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Continuous-Time Finance

Robert C. Merton

ISBN: 978-0-631-18508-6 November 1992 Wiley-Blackwell 754 Pages


Robert C. Merton's widely-used text provides an overview and synthesis of finance theory from the perspective of continuous-time analysis. It covers individual finance choice, corporate finance, financial intermediation, capital markets, and selected topics on the interface between private and public finance.
Foreword by Paul A. Samuelson.



Part I: Introduction to Finance and the Mathematics of Continuous-time Models:.

1. Modern Finance.

2. Introduction to Portfolio Selection and Capital Market Theory: Static Analysis.

3. On the Mathematics and Economic Assumptions of Continuous-time Financial Models.

Part II: Optimum Consumption and Portfolio Selection in Continuous-time Models:.

4. Lifetime Portfolio Selection under Uncertainty: The Continuous-time Case.

5. Optimum Consumption and Portfolio Rules in a Continuous-time Model.

6. Further Developments in Theory of Optimal Consumption and Portfolio Selection.

Part III: Warrant and Option Pricing Theory:.

7. A Complete Model of Warrant Pricing that Maximizes Utility.

8. Theory of Rational Option Pricing.

9. Option Pricing when Underlying Stock Returns are Discontinuous.

10. Further Developments in Option Pricing Theory.

Part IV: Contingent-Claims Analysis in the Theory of Corporate Finance and Financial Intermediation:.

11. A Dynamic General Equilibrium Model of the Asset Market and its Application to the Pricing of the Capital Structure of the Firm.

12. On the Pricing of Corporate Debt: The Risk Structure of Interest Rates.

13. On the Pricing of Contingent Claims and the Modigliani-Miller Theorem.

14. Contingent Claims Analysis in the Theory of Corporate Finance and Financial Intermediation.

Part V: An Intertemporal-Equilibrium Theory of Finance:.

15. An Intertemporal Capital Asset Pricing Model.

16. A General Equilibrium Theory of Finance in Continuous Time.

Part VI: Applications of the Continuous-Time Model to Selected Issues in Public Finance:.

17. An Asymptotic Theory of Growth Under Uncertainty.

18. On Consumption-Indexed Public Pension Plans.

19. An Analytic Derivation of the Cost of Loan Guarantees and Deposit Insurance.

20. On the Cost of Deposit Insurance when there are Surveillance Costs.

21. Optimal Investment Strategies for University Endowment Funds.


Author Index.

Subject Index.

"The thoughtful way in which the book is organized, the connective sections, and the fullness of this remarkable scholar's accomplishments, succeed in making this collection into a watershed event in finance. It is a testament to how much of modern finance he has formulated, advanced, and, in a meaningful sense, brought to a satisfactory completeness. Modern finance has much to do, but it can do no better than to add to what Merton has already done, and I recommend this book to all who wish to learn what finance has been up to for the past two decades." Stephen Ross, Journal of Finance

<!--end-->"I do not see how one can undertake research in intertemporal asset-pricing under uncertainty without studying very carefully the past and present work of Robert C. Merton. Accordingly, Basil Blackwell has done the academic and non-academic finance community a great service by publishing this book." Michael Selby, The Economic Journal

"A coherent text that represents a bible on continuous-time finance. Anyone with an interest in financial economics will be aware of the outstanding achievements of Robert C. Merton. To these individuals the book will come as no disappointment. It will undoubtedly be a classic reference on continuous-time finance for many years to come." The Manchester School

"John Maynard Keynes alludes to economics in the following terms ...'the delightful paths of our own most agreeable branch of moral sciences, in which theory and fact, intuitive imagination and practical judgment, are blended in a manner comfortable to the human intellect.' Robert C. Merton's Continuous-time Finance, which comes to us more than 20 years after his first paper appeared, squarely fits this description." Suresh Sundaresan, Columbia University, The Review of Financial Studies

* This is a landmark book in finance - see reviews! * Already adopted as a text in hardback. Certain to be taken up even more widely in paperback. * Merton is a pioneer in finance.