Theory of stochastic processes. With applications to financial mathematics and risk theory (Q1031112)

This book provides a collection of more than 800 problems for the theory of stochastic processes. It is divided into 20 chapters that cover different aspects of this theory. In the first part of each chapter, there is a collection of the main definitions and theorems followed by a list of references where to find more detailed information. These introductions give a good overview of the important results of the respective topics and establish the notions later used in the exercises. The second section of each chapter includes problems in different degrees of difficulty, ranging from quite simple calculations to proofs of theoretical results. Further assistance can be obtained by looking into the following section with hints for various problems. The final section contains solutions and answers. The first four chapters of the book are dedicated to the general introduction of stochastic processes and their characteristics like finite-dimensional distributions, mean and covariance functions, characteristic functions, trajectories, modifications, filtrations, continuity, differentiability and integrability. Chapters five to seven are concerned with special classes of processes like processes with independent increments, Wiener and Poisson processes, Gaussian processes and finally martingale theory in discrete and continuous time. This is followed by a short excursion to stationary processes and their prediction and interpolation in chapters eight and nine. The next three chapters deal with Markov chains and processes, renewal and queueing theory and diffusion processes. Chapters 13 and 14 provide problems for the field of stochastic integration including the Itô and Tanaka formulas and stochastic differential equations. Chapter 15 covers the problem of optimal stopping, chapter 16 the theory of measures in functional spaces (together with weak convergence, probability metrics and functional limit theorems) and chapter 17 the statistics of stochastic processes. The last three chapters deal with applications of stochastic processes in financial mathematics and risk theory. In general, this is not an introductory book, so readers should already be familiar with probability theory and have some experience with its techniques. It provides exercises for a more advanced theory of stochastic processes where problem books are much rarer than for the basic topics. Not all of the problems are new, some already appeared in other problem collections and textbooks on probability theory (references are given by the authors in the introduction). Nevertheless this compilation is new in its broadness and completeness for the theory of stochastic processes and is well suited for students in their self-studies as well as lecturers to prepare their classes in this field of probability theory.