The Physics of Wall Street
Twenty-first century finance is built on complex mathematical tools developed by “quants,” a different breed of investor with expertise in fields such as physics, mathematics, and computer science. These models have been the basis for both new trading strategies and new financial products, leading to untold wealth.In some cases, however, these models have done more damage than good, making markets less stable and introducing new systemic risk.
In his Perimeter Institute Public Lecture, James Weatherall will tell the story of how, in the aftermath of World War II, some innovative physicists and mathematicians saw surprising connections between physics, gambling, and finance, and put those connections to use to become the first quants. He will introduce some of the ideas behind modern quantitative trading and show how the history of mathematical reasoning in finance reveals that these models can be extremely useful — but only if we understand their limitations.James Owen Weatherall is Professor of Logic and Philosophy of Science at the University of California, Irvine. His work primarily concerns the mathematical and conceptual foundations of physics, though he also maintains serious interests in general philosophy of science and in philosophy of economics. He is the author of The Physics of Wall Street (Houghton Mifflin Harcourt, 2013) and, most recently, Void: The Strange Physics of Nothing (Yale University Press, 2016), which explores the structure of empty space in physics from the 17th century to today. In addition to his academic work, Weatherall has written on physics, philosophy, and finance for numerous magazines and newspapers, including Scientific American, The Financial Times, and Slate.