The Black-Scholes-Merton Model as an Idealization of Discrete-time Economies

The Black-Scholes-Merton Model as an Idealization of Discrete-time Economies
Author: David M. Kreps
Publisher: Cambridge University Press
Total Pages: 217
Release: 2019-09-19
Genre: Business & Economics
ISBN: 1108486363

"I began this monograph (which, at the time, was a nascent paper) with the objective of understandinghow and how well continuous-time models of economic phenomena - and in particular models that employ Brownian motion - relate to "near by" discrete-time models. We know by examples that the connections are sometimes not altogether obvious; see, for instance, Fudenberg and Levine (2009) and Sadzik and Stacchetti (2015). So, it seemed to me, a general theory connecting the two types of models ought to be available"--

The Black–Scholes–Merton Model as an Idealization of Discrete-Time Economies

The Black–Scholes–Merton Model as an Idealization of Discrete-Time Economies
Author: David M. Kreps
Publisher: Cambridge University Press
Total Pages: 218
Release: 2019-09-19
Genre: Business & Economics
ISBN: 1108775500

This book examines whether continuous-time models in frictionless financial economies can be well approximated by discrete-time models. It specifically looks to answer the question: in what sense and to what extent does the famous Black-Scholes-Merton (BSM) continuous-time model of financial markets idealize more realistic discrete-time models of those markets? While it is well known that the BSM model is an idealization of discrete-time economies where the stock price process is driven by a binomial random walk, it is less known that the BSM model idealizes discrete-time economies whose stock price process is driven by more general random walks. Starting with the basic foundations of discrete-time and continuous-time models, David M. Kreps takes the reader through to this important insight with the goal of lowering the entry barrier for many mainstream financial economists, thus bringing less-technical readers to a better understanding of the connections between BSM and nearby discrete-economies.

Analysis of Panel Data

Analysis of Panel Data
Author: Cheng Hsiao
Publisher: Cambridge University Press
Total Pages: 539
Release: 2022-07-07
Genre: Business & Economics
ISBN: 131651210X

A comprehensive introduction of fundamental panel data methodologies.

Stochastic Finance

Stochastic Finance
Author: Amanda Turner
Publisher: Cambridge University Press
Total Pages: 264
Release: 2023-01-31
Genre: Mathematics
ISBN: 1009059270

Stochastic Finance provides an introduction to mathematical finance that is unparalleled in its accessibility. Through classroom testing, the authors have identified common pain points for students, and their approach takes great care to help the reader to overcome these difficulties and to foster understanding where comparable texts often do not. Written for advanced undergraduate students, and making use of numerous detailed examples to illustrate key concepts, this text provides all the mathematical foundations necessary to model transactions in the world of finance. A first course in probability is the only necessary background. The book begins with the discrete binomial model and the finite market model, followed by the continuous Black–Scholes model. It studies the pricing of European options by combining financial concepts such as arbitrage and self-financing trading strategies with probabilistic tools such as sigma algebras, martingales and stochastic integration. All these concepts are introduced in a relaxed and user-friendly fashion.

The Theory of General Economic Equilibrium

The Theory of General Economic Equilibrium
Author: Andreu Mas-Colell
Publisher: Cambridge University Press
Total Pages: 396
Release: 1985
Genre: Business & Economics
ISBN: 9780521388702

This book brings together the author's pioneering work, written over the last twenty years, on the use of differential methods in general equilibrium theory.

Microeconomic Foundations II

Microeconomic Foundations II
Author: David M. Kreps
Publisher: Princeton University Press
Total Pages: 0
Release: 2023-05-23
Genre: Business & Economics
ISBN: 9780691250144

