This updated second edition provides a framework that shows how to bridge the gap between the continuous-time pricing practice in financial engineering and the capital market data from discrete-time intervals. Starting with a comprehensive treatment of the particular stochastic modeling and econometric estimation framework, the main part of the book covers applications to risky assets traded on the markets for funds, fixed-income products and electricity derivatives. The second edition includes a new chapter on financial modeling which discusses vital PDE- and EMM-approaches. The reorganized and improved text further integrates the latest research contributions in the three covered application fields.