Itô's Lemma and Stochastic Calculus › Key Parameters
Michael BrenndoerferNovember 23, 20251 min read
Quantitative FinanceAll chapters Part 5 of 15Stochastic Calculus and Pricing Theory
Itô's Lemma and Stochastic Calculus › Key ParametersOne section · Sections in this chapter7 / 11 ↓
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The key parameters used in the stochastic calculus simulations are:
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S0: Initial asset price ($100)
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mu: Drift rate (). Represents the expected annualized return.
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sigma: Volatility (). Represents the annualized standard deviation of returns.
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T: Time horizon in years.
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n_steps: Number of discrete time steps (e.g., 252 for daily steps).
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n_paths: Number of Monte Carlo paths simulated.