Stochastic analysis and mathematical finance

In 1997 the Nobel Prize of Economics was awarded Robert Merton and Myron Scholes, mainly for their work related to what is now known as the Lack-Scholes Option Pricing Formula. This formula has had an enormous impact on the research and practice in financ e throughout the world. Today it is said that trading in options without the Black-Scholes formula would be like wandering in the desert without a compass! Accordingly, the theory of finance has become almost totally mathematized, to the extent that it is now often regarded as a brabch of mathematics, or more precisely, a branch of stochastic analysis. This development has led to a big increase in the demand for persons with such mathematical qualifications. There is a fruitful interplay between the current research in stochastic analysis and its applications to finance. With this project we intend to enhance the research potential in Norway of this rapidly developing field. This will benefit both our student s and our research institutions, as well as the increasing number of firms and finance institutions who require candidates with these qualifications.