Stochastic Processes in Option Pricing: Geometric Brownian Motion & Black-Scholes by Tala Damra ’25

Stochastic Processes in Option Pricing: Geometric Brownian Motion and Black-Scholes by Tala Damra ’25, Wednesday April 9, 1:00 – 1:50pm, North Science Building 015, Wachenheim, Statistics Colloquium

Abstract: This talk explores the foundational role of stochastic processes in financial modeling, with a focus on Geometric Brownian Motion (GBM) and the Black-Scholes option pricing framework. Pricing financial derivatives relies on statistical tools that model uncertainty in asset prices. Geometric Brownian Motion is one of the most commonly used models for stock price dynamics. We will begin by introducing Brownian motion, demonstrate how to model and price financial assets using GBM, and derive the Black-Scholes pricing equation and the Black-Scholes call formula.