Theory of Financial Risk and Derivative Pricing: From Statistical Physics to Risk Management 2nd Edition
Author(s): Jean-Philippe Bouchaud (Author), Marc Potters (Author)
Publisher: Cambridge University Press
Publication Date: January 22, 2009
Edition: 2nd
Language: English
Print length: 400 pages
ISBN-10: 0521741866
ISBN-13: 9780521741866
Book 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.
Editorial Reviews
Review
"...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
Book Description
This 2003 book summarizes theoretical developments in statistical tools to measure financial markets, for students and professionals in econophysics and analytical markets.
About the Author
Jean-Philippe Bouchaud co-founded the company Science & Finance, which merged with Capital Fund Management (CFM) in 2000, where he now supervises the research team with Marc Potters. He teaches statistical mechanics and finance in various Grandes Écoles, and has worked at CRNS and CEA-Saclay. He was awarded the CRNS Silver Medal in 1996.
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.
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