About the book
Written as a textbook, Johannes Voit's survey traces the links between statistical physics and finance, covering both those that grew from a century of exchange between the fields and newer research on capital markets. The random walk serves as the base model, supporting option pricing and hedging in the Black-Scholes theory and risk control through diversification. Voit tests these assumptions against empirical market data and against physical analogies such as turbulence, fluid flow and superdiffusion. He also covers computer simulations of interacting agent models and treats market crashes like phase transitions and earthquakes. A third edition, published four years after the first, drew on his risk management work and added chapters on risk and on regulatory capital, including Basel II.
Nassim Nicholas Taleb praised it as very useful, especially on alternative L-stable distributions, and singled out its clear historical account of Einstein and Bachelier.
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This book has 1 recommendation
Nassim Nicholas Taleb (Flaneur)
Very useful book, particularly in what concerns alternative L-Stable distributions. True, not too versed in financial theory but I'd rather see the author erring on the side of more physics than mathematical economics. As an author I don't ask much from books, just to deliver what they indend. This one does.
Clear historical description of Einstein/Bachelier. Hopefully one day we will call derivatives pricing the Bachelier valuation.
The book in short provides an excellent perspective on the statistical approach to asset price dynamics. Very clear and to the point.
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