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Amazon.com Review QA with James Owen Weatherall Q. What is The Physics of Wall Street all about A. Over the past few years, we've heard a lot about a new kind of Wall Street elite known as "quants." These are often physicists and mathematicians who have moved to finance and brought radically new ideas along with them. This book is an attempt to understand these quants and the mathematical models they use to predict market behavior. It's two parts history and one part argument: I tell the surprisingly fun story of how physicists and their ideas made it to Wall Street in the first place, and along the way I argue that this history reveals something important about how we should think about the models and practices they have introduced--especially in light of the 2007-2008 financial crisis. Q. You say the history is surprisingly fun. Can you give an example A. The physicists and mathematicians I write about in the book are (or were) very smart, creative people who put their scientific training to use in surprising new ways. Their stories are fascinating. For instance, Edward Thorp, who invented the modern quantitative hedge fund, was also the first person to prove that card counting could be used to reliably get an edge in blackjack. He spent a good amount of time working the card tables in Las Vegas. And Norman Packard and Doyne Farmer, who started a pioneering financial services firm in the early 1990s, spent their graduate school years at UC Santa Cruz inventing the new science of chaos theory while trying to build a computer to beat the odds in roulette--the profits from which were intended to start a yippie commune in the Pacific Northwest. Q. What surprised you most about the history you uncovered A. One thing that surprised me was that derivatives contracts such as options, futures, and swaps, which are often discussed as though they were a troubling new innovation, have actually been around for thousands of years. For example, scientists have found cuneiform tablets containing records of futures traded by ancient Sumerians. Even the idea of using mathematical methods to price options is quite old. I pick up the story in 1900, with the visionary work of a French physicist named Louis Bachelier, but some strands go back further, to the mid-nineteenth century. Plus, there are some striking historical connections in the book. For instance, I explain the relationship between the invention of nylon and the development of the atomic bomb--and how both influenced at least one physicist's to switch to a financial career. And I tell the story of how the space race and the Vietnam War were partly responsible for many physicists moving to Wall Street banks in the 1980s. Q. What can this history teach us about models used in finance A. If you look at how the physicists and mathematicians who came up with the earliest financial models thought about what they were doing, the role of simplifying assumptions and idealizations becomes very clear. The goal was to get a toehold on some very hard problems, and not to come up with a final, overarching theory of financial markets. Making simplified assumptions can lead to the solution of a problem that you otherwise couldn’t solve--but that solution is only going to be a reliable guide to how the world works when the assumptions you’ve made are approximately true. The important question, and the one that physicists are always trained to ask, is when do your assumptions fail and what happens when they do I don’t think the importance of this question has been recognized as widely as it should be among the traders who rely on these models. Q. At the end of the book, you describe an "Economic Manhattan Project." What would that be like A. The Economic Manhattan Project was proposed in 2008 by the mathematical physicist and hedge fund manager Eric Weinstein. The idea is that economic and financial security--that is, regulating the economy to avoid future calamities--should be at the very top of our agenda. Yet the resources we devote to physical security, to military technology and defense, far outstrip what we spend on developing better economic theories. In the past, America has set goals--for the original Manhattan Project, the race to the moon, and others--when we have funneled resources into serious innovation. And whenever we have done so, we have succeeded in accomplishing great things. I think it is time to make a similar kind of commitment to developing the next generation of economic models, with the goal of finding radical new ideas to make the economy safer and more robust. Q. You're a philosophy professor. Why did you write a book about finance A. The short answer is simply that I find the history and the ideas fascinating. I have a Ph.D. in physics and I like thinking about how physics can be applied to novel problems. The longer answer is that the issues in this book aren't so far removed from philosophy. Philosophers spend a lot of time thinking about what we can know about the world and how to deal with fundamental uncertainty. Philosophy has a reputation for being abstract and distant from everyday concerns. And sometimes it is. But when it comes to mathematical models, philosophical issues really matter for how we make important economic and financial decisions--decisions that have significant real-world ramifications. And for me, at least, the most interesting and important philosophical questions are those that we face as practicing scientists and policymakers--and even as investors. Problems with the use of student test scores to evaluate About the authors Authors each of whom is responsible for this brief as a whole are listed alphabetically Correspondence may be addressed to Educ_Prog@epiorg Archives - Phillycom Archives and past articles from the Philadelphia Inquirer Philadelphia Daily News and Phillycom Culture: Music TV & radio books film art dance Offers news comment and features about the British arts scene with sections on books films music theatre art and architecture Requires free registration Decision Making : Overcoming Serious Indecisiveness How People Avoid Making Serious Decisions In The Histories written in 450 BC Herodotus makes the following statement: "If an important decision is to be made [the Horizon of Reason Michael Mangan Performing Dark Arts A cultural history of conjuring (Bristol en Chicago 2007) Disselkoen Dick ed Twaalf Operas als Spiegel van hun Tijd Maritime Archaeology and History of the Pacific Symposium 1989-2016 SYMPOSIA ABSTRACTS (in reverse chronological order) (Information provided courtesy of the UH Marine Option Program; NOAA National Marine Sanctuaries and WHAT DO WE DO NOW? The Burning Platform As this vitriolic unpredictable outrageously entertaining presidential campaign enters its final stages I find myself pondering what happens next I was reminded of Awesomeness by Analysis - TV Tropes The Awesomeness by Analysis trope as used in popular culture Some people learn by flipping pages Some people must gain knowledge through pain Some people No Big Bang? Quantum equation predicts universe has no No singularities nor dark stuff In addition to not predicting a Big Bang singularity the new model does not predict a "big crunch" singularity either Fukushima Daiichi nuclear disaster - Wikipedia The Fukushima Daiichi nuclear disaster ( Fukushima Dai-ichi ( pronunciation) genshiryoku hatsudensho jiko?) was an energy
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