Stochastic process and its role in the development of the financial market: Celebrating professor chows long and successful career

Abstract

Stochastic calculus has played an important role in the development of the financial markets in the past 40+ years. The Black-Sholes option pricing model published in 1973 revolutionized the derivatives market. The advances in volatility estimate such as GARCH helped to improve the risk measures and risk management process. Other developments might have contributed to the onsite of the great financial crisis (GFC). In celebrating Professor Chow's successful career, I would like to share some of the applications of stochastic calculus in the financial engineering, and the role it played in the financial market development.