Equity Securities

Equity securities are assets that represent ownership in a company and trade on stock exchanges. They can provide capital gains and dividend income, but also carry risks due to market fluctuations.

Outline

This section will focus on modeling and analyzing equity prices, such as stocks or exchange-traded funds. We will first examine the main characteristics of equity markets and the statistical properties of equity prices. Then, we will introduce various tools and techniques for modeling and analyzing equity prices.

• Equities, Markets, and Stylized Facts are the foundation of wealth creation for individuals and professional investors. We discuss the main characteristics of equity markets and the stylized facts, e.g., statistical features of price data that are important for modeling and analysis of the share prices.

• Lattice models of equity share price are a class of models that are based on the assumption that the price of an equity security can only take a finite number of values. We discuss the main characteristics of lattice models and how they can be used to model equity prices.

• Brownian motion models of equity share price are a class of models based on the assumption that the price of an equity security can be described by a continuous random process. We discuss the main characteristics of Brownian motion models, for single stocks and collections of stocks, and how they can be used to model equity prices.

• Stochastic volatility models of share price assume the volatility, or other parameters in Brownian models of an equity security price, can be described by a continuous random process. We will discuss the main characteristics of stochastic volatility models and how they can be used to compute equity prices.