Importance of Stochastic Modelling in Management Science. Quantitative finance has started occupying central role in business decisions. Stochastic modeling is a particular branch of quantitative finance.
‘Decision under uncertainty’ is driving all modern research and under this stochastic modeling (SM) has assumed more importance. In any branch of management science, setting up of organization, production / manufacturing and distribution are the three key branches. SM is extensively used in optimal way of procuring capital, so that cost of capital is managed well, least cost manufacturing techniques, containing distribution costs, enhancing shareholders share, determination of warranty period, pricing under constrained maximization, inventory control, estimation of ruin probability, determination of royalty bonus according to different sales level etc.. These are a few examples where SM is used extensively. I have not touched on the use of SM in derivates.
In this course, a good starting point is made and takes you through various techniques of SM and also emphasizing the utility of theoretical knowledge in application of solving real issues.
