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Syllabus for

Academic year
MVE172 - Basic stochastic processes and financial applications  
Grundläggande stokastiska processer och finansiella tillämpningar
Syllabus adopted 2020-02-18 by Head of Programme (or corresponding)
Owner: TKIEK
7,5 Credits
Grading: TH - Pass with distinction (5), Pass with credit (4), Pass (3), Fail
Education cycle: Second-cycle
Major subject: Mathematics

Teaching language: English
Application code: 51141
Open for exchange students: Yes
Only students with the course round in the programme plan

Module   Credit distribution   Examination dates
Sp1 Sp2 Sp3 Sp4 Summer course No Sp
0120 Laboratory 3,0 c Grading: UG   3,0 c    
0220 Examination 4,5 c Grading: TH   4,5 c   05 Dec 2020 am J   07 Apr 2021 am J,  24 Aug 2021 pm J  

In programs

TKIEK INDUSTRIAL ENGINEERING AND MANAGEMENT - Financial mathematics, Year 3 (compulsory)
MPDSC DATA SCIENCE AND AI, MSC PROGR, Year 1 (compulsory elective)


Patrik Albin

  Go to Course Homepage


General entry requirements for Master's level (second cycle)
Applicants enrolled in a programme at Chalmers where the course is included in the study programme are exempted from fulfilling the requirements above.

Specific entry requirements

English 6 (or by other approved means with the equivalent proficiency level)
Applicants enrolled in a programme at Chalmers where the course is included in the study programme are exempted from fulfilling the requirements above.

Course specific prerequisites

Sannolikhetsteori motsvarande en första kurs i matematisk statistik. Någon erfarenhet av datoranvändning såsom exempelvis grunderna i Matlab-programmering eller liknande. Matematikkunskaper motsvarande vad som läres ut under första året på I-linjen.


Kursen syftar till att ge en introduktion till samt översikt av de klasser av stokastiska processer som är viktigast i såväl tekniska och naturvetenskapliga tillämpningar som i vidare matematisk och matematisk statistisk teoribyggnad.

Learning outcomes (after completion of the course the student should be able to)

  • narrate the theory for discrete time Markov chains and make applied calculations for them
  • narrate the meaning of dependence and independence between different stochastic process values/random variables and use this in applied calculations
  • narrate the defining properties of weak/wide sense stationary processes redogöra för de grundläggande definierande egenskaperna för svagt stationära processer, Gaussian/normal processes and martingales and make applied calculations for them
  • use stochastic processes as models in mathematical finance, e.g., to calculate prices for financial contracts/options


Short repetition/treatment of some important concepts from mathematics and multivariate probability theory. Discrete time and continuous time stochastic processes. Finite dimensional distribution functions. Mean and autocorrelation/aoutocovariance function. Stationary and weak/wide sense stationary processes. Processes with independent stationary increments/Levy processes. Gaussian/normal processes. Discrete time Markov chains. Martingales in discrete and continuous time. Continuity for and differentiation, integration and summation of stochastic processes. Basic queueing theory. Computer implementation of most of the mentioned classes of stochastic processes. Finacial applications.


Lectures, exercise sessions and computer laborations.


Hwei Hsu: Probability, Random Variables, and Random Processes, 2nd
Edition. Schaum's Outlines, McGraw-Hill 2010. Lecture notes on financial applications.

Examination including compulsory elements

Written exam. Mandatory computer laboration.

Page manager Published: Mon 28 Nov 2016.