This new 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.
PHYSICS TODAYThis introductory treatment describes parallels between
statistical physics and finance, both long established and new research
results on capital markets. Forming the core of Voit's treatment are the
concepts of random walks, scaling of data, and risk control. Voit discusses
the underlying assumptions using empirical financial data and analogies to
physical models such as fluid flows and turbulence. He formulates theories of
derivative pricing and risk control, and shows how computer simulations of
markets provide insights into price fluctuations and how crashes are modelled
in ways analogous to phase transitions. This corrected edition has been
updated with several new and significant developments, e.g. the dynamics of
volatility smiles and implied volatility surfaces, path integral approaches
to option pricing, a new simulation scheme for options, multifractals, the
application of nonextensive statistical mechanics to financial markets, and
the minority game.
