Probability and Finance: It's Only a Game!
By Glenn Shafer, Vladimir Vovk
* Publisher: Wiley-Interscience
* Number Of Pages: 440
* Publication Date: 2001-06-15
* ISBN-10 / ASIN: 0471402265
* ISBN-13 / EAN: 9780471402268
Product Description:
Provides a foundation for probability based on game theory rather than measure theory.
* A strong philosophical approach with practical applications.
* Presents in-depth coverage of classical probability theory as well as new theory.
Summary: probability for finance made interesting
Rating: 5
Glenn Shafer wrote a very thought provoking book on the mathematical theory of evidence many years ago. Vladimir Vovk was a student of Kolmogorov. At first I thought this would be a book that tries to replace the measure theoretic approach to probability with a game theory (gambling) approach and I was skeptical about it being successful. But these authors are serious and first rate probabilists who understand the theory, foundations and history of probability from all the angles.
The authors sell the book as two books. The first half presents probability theory and the classic probability results in the framework of a game between two opponents that they call Skeptic and the World. If we replaced Skeptic by Investor and World by Market we see it naturally as an investment problem in finance. They see their methodology as natural for a course in the probabilist approach to financial problems. The special topics in finance and important models such as Black-Scholes is then the subject of the second part of the book.
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