Ordinary calculus, as in the first calculus people learn, is deterministic. There are functions in this calculus, whether trig functions like cosine or polynomial functions like f(x) = x3 + 2×2 , and these have definite answers/outputs. In other words, their paths are known with certainty. Stochastic calculus instead deals with processes whose paths are […]
Itô’s Integral and How to Calculate It
The first thing to be said about Itô’s Integral is that it isn’t really an integral in the same sense as an area under a curve basic calculus or Riemann rectangles integration way. An Itô Integral is really fundamentally a finance calculation. It can and frequently does contain negative values. What sort of rectangle has […]
Essentials of Calculus for Finance Professionals
Big Ideas of Calculus As odd as this sounds, what we now refer to as Calculus (or as Real Analysis if we’re British) was independently invented by Isaac Newton in England and GW Leibnitz in Germany during the 1600s. It would be hard to overstate its importance. Basically everything we know about the world from […]
Why Do Economists Use Advanced Math Instead of Plain English to Communicate?
Economists used to communicate without using any math at all. They relied on clear thinking and plain English. A fantastic example of this is Ronald Coase’s 1937 essay on the nature of the firm. Economists should still rely on clear thinking and present their thoughts and research findings using plain English. No matter how technical, […]
