Probability and Finance: It's Only a Game! / Edition 1

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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.
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Editorial Reviews

From the Publisher
"Shafer...and Vovk...explain how probability can be based on game theory rather than measure theory, and how doing so allows it to be used in finance with out a lot of distracting an confusing assumptions about randomness." (Reference & Research Book News, November 2001)

" interesting new mathematical and philosophical framework for probability..." (Zentralblatt Math, Vol.985, No.10, 2002)

"...a creative, entertaining and imaginative book..." (Short Book Reviews, August 2002)

"The first half of this truly original book introduces a novel approach to probability, founded on game theory rather than measure theory. In an admirably clear, scholarly and engaging manner, it traces its historical antecedents, expounds its advantages, develops its technicalities, and addresses its philosophical implications. The second half goes on to do the same for financial modelling. This is a book that should utterly change the way we think about its two topics."

Philip Dawid (University College London, UK)

Short Book Reviews
..a creative, entertaining and imaginative book..
Shafer (management, Rutgers U.) and Vovk (computer science, U. of London) explain how probability can be based on game theory rather than measure theory, and how doing so allows it to be used in finance without a lot of distracting and confusing assumptions about randomness. Where necessary, they have chosen clarity and simplicity over completeness and generality, and invite readers to participate in developing the idea rather than aspiring to a comprehensive treatise. After setting out the principles, they look first at probability without measure, and then at finance without probability. Annotation c. Book News, Inc., Portland, OR (
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Product Details

Meet the Author

GLENN SHAFER, PhD, is Professor in the Graduate School of Management at Rutgers University. He is also the author of The Art of Causal Conjecture, Probabilistic Expert Systems, and A Mathematical Theory of Evidence.
VLADIMIR VOVK, PhD, is Professor in the Department of Computer Science at Royal Holloway, University of London.

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Table of Contents


Probability and Finance as a Game.


The Historical Context.

The Bounded Strong Law of Large Numbers.

Kolmogorov's Strong Law of Large Numbers.

The Law of the Iterated Logarithm.

The Weak Laws.

Lindeberg's Theorem.

The Generality of Probability Games.


Game-Theoretic Probability in Finance.

Games for Pricing Options in Discrete Time.

Games for Pricing Options in Continuous Time.

The Generality of Game-Theoretic Pricing.

Games for American Options.

Games for Diffusion Processes.

The Game-Theoretic Efficient-Market Hypothesis.


Photograph Credits.



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