Quantitative Finance for Physicists

Book description

With more and more physicists and physics students exploring the possibility of utilizing their advanced math skills for a career in the finance industry, this much-needed book quickly introduces them to fundamental and advanced finance principles and methods.

Quantitative Finance for Physicists provides a short, straightforward introduction for those who already have a background in physics. Find out how fractals, scaling, chaos, and other physics concepts are useful in analyzing financial time series. Learn about key topics in quantitative finance such as option pricing, portfolio management, and risk measurement. This book provides the basic knowledge in finance required to enable readers with physics backgrounds to move successfully into the financial industry.

* Short, self-contained book for physicists to master basic concepts and quantitative methods of finance
* Growing field—many physicists are moving into finance positions because of the high-level math required
*Draws on the author's own experience as a physicist who moved into a financial analyst position

Table of contents

  1. Front Cover
  2. Quantitative Finance for Physicists: An Introduction
  3. Copyright Page
  4. Detailed Table of Contents
  5. Chapter 1. Introduction
  6. Chapter 2. Financial Markets
    1. 2.1 Market Price Formation
    2. 2.2 Returns and Dividends
    3. 2.3 Market Efficiency
    4. 2.4 Pathways for Further Reading
    5. 2.5 Exercises
  7. Chapter 3. Probability Distributions
    1. 3.1 Basic Definitions
    2. 3.2 Important Distributions
    3. 3.3 Stable Distributions and Scale Invariance
    4. 3.4 References for Further Reading
    5. 3.5 Exercises
  8. Chapter 4. Stochastic Processes
    1. 4.1 Markov Processes
    2. 4.2 Brownian Motion
    3. 4.3 Stochastic Differential Equation
    4. 4.4 Stochastic Integral
    5. 4.5 Martingales
    6. 4.6 References for Further Reading
    7. 4.7 Exercises
  9. Chapter 5. Time Series Analysis
    1. 5.1 Autoregressive and Moving Average Models
    2. 5.2 Trends and Seasonality
    3. 5.3 Conditional Heteroskedasticity
    4. 5.4 Multivariate Time Series
    5. 5.5 References for Further Reading and Econometric Software
    6. 5.6 Exercises
  10. Chapter 6. Fractals
    1. 6.1 Basic Definitions
    2. 6.2 Multifractals
    3. 6.3 References for Further Reading
    4. 6.4 Exercises
  11. Chapter 7. Nonlinear Dynamical Systems
    1. 7.1 Motivation
    2. 7.2 Discrete Systems: Logistic Map
    3. 7.3 Continuous Systems
    4. 7.4 Lorenz Model
    5. 7.5 Pathways to Chaos
    6. 7.6 Measuring Chaos
    7. 7.7 References for Further Reading
    8. 7.8 Exercises
  12. Chapter 8. Scaling in Financial Time Series
    1. 8.1 Introduction
    2. 8.2 Power Laws in Financial Data
    3. 8.3 New Developments
    4. 8.4 References for Further Reading
    5. 8.5 Exercises
  13. Chapter 9. Option Pricing
    1. 9.1 Financial Derivatives
    2. 9.2 General Properties of Options
    3. 9.3 Binomial Trees
    4. 9.4 Black-Scholes Theory
    5. 9.5 References for Further reading
    6. 9.6 Appendix. The Invariant of the Arbitrage-Free Portfolio
    7. 9.7 Exercises
  14. Chaptert 10. Portfolio Management
    1. 10.1 Portfolio Selection
    2. 10.2 Capital Asset Pricing Model (CAPM)
    3. 10.3 Arbitrage Pricing Theory (APT)
    4. 10.4 Arbitrage Trading Strategies
    5. 10.5 References for Further Reading
    6. 10.6 Exercises
  15. Chapter 11. Market Risk Measurement
    1. 11.1 Risk Measures
    2. 11.2 Calculating Risk
    3. 11.3 References for Further Reading
    4. 11.4 Exercises
  16. Chapter 12. Agent-Based Modeling of Financial Markets
    1. 12.1 Introduction
    2. 12.2 Adaptive Equilibrium Models
    3. 12.3 Non-Equilibrium Price Models
    4. 12.4 Modeling of Observable Variables (1/2)
    5. 12.4 Modeling of Observable Variables (2/2)
    6. 12.5 References for Further Reading
    7. 12.6 Exercises
  17. Comments
  18. References (1/2)
  19. References (2/2)
  20. Answers to Exercises
  21. Index (1/2)
  22. Index (2/2)

Product information

  • Title: Quantitative Finance for Physicists
  • Author(s): Anatoly B. Schmidt
  • Release date: December 2004
  • Publisher(s): Academic Press
  • ISBN: 9780080492209