Asset Price Dynamics, Volatility, and Prediction

Asset Price Dynamics, Volatility, and Prediction offers an in-depth exploration of how today’s market prices can reveal valuable information about the probability distributions governing future asset values. Stephen J. Taylor combines theoretical insights with empirical studies from equity and foreign exchange markets to show how daily price data and option contracts can be used to predict future prices and their volatility. The book presents a balanced approach by employing stochastic processes to create mathematical models for asset price dynamics while keeping the presentation accessible compared to more mathematically intensive alternatives. Key techniques such as random walk tests, trading rules, ARCH models, and stochastic volatility models are discussed, along with an analysis of high-frequency data and the implications of option prices. A valuable resource for students and professionals alike, this 544-page work published in 2011 by Princeton University Press equips readers in economics, finance, and mathematics with the tools to understand and forecast asset price behavior in an ever-evolving market environment.