by Andrew Lesniewski
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Suggested foundations for stochastic processes and pricing and rates and fixed income. 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.
Understand discounting in a stochastic-rate model.
Translate yield movements into first-order price risk.
Connect stochastic dynamics to no-arbitrage prices.
Translate continuous dynamics into a numerical experiment.
Build a consistent discount curve.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.