The application of skills from the mathematical physics branch of science to finance and economics has become firmly established. By the late 1990s, physics graduates were being vigorously recruited by finance houses. As I write this, the Securities and Investment Institute’s Career Centre is advertising for ‘incredibly bright mathematics/ physics graduates (MSc/PhD preferred) to work alongside the founding partners’. Elsewhere, insights from physics have fed the development of models that provide understanding of wealth and poverty distributions.
To those working in them, there are several very different fields of study here: on a scale from everyday application to underpinning research (or from small to large scale) you will hear variously of ‘quantitative finance’ at one end, ‘econophysics’ at the other, with ‘financial engineering’ and numerous other niche labels in between. For my present purposes, however, these differences are a distraction. The important thing is an overarching view of the space within which monetary transactions occur as a statistical universe whose characteristics permit use of models derived from the physical. [read more]
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