Recent research in financial modelling
E. J. Stokking, Giovanni Zambruno
Physica-Verlag, 1993 - Business & Economics - 174 pages
The book contains a selection of recently revised papers that have initiallybeen presented at two different meetings of the EURO Working Group on Financial Modelling. The papers related to the microstructure of capital markets provide evidence that the price dynamics of financial assets can on- ly be explained - and modelled - on the basis of a careful examination of the decision process which leads traders to interact and fix the equilibrium prices. The papers by Pec- cati, Luciano, Ferrari and Cornaglia belong to this catego- ry, and help considerably unterstand the performance of mar- kets which are relatively far from perfection (owing to thinness, frictions, taxation and the like). This is indeed the case for some European Exchanges. The very foundations of quantitative financial analysis have been discussed in the contributions of Luciano, Canestrelli, Uberti and Van der Meulen. The classical - although recent - advances on the pricing of derivative securities have been analyzed and applied by Kremer, Hallerbach and Jensen/Niel- son, thus demonstrating that established theories still pro- vide space for a deeper investigation. Another major topic of interest relates to empirical studies about how markets behave with respect to theoretical models. In this respect, the contributions of Viren, Bradfield and Wilkie/Pollock are quite significant. They present evidence based on real data discussed in the light of advanced stati- stical techniques. It is apparent that Corporate Finance and Capital Markets are becoming more and more related and in- teractingwith each other.
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A Decomposition of Random Net Present Values
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agents analysis assets and liabilities assumed bank behaviour biases bond prices capital CAPM cash flow changes coefficients components constraints correlation costs currency forecasting current account denote dependent deposits diagnosis discount function discount rate duration dynamic economies of scope effect empirical equation equilibrium estimated excess growth exchange rates expected value factors Fama and MacBeth Fama-MacBeth Financial Economics Financial Modelling foreign exchange market forward price fundamental value growth rate hypothesis illusory correlation imitation inflation interest rate investment investors Journal of Financial judgement linear Luciano margins MV efficient non-professional traders non-random Npts NYSE optimal paper parameter Peccati performance policy reactions portfolio predictions probabilistic problem random random variables reaction function relation risk premium riskless sensitivity short-run specialist specification stability stochastic stock market stock price stock returns term structure test period threshold uncertainty variables variance vector zero-coupon bond