Introduction

Olivier Le Courtois and Christian Walter ()

Chapter 1 in Extreme Financial Risks and Asset Allocation, 2014, pp 1-7 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In physics, the principle of continuity states that change is continuous rather than discrete. Leibnitz and Newton, inventors of differential calculus, said “Natura non facit saltus” (nature does not make jumps). This same principle underpinned the thoughts of Linné on the classification of species and later Charles Darwin's theory of evolution (1859). In 1890, Alfred Marshall's Principles of Economics assumed the principle of continuity, allowing the use of differential calculus in economics and the subsequent development of neoclassical economic theory. Modern financial theory grew out of neoclassical economics and naturally assumes the same principle of continuity…

Keywords: Lévy Process; Extreme Risks; Risk Management; Portfolio Management; Asset Allocation (search for similar items in EconPapers)
Date: 2014
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