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Theory of Financial Risk and Derivative Pricing From Statistical Physics to Risk Management

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ISBN-10: 0521819164

ISBN-13: 9780521819169

Edition: 2nd 2003 (Revised)

Authors: Jean-Philippe Bouchaud, Marc Potters

List price: $135.00
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Description:

Summarizing market data developments, some inspired by statistical physics, this book explains how to better predict the actual behavior of financial markets with respect to asset allocation, derivative pricing and hedging, and risk control. Risk control and derivative pricing are major concerns to financial institutions. The need for adequate statistical tools to measure and anticipate amplitude of potential moves of financial markets is clearly expressed, in particular for derivative markets. Classical theories, however, are based on assumptions leading to systematic (sometimes dramatic) underestimation of risks. First edition Hb (2000): 0-521-78232-5
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Book details

List price: $135.00
Edition: 2nd
Copyright year: 2003
Publisher: Cambridge University Press
Publication date: 12/11/2003
Binding: Hardcover
Pages: 400
Size: 7.00" wide x 10.00" long x 0.75" tall
Weight: 0.946
Language: English

Marc Potters has been Head of Research at CFM since 1998, where he supervises thirty physics PhD's. He has published numerous articles in the new field of statistical finance, in particular on Random Matrix Theory applied to portfolio management. He works on various concrete applications of financial forecasting, option pricing and risk control.

Foreword
Preface
Probability theory: basic notions
Maximum and addition of random variables
Continuous time limit, Ito calculus and path integrals
Analysis of empirical data
Financial products and financial markets
Statistics of real prices: basic results
Non-linear correlations and volatility fluctuations
Skewness and price-volatility correlations
Cross-correlations
Risk measures
Extreme correlations and variety
Optimal portfolios
Futures and options: fundamental concepts
Options: hedging and residual risk
Options: the role of drift and correlations
Options: the Black and Scholes model
Options: some more specific problems
Options: minimum variance Monte-Carlo
The yield curve
Simple mechanisms for anomalous price statistics
Index of most important symbols
Index