The Statistical Mechanics of Financial Markets, Third Edition (Hardback)

Condition

LIKE NEW: This book is in excellent, like-new condition. It was printed on acid-free paper.

Product Details

This book is a member of theTexts and Monographs in Physics series published by Springer.

Continued from the back cover: "The random-walk techniques, 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, plus methods of portfolio optimization. Here the underlying assumptions are assessed critically. Using empirical financial data and analogies to physical models such as fluid flows, turbulence, or superdiffusion, the book develops a more accurate description of financial markets based on random walks. With this approach, novel methods for derivative pricing and risk management can be formulated. Computer simulations of interacting-agent models provide insight into the mechanisms underlying unconventional price dynamics. It is shown that stock exchange crashes can be modelled in ways analogous to phase transitions and earthquakes, and sometimes have even been predicted successfully.

"This third edition of The Statistical Mechanics of Financial Markets especially stands apart from other treatments because it offers new chapters containing a practitioner's treatment of two important current topics in banking: the basic notions and tools of risk management and capital requirements for financial institutions, including an overview of the new Basel II capital framework which may well set the risk management standards in scores of countries for year to come."

Chapters

1. Introduction
2. Basic Information on Capital Markets
3. Random Walks in Finance and Physics
4. The Black-Scholes Theory of Option Prices
5. Scaling in Financial Data and in Physics
6. Turbulence and Foreign Exchange Markets
7. Derivative Pricing Beyond Black-Scholes
8. Microscopic Market Models
9. Theory of Stock Exchange Crashes
10. Risk Management
11. Economic and Regulatory Capital for Financial Institutions

The book concludes with an Appendix, Notes and References, and Index.