<p>
  In this chapter, we modeled stock price with the stochastic process. The stochastic process usually assumed for a stock price is geometric Brownian motion.The Black–Scholes–Merton model, which we cover in the next chapter, is based on the geometric Brownian motion assumption. Under this process, the logarithm of stock return in a small period of time is normally distributed and the returns in two nonoverlapping periods are independent.
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<p>
  In the second part of the tutorial,  we applied Monte Carlo method to simulate the stock price in order to gain an intuitive understanding of the stochastic process followed by stock price. Then we discussed how to use Monte Carlo method to price the options based on the underlying prices paths.
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