Glossary
Mathematical Finance : Asset Pricing

Stochastic calculus ; stochastic calculus

Branch of mathematics that studies stochastic processes and defines integrals that integrate one stochastic process against another. In particular, Ito's calculus defines a stochastic integral with respect to Brownian motion. Self-financing portfolios in finance are stochastic integrals, which explains the considerable development of this field.

Price calibration in finance ; price calibration in finance

The aim is to determine the parameters of a theoretical model in such a way that the theoretical prices induced are as close as possible to those observed on the market. Generally, quadratic minimization is implemented.

Vanilla call/put option ; vanilla option call/put

A derivative gives the holder the right to buy (call) or sell (put) the underlying asset at a predetermined price (strike) at a predetermined future date...