Physics of Finance: Gauge Modelling in Non-Equilibrium Pricing (Frontiers in Finance Series) - Hardcover

Ilinski, Kirill

Hardcover

ISBN 10: 0471877387 ISBN 13: 9780471877387

Publisher: Wiley, 2001

Synopsis

One of the newest and most controversial approaches to financial pricing. In Physics of Finance the author applies the methods of theoretical physics to financial economics to develop an altogether original method for pricing financial assets that steps outside the equilibrium paradigm in finance.
In Physics of Finance, basic assumptions underlying equilibrium pricing are re-examined, the risk factors hidden in the implications of equilibrium theory and the potential profit in unstable markets are discussed and gauge modelling is introduced.

About this title

About the Author

Kirill Ilinski graduated from the Physics Department of Leningrad State University. He received his PhD in mathematical physics from the Leningrad Branch of the Steklov Mathematical Institute of the Russian Academy of Sciences. He spent five years as a Research Fellow in the School of Physics at the University of Birmingham, where he became interested in applications of methods of theoretical physics to financial economics, and attracted the attention of both financial researchers and practitioners by introducing gauge modelling of asset prices out of equilibrium. He has written over 50 articles on financial mathematics, mathematical physics, mathematical methods in statistical physics and the theory of correlated systems. Dr Ilinski has joined the Equity Derivatives Desk at Chase Manhattan in London.

From the Back Cover

In Physics of Finance Kirill Ilinski offers the first insight in book form into what could become a totally new approach to pricing financial assets.

Equilibrium asset pricing is a cornerstone of contemporary finance and is widely used for a variety of purposes, from asset allocation to risk management. However, recent events, such as the collapse of Long Term Capital Management has prompted the need to re-examine the basic assumptions underlying equilibrium pricing. In response, and based on several year's research and work that applies the methods of theoretical physics to financial economics, the author has developed an important new approach that steps outside the equilibrium paradigm in finance.

In Physics of Finance:
* Basic assumptions underlying equilibrium pricing are re-examined
* The risk factors hidden in the implications of equilibrium theory and the potential profit in unstable markets are discussed at length
* Gauge modelling, an important new approach to the problem of tackling non-equilibrium pricing, is introduced
Physics of Finance has the potential to set off a new wave of thinking in financial circles. Written by a respected physicist and endorsed by highly regarded financial academics, this book will certainly generate heated debate and keen controversy in the financial community, both in academic and professional circles. Proving invaluable traders and financial engineers. Physics of Finance could be the first major step in a new journey in finance.

"The author applies field theory to non-equilibrium market dynamics thus opening an entirely new view on the subject. The result is a highly entertaining read packed with novel ideas. It will be a constant source of inspiration for both theoretical physicists and financial analysts for years to come"
Oliver Brockhaus, Head of Equity Derivatives Research, Chase

"A fascinating book and an excellent read. Refreshingly different from the thousands of nondescript books on quantitative finance."
Paul Wilmott

From the Inside Flap

There are already a number of different techniques employed in the world of international finance which claim to give the user an edge, provide a model to predict market behaviour or to price financial assets and derivatives accurately. Each of these techniques has its supporters and detractors, and while some methodologies, such as Black-Scholes, have become predominant, the financial world is constantly on the look-out for new theories which can better and more accurately help the analysts and traders.

Kirill Ilinski, who has been developing and publishing his theory over the past four years, offers in Physics of Finance what could become a totally new method of pricing financial assets, applying the techniques of physics to the world of finance. This book could prove to be the pivotal publication as the next generation of traders and financial engineers begin the search for the next significant stage in modern finance.

Edition details

• Publisher: Wiley
• Publication date: 2001
• Language: English
• ISBN 10: 0471877387
• ISBN 13: 9780471877387
• Binding: Hardcover
• Edition number: 1
• Number of pages: 326