Retrieving "Stochastic Calculus" from the archives

Cross-reference notes under review

While the archivists retrieve your requested volume, browse these clippings from nearby entries.

1. Financial Engineering

   Linked via "stochastic calculus"

   Historical Antecedents and Formalization
   The foundational principles of financial engineering draw heavily from stochastic calculus and statistical mechanics. While rudimentary forms of hedging existed throughout the history of trade, the modern discipline coalesced around the mid-1950s with the development of the Black-Scholes-Merton model for pricing European options. However, some scholars trace the earlies…

2. Overview of Statistical Arbitrage

   Linked via "stochastic calculus"

   Theoretical Underpinnings and Mean Reversion
   The core tenet of statistical arbitrage is the principle of mean reversion. This posits that the spread or ratio between two or more securities—which have demonstrated a stable co-integrating relationship over time—will eventually return to its historical average or equilibrium path. The mathematical models employed typically analyze time series data to define this "normal" range, often employing techniques derived from stochastic calculus and [cointegration theory](/entries/cointegra…