Continuous-time Finance. Revised Edition

Author: Robert C. Merton / Guoduo Zuo, etc.
Publisher:
Publish Date: 2005-04-01
Features: I can't imagine how one could study intertemporal asset pricing under uncertain conditions without learning very seriously about Robert C. Merton's past and present research. Therefore, this book by Blackwell Publishing will greatly benefit both the academic finance community and practitioners. It is a logically clear and concise book, akin to the Bible of continuous-time finance. Anyone interested in financial economics will recognize the outstanding achievements of Robert C. Merton. For these individuals, Merton's book will not go unnoticed, and it is undoubtedly a classic reference for many years to come. In terms of breadth and depth, this book is an ideal textbook for introducing doctoral students to continuous-time finance. Starting from a model where agents can adjust their decisions continuously, it develops financial mathematics and financial economic theory. Time and uncertainty are core elements influencing financial economic behavior. It is precisely the complexity of their interaction that presents intellectual challenges and stirs excitement in financial research. Correctly analyzing the impact of their interaction typically requires sophisticated analytical tools. In fact, advanced mathematical training has become a prerequisite for researchers in this field. However, despite its mathematical complexity, financial theory has had a direct and profound impact on financial practice. Merely comparing current practices with those from 20 years ago is enough to reveal the impact of efficient market theory, portfolio selection, risk analysis, and contingent claims pricing theory on money management, financial intermediaries, investment banking, corporate finance, and capital budgeting processes. One can even observe the influence of financial theory on legal issues, such as cases involving asset valuation, hearings on regulated industry returns, and the wave of innovative "sophisticated person" behavior in the regulation of trust institutions. Given that this book employs continuous-time modeling throughout, it might be logical to evaluate its context by treating the model as a synthesis and a dividing line in financial theory.