Martingale Methods in Financial Decision-Making

This paper presents an introduction to martingale theory by stating some basic definitions and presenting some probabilistic examples. Afterwards, we illustrate the use of martingale methods in economics and finance. In particular, we present applications of martingale methods in futures pricing, in stochastic present discounted value of capitalization and in intertemporal stochastic optimization. The main conclusion of this paper is that martingale methods have been applied as useful techniques in decision-making problems in economics and finance.