Table of Contents
Is it possible to forecast stock prices?
There are chances that you can predict or rather forecast some trends of the market to get a higher chance of success in the market as this is essentially what market researchers and analysts do but these forecasts are closer to educated guesses than 99\% accurate precise predictions.
What are stochastic differential equations used for?
A stochastic differential equation (SDE) is a differential equation in which one or more of the terms is a stochastic process, resulting in a solution which is also a stochastic process. SDEs are used to model various phenomena such as unstable stock prices or physical systems subject to thermal fluctuations.
What are stochastic partial differential equations (SPDEs)?
Stochastic partial differential equations (SPDEs) generalize partial differential equations via random force terms and coefficients, in the same way ordinary stochastic differential equations generalize ordinary differential equations. They have relevance to quantum field theory and statistical mechanics. Well, anyways, back to stocks.
What is a differential equation?
A differential equation is is an equation involving derivatives of a function or functions. To be more specific, it’s a mathematical equation for an unknown function of one or several variables that relates the values of the function itself and of its derivatives of various orders.
What determines the stock price dynamics?
The stock price dynamics is described by a Brownian motion with drift. The manifest characteristic of the final valuation formula is the parameters it does not depend on. The option price does not depend on the expected return rate of the stock or the risk preferences of the investors.
What is an option in the stock market?
So, first off, you need to know what an “option” in the stock market. An option it is a contract giving the holder the right to buy or sell an asset at a set strike price (options can also be applied to other transactions, ).