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Financial markets and martingales: observations on science and speculation

Author: Bouleau, Nicolas Publisher: Springer, 2004.Language: EnglishDescription: 151 p. ; 24 cm.ISBN: 1852335823Type of document: BookBibliography/Index: Includes bibliographical references and index
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Europe Campus
Main Collection
Print HG4529.5 .B68 2004
(Browse shelf)
001212053
Available 001212053
Total holds: 0

Includes bibliographical references and index

Digitized

Financial Market and Matingales Observations on Science and Speculation Contents Introduction.......................................................................................................................... ix Part I. Martingales 1. Luck in the Casino ........................................................................................................ 3 The Passion for Gambling.......................................................................... 3 The Martingales of Gamblers ..................................................................... 5 2. The Stock Market and Probability............................................................................ 7 Economy and Chance .............................................................................. 7 The Ideas of Louis Bachelier........................................................................ 9 Processes having the Centre of Gravity Property ............................................. 10 The Martingales of Mathematicians ...................................................................... 11 3. Mathematical Development outside the Finance Sector ............................... 13 Mathematics Ahead of its Applications ............................................................... 13 Brownian Motion ......................................................................................................... 15 The Stochastic Integral as the Speculator's Gain ............................................ 17 The Concept of the Integral since Archimedes........................................ 17 The Stochastic Integral and Itô Calculus ................................................. 19 Mathematical Expectation and Best Rational Estimation ............................. 21 vi Contents Part II. Option Hedging: an Epistemological Rupture 4. The Unexpected Connection.................................................................................. 27 Organised Markets .................................................................................................. 28 Hedging Portfolios and Non-arbitrage............................................................... 30 5. A Different Approach................................................................................................. 33 The Principle of Hedging and Best Rational Estimation............................ 33 The Thinking of the Market.................................................................................. 35 Subjectivity of the Laws of Probability ............................................................ 36 6. Hedging Risks Thanks to the Market................................................................. 39 The Strength of the Arbitrage Non-arbitrage Argument and the Principle of Hedging ...................................................................................... 39 Mobility of Capital and the Hedging of Options............................................ 42 Part III. Science and Speculation 7. A Complex Dynamic .................................................................................................. 47 The Professionals ..................................................................................................... 48 Speculation and Exchange of Risks.................................................................. 49 8. Illusions of Chance ................................................................................................... 51 Stability and Instability in the Presence of Noise......................................... 51 The Problem of the Monetary Base ................................................................... 55 The Relationship of Force to Risk...................................................................... 56 9. Three Types of Speculation.................................................................................... 65 Economic Speculation ........................................................................................... Psychological Speculation .................................................................................... Mathematical Speculation..................................................................................... Geometric Representation of Portfolios ................................................ Taking Advantage of the Mutual Agitation of Assets ...................... Remarks ........................................................................................................... 65 67 70 70 71 72 10. Practical and Moral Values .................................................................................. 75 Positions and Arbitrage.......................................................................................... 75 Ethical Questions .................................................................................................... 78 Contents vii Part IV. The Stakes and the Payoffs 11. Markets and Economy............................................................................................. 87 Grounds for Belief and the Theory of Utility ................................................... Change of Axes in Physics: The Experiments on Light ............................... Change of Axes in Finance: The Experiments on Brownian Motion . .... The Efficiency of Markets is a Subjective Concept......................................... 12. The Special Role of Finance in the Production of Knowledge 101 New Scientific Outlets .......................................................................................... 102 Teaching and Finance .......................................................................................... 103 Privatisation of Learning and Knowledge in the Public Domain ........... 104 13. Power and Innocence in Finance...................................................................... 107 Modification of the Influence of Power due to the Appearance of Derivatives Markets...................................................................................... 108 Psychology and the Operation of Markets ..................................................... 110 The Market as Universalism .............................................................................. 114 European Construction and the Financial Markets .................................. 118 14. Long Term Risks .................................................................................................... 121 The World Financial Storm ................................................................................. 121 Engineering Culture and Finance Culture .................................................... 122 Conclusion ....................................................................................................................... 127 Glossary.............................................................................................................................. 133 Bibliography...................................................................................................................... 143 Index.................................................................................................................................... 149 88 91 92 96

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