Continuous-Time Finance (Revised Edition): Financial Translation Series

Author: Merton, Robert C. (USA)
Publisher:
Publish Date: 2005-04-29
Features: I cannot imagine how one could study the pricing of intertemporal assets under uncertain conditions without learning very seriously the past and present research achievements of Robert C. Merton. Therefore, this book by Blackwell Publishing will greatly benefit both the academic and practical fields of finance. It is a logically clear and concise book, 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 let them down, 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 doctoral 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 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 complex mathematics, financial theory has had a direct and significant impact on financial practice. Merely comparing current practices with those of 20 years ago is enough to reveal the impact of the 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 role of financial theory in the wave of innovative "sophisticated" behavior of trust institutions. Given that this book employs continuous-time models throughout its analysis, it might be logical to evaluate it by considering the model as a comprehensive synthesis and a dividing line in the context of financial theory.