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At each node a positive stock price moves to $u{S}_t$ or $d{S}_t$, with $0<d<u$, while a bank account grows by a fixed gross factor $R>0$. Assume both successors have positive physical probability, no dividends, a frictionless market with no trading costs, divisible holdings, unrestricted short selling, and borrowing and lending at the same fixed $R$. A self-financing portfolio receives no outside cash after its initial funding; subsequent rebalancing uses its own proceeds.

This binomial market excludes arbitrage exactly when $d<R<u$. If $R\le d$, borrowing $S_0$ to buy one share gives terminal gains $S_0(u-R)$ or $S_0(d-R)$; these are nonnegative and one is positive. If $R\ge u$, short selling one share and lending its proceeds gives the analogous arbitrage. Strict inequalities allow a positive risk-neutral probability for each state. The two traded payoffs also span both successor states, giving market completeness relative to the information generated by this tree.

For independent return innovations ${\xi }_n$ and a predictable process of holdings ${\theta }_n$, wealth obeysThe investor chooses the holdings to maximize expected utility of terminal wealth.

In expected-utility portfolio choice, an increasing utility function prefers greater wealth, while concavity models aversion to risk.

A utility function assigns numerical values to outcomes consistently with preference comparisons. It represents utility; the representation and the preference concept are distinct.

An arbitrage is an allowed self-financing portfolio with zero initial wealth, nonnegative terminal portfolio wealth almost surely under the physical probability measure $P$, and strictly positive terminal wealth with positive probability. In a finite model where every state has positive probability, nonnegativity means no loss in any state. Positive expected return alone does not establish arbitrage: losses may still occur.

For the binomial market example, suppose the European call option sells for 13 while its replicating portfolio costs $250/21$. Sell the call, buy its replicating portfolio, and lend the surplus $13-250/21=23/21$ in the bank account. The initial net cost is zero. At maturity the call obligation and portfolio cancel in either state, leaving $(21/20)(23/21)=23/20$. A price below $250/21$ permits the reversed construction, using short selling and borrowing. This is the law of one price made operational; the assumed trading permissions are essential.

A Lagrangian trajectory follows one marked fluid particle and solves

An Eulerian time average holds spatial position fixed while averaging a time-dependent field:

A Lagrangian coordinate labels a material particle and remains attached to it as the continuum moves.

An Eulerian coordinate labels a fixed position in space at which continuum fields are observed.

Substitution of $n(t)=e^{\lambda t}$ into $n^{\prime }(t)=rn(t-\tau )$ gives the transcendental characteristic equation

Given the solution on one interval of length $\tau$, the delayed term is known on the next interval, where the delay equation becomes an ordinary differential equation. Repeating this process constructs the solution interval by interval.

A magnetic dipole moment is a vector that summarizes the strength and orientation of a localized magnetic source. For a planar current loop, it is the electric current times the vector area: $\mathbf{m}=IA\hat{\mathbf{n}}$. The right-hand rule fixes the unit normal vector $\hat{\mathbf{n}}$: curl the fingers of the right hand along the conventional current, and the thumb points along $\mathbf{m}$. This single vector predicts both the distant magnetic dipole field and the turning effect of an imposed magnetic field.^[ref]

The SI unit is ampere times square metre, $\mathrm{A}{\mathrm{m}}^2$, equivalently joule per tesla. A magnetic dipole moment is neither a magnetic field nor a magnetic monopole: a closed current loop can have a nonzero magnetic dipole moment while its net outward magnetic flux through any closed surface remains zero, as required by Gauss's law for magnetism.

For a localized, steady electric current density $\mathbf{J}(\mathbf{r})$, the more general definition isHere the cross product is integrated over the complete source, including return paths. Steadiness requires $\nabla \cdot \mathbf{J}=0$, and localization requires sufficiently rapid decay for the boundary terms to vanish. Under these assumptions the localized steady-current moment identities give $\int \mathbf{J}{d}^{3}r=0$: shifting the origin by $\mathbf{a}$ changes the proposed magnetic dipole moment by $-\frac{1}{2}\mathbf{a}\times \int \mathbf{J}{d}^{3}r=0$. An isolated open wire segment does not satisfy these assumptions. ^[ref].

The transformation $A\mapsto A+\nabla \chi$ leaves $B=\nabla \times A$ unchanged because the curl of a gradient vanishes.

The Coulomb gauge imposeson the magnetic vector potential. A gauge transformation $A\mapsto A+\nabla \chi$ reaches this gauge when $\chi$ solves

For thin closed wire loops $C_1,C_2$, the mutual inductance is

Magnetic flux measures the signed amount of magnetic field crossing an oriented surface $S$. Choose a unit normal $\hat{\mathbf{n}}$ and use the oriented surface element $d\mathbf{S}=\hat{\mathbf{n}}dA$. The defining surface integral isFor a uniform magnetic field across a flat surface of area $A$, the dot product reduces this towhere $\theta$ is the angle between the magnetic field and the chosen unit normal, rather than the plane of the surface. The SI unit is the weber, $1\mathrm{Wb}=1\mathrm{T}{\mathrm{m}}^2$. ^[ref].

For a stipulated magnetic field $B=2\mathrm{T}$ and area $A=3{\mathrm{m}}^2$, the magnetic flux is $6\mathrm{Wb}$ at $\theta =0$, $3\mathrm{Wb}$ at $\theta =\pi /3$, and zero at $\theta =\pi /2$. In the last case the magnetic field lies in the plane of the surface, so it does not cross it. Reversing the chosen unit normal reverses the sign of magnetic flux without changing the physical magnetic field; at $\theta =\pi$ the same example gives $-6\mathrm{Wb}$.

The geometric idea is projected area: tilting a flat surface reduces the area seen perpendicular to the magnetic field by the factor $\cos \theta$. This explains how rotation alone can change magnetic flux even when the magnetic field is constant; Faraday's law of induction turns such changes into an electromotive force. ^[ref].

If a Lyapunov function is nonincreasing on a sublevel set, trajectories cannot cross its boundary outward.

A positive-definite quadratic form defines ellipsoidal sublevel sets and often turns a polynomial vector field into an exact factored orbital derivative.

An equilibrium is asymptotically stable when it is Lyapunov stable and every trajectory starting sufficiently nearby converges to it.

A positive-definite Lyapunov function with strictly negative orbital derivative away from the equilibrium proves asymptotic stability.

A positive-definite Lyapunov function with nonpositive orbital derivative proves Lyapunov stability of the equilibrium. Indeed, fix a sufficiently small ball $B_{\epsilon }$ in the function's domain and putContinuity and $V(0)=0$ give a ball $B_{\delta }$ on which $V<\alpha$. Since $V$ cannot increase along a trajectory, one starting in $B_{\delta }$ cannot cross the sphere $\Vert x\Vert =\epsilon$, on which $V\ge \alpha$. It therefore remains in $B_{\epsilon }$ for all forward time.