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Hydrodynamics of Markets

Hydrodynamics of Markets Hidden Links Between Physics and Finance - Elements in Quantitative Finance

Hardback (02 Jan 2025)

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Publisher's Synopsis

An intriguing link between a wide range of problems occurring in physics and financial engineering is presented. These problems include the evolution of small perturbations of linear flows in hydrodynamics, the movements of particles in random fields described by the Kolmogorov and Klein-Kramers equations, the Ornstein-Uhlenbeck and Feller processes, and their generalizations. They are reduced to affine differential and pseudo-differential equations and solved in a unified way by using Kelvin waves and developing a comprehensive math framework for calculating transition probabilities and expectations. Kelvin waves are instrumental for studying the well-known Black-Scholes, Heston, and Stein-Stein models and more complex path-dependent volatility models, as well as the pricing of Asian options, volatility and variance swaps, bonds, and bond options. Kelvin waves help to solve several cutting-edge problems, including hedging the impermanent loss of Automated Market Makers for cryptocurrency trading. This title is also available as Open Access on Cambridge Core.

About the Publisher

Cambridge University Press

Cambridge University Press dates from 1534 and is part of the University of Cambridge. We further the University's mission by disseminating knowledge in the pursuit of education, learning and research at the highest international levels of excellence.

Book information

ISBN: 9781009503112
Publisher: Cambridge University Press
Imprint: Cambridge University Press
Pub date:
DEWEY: 332.015118
DEWEY edition: 23
Language: English
Number of pages: 75
Weight: 364g
Height: 161mm
Width: 237mm
Spine width: 16mm