This book provides a thorough introduction to econophysics and finance market theory, and leads the reader from the basics to the frontiers of research. These are good times for econophysics with emphasis on market instability, and bad times for the standard economic theory that teaches stable equilibrium of markets. I now explain how the new volume differs in detail from the first edition.

The first edition of Dynamics of Markets (2004) was based largely on our discovery of diffusive dynamics of the exponential model, and more generally on the dynamics of Markovian models with variable diffusion coefficients. Since that time, the progress by the University of Houston Group (Kevin Bassler, Gemunu Gunaratne, and me) has produced a far more advanced market dynamics theory based on our initial discovery. The present book includes our discoveries since 2004. In particular, we've understood the limitations of scaling and one-point densities: given a scaling process, only the one-point density can scale, the transition density and all higher-order densities do not and cannot scale, and a one-point density (as Hänggi and Thomas pointed out over 30 years ago) cannot be used to identify an underlying stochastic process. Even pair correlations do not scale. It follows that scaling cannot be used to determine the dynamics that generated a time series. In particular, scaling is not an indication of long time correlations, and we exhibit scaling Markov models to illustrate that point.