Stochastic Processes for Risk Management

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The book explores the historical significance and application of stochastic processes in finance, highlighting Bachelier's pioneering use of Brownian motions to model asset prices on the Paris stock exchange. It delves into the evolution of financial modeling, particularly the rise of jump processes following the 2007/2008 financial crisis, which account for sudden changes in asset behavior. Theoretical properties of both diffusion and jump processes are presented, alongside practical numerical applications using R, making it a valuable resource for understanding modern financial dynamics.