Physics Of Finance

Equilibrium asset pricing is a cornerstone of contemporary finance and is widely used for a variety of purposes, from asset allocation to risk management. However, recent events, such as the collapse of Long Term Capital Management has prompted the need to re-examine the basic assumptions underlying equilibrium pricing. In response, and based on several year's research and work that applies the methods of theoretical physics to financial economics, the author has developed an important new approach that steps outside the equilibrium paradigm in finance.

In Physics of Finance:
* Basic assumptions underlying equilibrium pricing are re-examined
* The risk factors hidden in the implications of equilibrium theory and the potential profit in unstable markets are discussed at length
* Gauge modelling, an important new approach to the problem of tackling non-equilibrium pricing, is introduced Physics of Finance has the potential to set off a new wave of thinking in financial circles. Written by a respected physicist and endorsed by highly regarded financial academics, this book will certainly generate heated debate and keen controversy in the financial community, both in academic and professional circles. Proving invaluable traders and financial engineers. Physics of Finance could be the first major step in a new journey in finance.

"The author applies field theory to non-equilibrium market dynamics thus opening an entirely new view on the subject. The result is a highly entertaining read packed with novel ideas. It will be a constant source of inspiration for both theoretical physicists and financial analysts for years to come"
Oliver Brockhaus, Head of Equity Derivatives Research, Chase

"A fascinating book and an excellent read. Refreshingly different from the thousands of nondescript books on quantitative finance."
Paul Wilmott

Uncover an innovative new method of applying contemporary techniques from physics into the financial worldArguably one of the newest and most controversial approaches in financial analysis, this book uses techniques from modern physics to develop an altogether original method for pricing financial assets. Not only does the author use gauge theories from physics to take a new look at market equilibrium, his new financial model links the concepts of standard pricing and technical analysis, bridging the gap between "quants" (those who traditionally use pricing models) and traders (those who use trading strategies). He also lets the reader relate his pricing model specifically to derivatives and tests his ideas on markets that are far from a state of equilibrium, usually during bubbles or crashes. Throughout the book, examples are used from the S&P 500 market index, the Hang Seng, FTSE100, and ISDEX.Kirill Illinski is Post Doctorate Research Fellow in the School of Physics and Space Research at the University of Birmingham, as well as Senior Researcher at the Russian Academy of Sciences, Moscow.

Booknews

Ilinski (now at the equity derivatives desk of a large London bank; formerly physics, U. of Birmingham, England) presents new theory and models of pricing financial assets, applying the techniques of physics to financial calculations. Based on the idea that the underlying symmetry of financial markets and fundamental theories in physics, namely the gauge symmetry, is the same, Ilinski addresses fibre bundles in finance; the mathematics and physics of fibre bundles; gauge field dynamics of fibre bundles in finance; the dynamics of fast money flows; virtual arbitrage pricing theory; and derivatives. Annotation c. Book News, Inc., Portland, OR (booknews.com)

Kirill Ilinski graduated from the Physics Department of Leningrad State University. He received his PhD in mathematical physics from the Leningrad Branch of the Steklov Mathematical Institute of the Russian Academy of Sciences. He spent five years as a Research Fellow in the School of Physics at the University of Birmingham, where he became interested in applications of methods of theoretical physics to financial economics, and attracted the attention of both financial researchers and practitioners by introducing gauge modelling of asset prices out of equilibrium. He has written over 50 articles on financial mathematics, mathematical physics, mathematical methods in statistical physics and the theory of correlated systems. Dr Ilinski has joined the Equity Derivatives Desk at Chase Manhattan in London.