility Receivers: A Case Study on Tose'e Ta'avon Bank of Guilan Province
Nowadays, one of the most important topics in risk management of banks, financial, and credit institutions is credit risk management. In this research, the researchers used survival analytic methods for credit risk modeling in terms of the conditional distribution function of default time. As a practical task, the authors considered the reward credit portfolio of Tose'e Ta'avon Bank of Guilan P...
متن کاملFinancial Risk Modeling with Markova Chain
Investors use different approaches to select optimal portfolio. so, Optimal investment choices according to return can be interpreted in different models. The traditional approach to allocate portfolio selection called a mean - variance explains. Another approach is Markov chain. Markov chain is a random process without memory. This means that the conditional probability distribution of the nex...
متن کاملModeling Stock Return Volatility Using Symmetric and Asymmetric Nonlinear State Space Models: Case of Tehran Stock Market
Volatility is a measure of uncertainty that plays a central role in financial theory, risk management, and pricing authority. Turbulence is the conditional variance of changes in asset prices that is not directly observable and is considered a hidden variable that is indirectly calculated using some approximations. To do this, two general approaches are presented in the literature of financial ...
متن کاملExplaining Psychological Well-Being in Divorced Women Based on Maslow's Theory: The Role of Public Health, Financial Distress, Social Support and Self-Concept
The present study aimed to explain psychological well-being in divorced women based on Maslow's theory: the role of public health, financial distress, social support, and self-concept. The population comprised all divorced women (20 to 45 years old) in Arak and Khomein from august to December 2021. 429 people were selected by the available non-random sampling method. All participants completed ...
متن کامل