Noncommutative Geometry and Stochastic Calculus: Applications in Mathematical Finance
Eric A. Forgy
University of Illinois at Urbana-Champaign
May 20, 2002
The present report contains an introduction to some elementary concepts in noncommutative differential geometry. The material extends upon ideas first presented by Dimakis and Mueller-Hoissen. In particular, stochastic calculus and the Ito formula are shown to arise naturally from introducing noncommutativity of functions (0-forms) and differentials (1-forms). The abstract construction allows for the straightforward generalization to lattice theories for the direct implementation of numerical models. As an elementary demonstration of the formalism, the standard Black-Scholes model for option pricing is reformulated.
Number of Pages in PDF File: 15
Keywords: Mathematical Finance, Black-Scholes Model, Stochastic Calculus, Noncommutative Geometryworking papers series
Date posted: June 16, 2009
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