by Bruno E. Holtz, Carlos A. Abanto-Valle, Gabriel Rodríguez, Ricardo S. Ehlers
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Suggested foundations for probability and statistical reasoning and volatility models and surfaces. Specialist prerequisites vary by paper.
Read the distributions and expectations used in probabilistic arguments.
Interpret expectations after information is observed.
Follow diffusion-based models and their assumptions.
Separate conditional volatility from observed returns.
Assess uncertainty rather than treating an estimate as a fact.
Study a correlated stochastic-variance model.
Interpret prices across strikes and expiries.
Move from conditioning and expected values to timed problems with a defensible solution.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.