Continuous Time Finance · Revised Edition

Author: Merton
Publisher:
Publish Date: 2005-04-01
Features: I cannot imagine how one could study intertemporal asset pricing under uncertain conditions without learning very seriously the past and present research results of Robert C. Merton. Therefore, this book by Blackwell Publishing will be greatly beneficial to both the academic and practical fields of finance. It is a book with clear logic and concise content, equivalent to the Bible of continuous-time finance. Anyone interested in financial economics will recognize the outstanding achievements of Robert C. Merton. For these people, Merton's book will not be neglected, and it will undoubtedly become a classic reference for many years to come. In terms of breadth and depth, this book is an ideal textbook for introducing Ph.D. students to continuous-time finance. Starting from a model where agents can adjust their decisions continuously over time, the book develops financial mathematics and financial economic theory. Time and uncertainty are core elements affecting financial economic behavior. It is precisely the complexity of their interaction that poses intellectual challenges and makes financial research exciting. 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 complex mathematics, financial theory has had a direct and significant impact on financial practice. Comparing current practices with those of 20 years ago is enough to reveal the impact of theories such as the Efficient Market Hypothesis, portfolio selection, risk analysis, and contingent claims pricing 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 role of financial theory in the wave of innovations in the behavior of "sophisticated" trust institutions. Given that this book consistently employs continuous-time models, it might be logical to evaluate its context by considering the model as a synthesis and dividing line of financial theory.