Feynman-Kac Formula

The Feynman-Kac Formula is a mathematical concept that connects two fields: physics and finance. It shows how solutions to certain complex equations, known as partial differential equations, can be represented as the average outcomes of random processes, like stock prices or other financial assets. Essentially, it allows us to calculate the expected value of these processes over time, using the principles of probability. This formula helps in understanding how uncertainty affects various systems, making it valuable in areas like financial modeling, option pricing, and even in predicting physical systems influenced by random factors.