Statistics of financial markets. An introduction. (Q5920416)

The second edition of this book contains the following new additions. Some more pages on risk management in Chapter 6, including a discussion of Volga and Vanna. There is, in Chapter 6, a new, small, section on simulation techniques. Chapter 13 contains an updated review of multivariable GARCH in the context of volatility modeling. Chapter 17 on copulae and Value at Risk is an extensive update of the literature. And the authors added a new chapter, Chapter 22, on Credit Risk Management. On the positive side of this book stand its numerous well-chosen examples, sometimes insightful remarks, and an abundance of subjects that are important in the area of finance. However, I certainly would not recommend this book as a first text on Option Pricing. In my view the fundamental concepts are not always explained very well, for instance the treatment on dividends is much too brisk to be of some use. As I am not a statistician I refrain from a judgment about the second part of the book about the statistical methods of financial time series. However, the chapter about nonparametric concepts of estimation seems to be technically rather demanding compared to the other chapters in this part of the book. With respect to the third part of the book, containing selected financial applications, the chapter about risk management can at best serve as an introduction to this vast and certainly nowadays important area! And I would like to have seen a more critical discussion of the use of copulae, or at least a reference to critical remarks in the literature as for instance made by Th. Mikosch. All in all this book is useful as collateral reading, and in the hands of an experienced lecturer this book could add to the success of his course.