Theory of Financial Risk and Derivative Pricing
Theory of Financial Risk and Derivative Pricing
Marc Potters, Capital Fund Management
Risk control and derivative pricing have become of major concern to financial institutions, and there is a real need for adequate statistical tools to measure and anticipate the amplitude of the potential moves of the financial markets. Summarising theoretical developments in the field, this 2003 second edition has been substantially expanded. Additional chapters now cover stochastic processes, Monte-Carlo methods, Black-Scholes theory, the theory of the yield curve, and Minority Game. There are discussions on aspects of data analysis, financial products, non-linear correlations, and herding, feedback and agent based models. This book has become a classic reference for graduate students and researchers working in econophysics and mathematical finance, and for quantitative analysts working on risk management, derivative pricing and quantitative trading strategies.
- Now expanded to include stochastic processes, data analysis, estimate techniques, path integrals, Ito calculus and much more
- New chapters cast a fresh look at derivative pricing, financial products and markets which is completely different from anything else available in the literature
- Contains a mixture of cutting edge results and basic knowledge to make for the most complete and up-to-date text on the subject
Reviews & endorsements
"...thought-provoking...The feeling one is left with after putting the book down is one of time well spent."
Risk
"...the authors offer fresh and valuable insights into financial markets." -
Mathematical Reviews
"The book is well written and self-contained...recommended to anyone interested in a new and fresh approach to the dynamics of financial markets."
Journal of Statistical Physics
"The book is interesting not only for physicists working in finance, but also practicioners and scholars with a mathematical or statistical background."
Journal of the American Statistical Association
Product details
February 2004Hardback
9780521819169
400 pages
254 × 178 × 22 mm
0.91kg
20 tables
Available
Table of Contents
- Foreword
- Preface
- 1. Probability theory: basic notions
- 2. Maximum and addition of random variables
- 3. Continuous time limit, Ito calculus and path integrals
- 4. Analysis of empirical data
- 5. Financial products and financial markets
- 6. Statistics of real prices: basic results
- 7. Non-linear correlations and volatility fluctuations
- 8. Skewness and price-volatility correlations
- 9. Cross-correlations
- 10. Risk measures
- 11. Extreme correlations and variety
- 12. Optimal portfolios
- 13. Futures and options: fundamental concepts
- 14. Options: hedging and residual risk
- 15. Options: the role of drift and correlations
- 16. Options: the Black and Scholes model
- 17. Options: some more specific problems
- 18. Options: minimum variance Monte-Carlo
- 19. The yield curve
- 20. Simple mechanisms for anomalous price statistics
- Index of most important symbols
- Index.