A cutting-edge introduction to key topics in modern economic theory for first-year graduate students in economics and related fields Volume II of Microeconomic Foundations introduces models and methods at the center of modern microeconomic theory. In this textbook, David Kreps, a leading economic theorist, emphasizes foundational material, concentrating on seminal work that provides perspective on how and why the theory developed. Because noncooperative game theory is the chief tool of modeling and analyzing microeconomic phenomena, the book stresses the applications of game theory to economics. And throughout, it underscores why theory is most useful when it supports rather than supplants economic intuition. Introduces first-year graduate students to the models and methods at the core of microeconomic theory today Covers an extensive range of topics, including the agency theory, market signaling, relational contracting, bilateral bargaining, auctions, matching markets, and mechanism design Stresses the use—and misuse—of theory in studying economic phenomena and shows why theory should support, not replace, economic intuition Includes extensive appendices reviewing the essential concepts of noncooperative game theory, with guidance about how it should and shouldn’t be used Features free online supplements, including chapter outlines and overviews, solutions to all the problems in the book, and more

Revealed Preference Theory

Revealed Preference Theory
Author: Christopher P. Chambers
Publisher: Cambridge University Press
Total Pages: 241
Release: 2016-01-05
Genre: Business & Economics
ISBN: 1107087805

The theory of revealed preference has a long, distinguished tradition in economics but lacked a systematic presentation of the theory until now. This book deals with basic questions in economic theory and studies situations in which empirical observations are consistent or inconsistent with some of the best known economic theories.

The Black-Scholes Model

The Black-Scholes Model
Author: Marek Capiński
Publisher: Cambridge University Press
Total Pages: 179
Release: 2012-09-13
Genre: Business & Economics
ISBN: 1107001692

Master the essential mathematical tools required for option pricing within the context of a specific, yet fundamental, pricing model.

Energy and Power Risk Management

Energy and Power Risk Management
Author: Alexander Eydeland
Publisher: John Wiley & Sons
Total Pages: 506
Release: 2003-02-03
Genre: Business & Economics
ISBN: 0471455873

Praise for Energy and Power Risk Management "Energy and Power Risk Management identifies and addresses the key issues in the development of the turbulent energy industry and the challenges it poses to market players. An insightful and far-reaching book written by two renowned professionals." -Helyette Geman, Professor of Finance University Paris Dauphine and ESSEC "The most up-to-date and comprehensive book on managing energy price risk in the natural gas and power markets. An absolute imperative for energy traders and energy risk management professionals." -Vincent Kaminski, Managing Director Citadel Investment Group LLC "Eydeland and Wolyniec's work does an excellent job of outlining the methods needed to measure and manage risk in the volatile energy market." -Gerald G. Fleming, Vice President, Head of East Power Trading, TXU Energy Trading "This book combines academic rigor with real-world practicality. It is a must-read for anyone in energy risk management or asset valuation." -Ron Erd, Senior Vice President American Electric Power

A Non-Random Walk Down Wall Street

A Non-Random Walk Down Wall Street
Author: Andrew W. Lo
Publisher: Princeton University Press
Total Pages: 449
Release: 2011-11-14
Genre: Business & Economics
ISBN: 1400829097

For over half a century, financial experts have regarded the movements of markets as a random walk--unpredictable meanderings akin to a drunkard's unsteady gait--and this hypothesis has become a cornerstone of modern financial economics and many investment strategies. Here Andrew W. Lo and A. Craig MacKinlay put the Random Walk Hypothesis to the test. In this volume, which elegantly integrates their most important articles, Lo and MacKinlay find that markets are not completely random after all, and that predictable components do exist in recent stock and bond returns. Their book provides a state-of-the-art account of the techniques for detecting predictabilities and evaluating their statistical and economic significance, and offers a tantalizing glimpse into the financial technologies of the future. The articles track the exciting course of Lo and MacKinlay's research on the predictability of stock prices from their early work on rejecting random walks in short-horizon returns to their analysis of long-term memory in stock market prices. A particular highlight is their now-famous inquiry into the pitfalls of "data-snooping biases" that have arisen from the widespread use of the same historical databases for discovering anomalies and developing seemingly profitable investment strategies. This book invites scholars to reconsider the Random Walk Hypothesis, and, by carefully documenting the presence of predictable components in the stock market, also directs investment professionals toward superior long-term investment returns through disciplined active investment management.