1. Last lecture Gamma distribution

2. Gamma density

3. Last lecture Bernoulli and binomial distribution Application of binomial distriubiton

4. What do you think? Can we use a binomial distribution to model the financial market. i.e one stock price going up or down for the next T days. a)Yes b)No Yes, with some assumptions about the market. actually, this is the a building block for discrete time Black- Scholes model

5. If you are interested, look at http://www.math.uh.edu/~rohop/spring_13/Chapter2.pdf