Statistics of Financial Markets: An Introduction (Universitext)

This is an essential text for anyone in the field of financial econometrics. Readers will find that, refreshingly, this text presents in a vivid yet concise style the necessary statistical and mathematical background for financial engineers. The focus is both on fundamentals of mathematical finance and financial time series analysis and on applications to given problems of financial markets, making the book the ideal basis for lectures, seminars and crash courses on the topic. From reviews of the first edition: “The material is well presented with a good balance between theoretical and applied aspects. ... The book is an excellent demonstration of the power of stochastics ... . The author’s goal is well achieved: this book can satisfy the needs of different groups of readers ... . this book can, and I expect it will, be successfully used.” (Jordan Stoyanov, Journal of the Royal Statistical Society, Vol. 168 (4), 2005) Front Matter....Pages i-xxii Front Matter....Pages 1-1 Derivatives....Pages 3-10 Introduction to Option Management....Pages 11-36 Basic Concepts of Probability Theory....Pages 37-45 Stochastic Processes in Discrete Time....Pages 47-56 Stochastic Integrals and Differential Equations....Pages 57-72 Black-Scholes Option Pricing Model....Pages 73-115 Binomial Model for European Options....Pages 117-127 American Options....Pages 129-141 Exotic Options....Pages 143-153 Models for the Interest Rate and Interest Rate Derivatives....Pages 155-161 Front Matter....Pages 163-163 Introduction: Definitions and Concepts....Pages 165-201 ARIMA Time Series Models....Pages 203-225 Time Series with Stochastic Volatility....Pages 227-278 Non-parametric Concepts for Financial Time Series....Pages 279-302 Front Matter....Pages 303-303 Pricing Options with Flexible Volatility Estimators....Pages 305-320 Value at Risk and Backtesting....Pages 321-332 Copulae and Value at Risk....Pages 333-369 Statistics of Extreme Risks....Pages 371-397 Neural Networks....Pages 399-427 Volatility Risk of Option Portfolios....Pages 429-441 Front Matter....Pages 303-303 Nonparametric Estimators for the Probability of Default....Pages 443-450 Credit Risk Management....Pages 451-466 Back Matter....Pages 467-505 Statistics of Financial Markets offers a vivid yet concise introduction to the growing field of statistical applications in finance. The reader will learn the basic methods to evaluate option contracts, to analyse financial time series, to select portfolios and manage risks making realistic assumptions of the market behaviour. The focus is both on fundamentals of mathematical finance and financial time series analysis and on applications to given problems of financial markets, making the book the ideal basis for lectures, seminars and crash courses on the topic. For the second edition the book has been updated and extensively revised. Several new aspects have been included, among others a chapter on credit risk management. From the reviews of the first edition: "The book starts ... with five eye-catching pages that reproduce a student’s handwritten notes for the examination that is based on this book. ... The material is well presented with a good balance between theoretical and applied aspects. ... The book is an excellent demonstration of the power of stochastics ... . The author’s goal is well achieved: this book can satisfy the needs of different groups of readers ... . " (Jordan Stoyanov, Journal of the Royal Statistical Society, Vol. 168 (4), 2005) {U201E}Growth, mergers, restructuring, innovation - all these important topics of today's companies cannot be implemented without a systematic approach to IT management. This book does not point out unrealistic "one size fits all? solutions but offers basic systems to solve a broad range of IT problems and challenges. It also presents case examples for successfully implemented solutions - mostly in big companies as they ask for specific IT management." Thorsten Ecke, CIO, Eon AG "IT is not a cost factor, but a tool, to cut process costs in a company. This message cannot be elaborated enough in times of very short IT budgets. The book points out, how a company with tight resources can generate value - using standard as well as individual software." Dr. Stephan Scholtissek, Sprecher der Geschäftsführung, Accenture Deutschland GmbH "Finally a book that gives an overview from a strategic perspective and enables top decision makers to understand and deploy IT in their companies. Dr. Jürgen Winkelmann, Member of the Board, Readymix AG "Statistics Of Financial Markets offers a vivid yet concise introduction to the growing field of statistical applications in finance. The reader will learn the basic methods to evaluate option contracts, to analyse financial time series, to select portfolios and manage risks making realistic assumptions of the market behaviour." "The focus is both on fundamentals of mathematical finance and financial time series analysis and on applications to given problems of financial markets, making the book the ideal basis for lectures, seminars and crash courses on the topic." "For the second edition the book has been updated and extensively revised. Several new aspects have been included, among others a chapter on credit risk management."--Jacket Readers will find that, refreshingly, this text presents in a vivid yet concise style the necessary statistical and mathematical background for financial engineers. The focus is both on fundamentals of mathematical finance and financial time series analysis and on applications to given problems of financial markets, making the book the ideal basis for lectures, seminars and crash courses on the topic. For the second edition the book has been updated and extensively revised. Several new topics have been included, such as a chapter on credit risk management. Classical financial mathematics deals first of all with basic financial instruments like stocks, foreign currencies and bonds. Option Pricing Statistical Model of Financial Time Series Selected Financial Applications.