Dynamics of markets/ the new financial economics
McCauley,Joseph L.
- 2nd ed
- Cambridge, UK: Cambridge University Press, 2009.
- xv, 270 p
1 Econophysics; why and what 1.1 Why econophysics? 1.2 Invariance principles and laws of nature 1.3 Humanly invented law can always be violated 1.4 Origins of econophysics 1.5 A new direction in econophysics 2 Neo-classical economic theory 2.1 Why study "optimizing behavior"? 2.2 Dissecting neo-classical economic theory (microeconomics) 2.3 The myth of equilibrium via perfect information 2.4 How many green jackets does a consumer want? 2.5 Macroeconomics 3 Probability and stochastic processes 3.1 Elementary rules of probability theory 3.2 Ensemble averages formed empirically 3.3 The characteristic function 3.4 Transformations of random variables 3.5 Laws of large numbers 3.6 Examples of theoretical distributions 3.7 Stochastic processes 3.8 Stochastic calculus 3.9 Ito processes 3.10 Martingales and backward-time diffusion 4 Intruduction to financial economics 4.1 What docs no-arbitragc mean? 4.2 Nonfalsifiablc nolions of value 4.3 The Gambler's Ruin 4.4 The Modigliani Miller argument 4.5 Excess demand in uncertain markets 4.6 Misidentifieation of equilibrium in economics and finance 4.7 Searching for Adam Smith's Unreliable Hand 4.8 Martingale markets (efficient markets) 4.9 Stationary markets; value and inefficiency 4.10 Black's "equilibrium": dreams of recurrence in the market 4.1 1 Value in real, nonstationary markets 4.12 Liquidity, noise traders, crashes, and fat tails 4.13 Long-term capital management 5 Introduction to portfolio .selection theory 5.1 Introduction 5.2 Risk and return 5.3 Diversification and correlations 5.4 The CAPM portfolio selection strategy 5.5 Hedging with options 5.6 Stock shares as options on a firm's as.sets 5.7 The Black-Scholes model 5.8 The CAPM option pricing strategy 5.9 Backward-time diffusion: solving the Black-Scholes pde 5.10 Enron 2002 6 Scaling, pair correlations, and conditional densitie.s 6.1 Hurst exponent .scaling 6.2 Selfsimilar I to processes 6.3 Long time increment correlations 6.4 The minimal description of dynamics 6.5 .Scaling of correlations and conditional probabilities? 7 Statistical ensembles: deducing dynamics from time series 7. 1 Detrending economic \ariables 7.2 En.semble averages constructed from time series 7.3 Time series analysis 7.4 Deducing dynamics from time series 7.5 Early evidence for variable diffusion models 7.6 Volatility measures 7.7 Spurious stylized facts 7.8 An sde for increments? 7.9 Topological inequivalence of stationary and nonstationary processes 8 Martingale option pricing 8.1 Introduction 8.2 Fair option pricing 8.3 Pricing options approximately via the exponential density 8.4 Option pricing with fat tails 8.5 Portfolio insurance and the 1987 crash 8.6 Collateralized mortgage obligations 9 FX market globalization: evolution of the Dollar to worldwide reserve currency 9.1 Introduction 9.2 The money supply and nonconservation of tiioney 9.3 The gold standard 9.4 How FX market stability worked on the gold standard 9.5 FX markets ffom WWI to WWII 9.6 The era of "adjustable pegged" FX rates 9.7 Emergence of deregulation 9.8 Deficits, the money supply, and inflation 9.9 Derivatives and shadow banking 9.10 Theory of value under instability 9.1 1 How may regulations change the market? 10 Macroeconomics and econometrics: regression models vs empirically based modeling 10.1 Introduction 10.2 Muth's rational expectations 10.3 Rational expectations in stationary markets 10.4 Toy models of monetary policy 10.5 The monetarist argument against government intervention 10.6 Rational expectations in a nonstationary world 10.7 Integration I(J) and cointegration 10.8 ARCH and GARCH models of volatility 11 Complexity 11.1 Reductionism and holism 11.2 What does "complex" mean? 11.3 Replication, mutations, and reliability 11.4 Emergence and self-organization