The Statistical Mechanics of Financial Markets
This highly praised introductory treatment describes the parallels between statistical physics and finance - both those established in the 100-year long interaction between these disciplines, as well as new research results on financial markets. The rando
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Johannes Voit
The Statistical Mechanics of Financial Markets Third Editon
With 99 Figures
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Dr. Johannes Voit Deutscher Sparkassen-und Giroverband Charlottenstraße 47 10117 Berlin Germany E-mail: [email protected]
Library of Congress Control Number: 2005930454 ISBN-10 3-540-26285-7 3rd ed. Springer Berlin Heidelberg New York ISBN-13 978-3-540-26285-5 3rd ed. Springer Berlin Heidelberg New York ISBN-10 3-540-00978-7 2nd ed. Springer Berlin Heidelberg New York This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable for prosecution under the German Copyright Law. Springer is a part of Springer Science+Business Media springeronline.com c Springer-Verlag Berlin Heidelberg 2005 Printed in The Netherlands The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Typesetting: by the authors and TechBooks using a Springer LATEX macro package Cover design: design & production GmbH, Heidelberg Printed on acid-free paper
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One must act on what has not happened yet. Lao Zi
Preface to the Third Edition
The present third edition of The Statistical Mechanics of Financial Markets is published only four years after the first edition. The success of the book highlights the interest in a summary of the broad research activities on the application of statistical physics to financial markets. I am very grateful to readers and reviewers for their positive reception and comments. Why then prepare a new edition instead of only reprinting and correcting the second edition? The new edition has been significantly expanded, giving it a more practical twist towards banking. The most important extensions are due to my practical experience as a risk manager in the German Savings Banks’ Association (DSGV): Two new chapters on risk management and on the closely related topic of economic and regulatory capital for financial institutions, respectively, have been added. The chapter on risk management contains both the basics as well as advanced topics, e.g. coherent risk measures, which have not yet reached the statistical physics community interested in financial markets. Similarly, it is surprising how little research by academic physicists has appeared on topics relating to Basel II. Basel II is the new capital adequacy framework which will set the standards in risk management in many countries for the years to come. Basel I
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