Category: Options

General Prerequisites:

Course Term: Michaelmas

Course Lecture Information: 16 lectures

Course Overview:

Learning Outcomes:

Course Synopsis:

Category: Options

General Prerequisites:

Course Term: Michaelmas

Course Lecture Information: 16 lectures

Course Overview:

Learning Outcomes:

Course Synopsis:

- Lecturer: James Martin

Category: Michaelmas

General Prerequisites:

Course Term: Michaelmas

Course Lecture Information: 16 lectures

Course Overview:

The first half of the course takes further the probability theory that was developed in the first year. The aim is to build up a range of techniques that will be useful in dealing with mathematical models involving uncertainty. The second half of the course is concerned with Markov chains in discrete time and Poisson processes in one dimension, both with developing the relevant theory and giving examples of applications.

Learning Outcomes:

Course Synopsis:

Continuous random variables. Jointly continuous random variables, independence, conditioning, functions of one or more random variables, change of variables. Examples including some with later applications in statistics.

Moment generating functions and applications. Statements of the continuity and uniqueness theorems for moment generating functions. Characteristic functions (definition only). Convergence in distribution, convergence in probability, and almost sure convergence. Weak law of large numbers and central limit theorem for independent identically distributed random variables. Strong law of large numbers (proof not examinable).

Discrete-time Markov chains: definition, transition matrix, n-step transition probabilities, communicating classes, absorption, irreducibility, periodicity, calculation of hitting probabilities and mean hitting times. Recurrence and transience. Invariant distributions, mean return time, positive recurrence, convergence to equilibrium (proof not examinable), ergodic theorem (proof not examinable). Reversibility, detailed balance equations. Random walks (including symmetric and asymmetric random walks on \(Z\), and symmetric random walks on \(Z^d\).

Moment generating functions and applications. Statements of the continuity and uniqueness theorems for moment generating functions. Characteristic functions (definition only). Convergence in distribution, convergence in probability, and almost sure convergence. Weak law of large numbers and central limit theorem for independent identically distributed random variables. Strong law of large numbers (proof not examinable).

Discrete-time Markov chains: definition, transition matrix, n-step transition probabilities, communicating classes, absorption, irreducibility, periodicity, calculation of hitting probabilities and mean hitting times. Recurrence and transience. Invariant distributions, mean return time, positive recurrence, convergence to equilibrium (proof not examinable), ergodic theorem (proof not examinable). Reversibility, detailed balance equations. Random walks (including symmetric and asymmetric random walks on \(Z\), and symmetric random walks on \(Z^d\).