The Statistical Mechanics of Financial Markets (2nd ed. 2003) (Theoretical and Mathematical Physics)

Synopsis

This textbook describes parallels between statistical physics and finance - both those established in the 100-year-long interaction between these disciplines, as well as new research results on capital markets. The random walk, well known in physics, is also the basic model in finance, upon which are built, for example, the Black--Scholes theory of option pricing and hedging, or methods of risk control using diversification. Here the underlying assumptions are discussed using empirical financial data and analogies to physical models such as fluid flows, turbulence, or superdiffusion. On this basis, new theories of derivative pricing and risk control can be formulated. Computer simulations of interacting agent models of financial markets provide insights into the origins of asset price fluctuations. Stock exchange crashes can be modelled in ways analogous to phase transitions and earthquakes. These models allow for predictions. This study edition has been updated with a presentation of several new and significant developments, e.g. the dynamics of volatility smiles and implied volatility surfaces, path integral approaches to option pricing, a new and accurate simulation scheme for options, multifractals, the application of nonextensive statistical mechanics to financial markets, and the minority game. Moreover, the book was scanned for and corrected from errors, both typographical and in presentation.

Copyright:

2003

Book Details

Book Quality:

Publisher Quality

ISBN-13:

9783662051252

Related ISBNs:

9783540009788

Publisher:

Springer Berlin Heidelberg

Date of Addition:

06/23/22

Copyrighted By:

N/A

Adult content:

No

Language:

English

Has Image Descriptions:

No

Categories:

Nonfiction, Science, Business and Finance, Earth Sciences, Mathematics and Statistics

Submitted By:

Bookshare Staff

Usage Restrictions:

This is a copyrighted book.