Abstract
No one can predict the future! All that can be done by way of prediction is to use what information is available as well as possible. Our task is to make the best quantitative statements we can about uncertainty — which in the financial context is usually uncertainty about the future. The basic tool to quantify uncertainty is a probability density or distribution. We will assume that most readers will be familiar with such things from an elementary course in probability and statistics; for a clear introduction see, e.g. Grimmett and Welsh (1986), or the first few chapters of Grimmett and Stirzaker (2001); Ross (1997), Resnick (2001), Durrett (1999), Ross (1997), Rosenthal (2000) are also useful.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2004 Springer-Verlag London
About this chapter
Cite this chapter
Bingham, N.H., Kiesel, R. (2004). Probability Background. In: Risk-Neutral Valuation. Springer Finance. Springer, London. https://doi.org/10.1007/978-1-4471-3856-3_2
Download citation
DOI: https://doi.org/10.1007/978-1-4471-3856-3_2
Publisher Name: Springer, London
Print ISBN: 978-1-84996-873-7
Online ISBN: 978-1-4471-3856-3
eBook Packages: Springer Book Archive