by Kiyoshi Kanazawa, Shunta Fujiwara, Yuki Sato
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Suggested foundations for stochastic processes and pricing and asset pricing and factor research. Specialist prerequisites vary by paper.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Interpret exposures, residuals and uncertainty in fitted coefficients.
Work with returns and recognise their empirical limitations.
Connect stochastic dynamics to no-arbitrage prices.
Translate continuous dynamics into a numerical experiment.
Connect factor definitions to portfolio construction.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.