Asset Price Dynamics, Volatility, and Prediction

by Stephen J. Taylor

This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions.


Stephen Taylor provides a comprehensive introduction to the dynamic behavior of asset prices, relying on finance theory and statistical evidence. He uses stochastic processes to define mathematical models for price dynamics, but with less mathematics than in alternative texts. The key topics covered include random walk tests, trading rules, ARCH models, stochastic volatility models, high-frequency datasets, and the information that option prices imply about volatility and distributions.



Asset Price Dynamics, Volatility, and Prediction is ideal for students of economics, finance, and mathematics who are studying financial econometrics, and will enable researchers to identify and apply appropriate models and methods. It will likewise be a valuable resource for quantitative analysts, fund managers, risk managers, and investors who seek realistic expectations about future asset prices and the risks to which they are exposed.

Genres: Finance

544 pages, Paperback

First published January 1, 2005

Reviews

[Lu Wangshan · Rating 5 out of 5]

Although a bit dated, this book gives pretty complete treatment of the title from the prespective of a practioner. It carefully balances the simplicity and the accuracy of the model, and describes in detail the pros and cons of the model given different modeling objectives. This is all based on dealing with actual market data from the field, but not just in theory. It also provides a lot of references for people who would want a deepr dive on specific topics. Highly recommended!