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Definition of functional integration here

Functional integration is a collection of results in mathematics and physics where the domain of an integral is no longer a region of space, but a space of functions. Functional integrals arise in probability, in the study of partial differential equations and in Feynman's approach to the quantum mechanics of particles and fields

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migrated from May 2 '12 at 8:05

This question came from our site for professional and academic economists and analysts.

It is a useful approach when solving exotic variations of the Black-Scholes equation for instance. –  Raskolnikov May 2 '12 at 8:07

1 Answer 1

You might be interested in the work of Mike Tehranchi and collaborators, who have worked on the theory of infinite-dimensional stochastic differential equations.

For example, when analysing interest rate derivatives the state of the system is not described by a point (as it would be when analysing derivatives of stocks) but by a function, and the evolution of this state over time naturally leads to functional analytic techniques.

Typically the function in question models the yield curve but there are many other curves that are objects of study in finance.

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