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5
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3answers
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How to use Itô's formula to deduce that a stochastic process is a martingale?

I'm working through different books about financial mathematics and solving some problems I get stuck. Suppose you define an arbitrary stochastic process, for example $ X_t := W_t^8-8t $ where $ W_t ...
8
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2answers
1k views

What are some examples of Compound Poisson processes in insurance?

I'm writing the Bachelor thesis but I need some information. I need to find some practical examples and applications of the Compound Poisson Process in insurance. Does anyone have any good examples?
15
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5answers
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Is the stock price process a martingale or a Markov process?

Some people claim that the data-generating process for stocks is a "martingale" and that is has the "Markov property". Are they unrelated? Is it that the Markov property implies some sort of ...
12
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3answers
690 views

Discrete-time model: stock dynamics

I am working in the area of probability theory and for a case study I would like to make some calculations in finance. Since I am developing theory for the discrete time, I am interested in models for ...
17
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2answers
1k views

Statistical properties of stochastic processes for moving average trading to work

Common wisdom holds it that a moving average approach is more successful than buy-and-hold. There is quantitative evidence for that across different asset classes (see e.g. this book, or this paper ...