From September 2015, students from all backgrounds will be able to study the philosophical issues underlying the relationship between physics and finance in our brand new course: Physics and the City – From Quantum Jumps to Stock Market Crashes.

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One of the most surprising discoveries of the 20th century is that many things can be described by tiny atoms moving randomly about. Thinking about the physical world in this way led to the invention of modern particle physics. Thinking about the financial world in this way led to modern financial modeling. This course is about some of the philosophical issues underlying the relationship between physics and finance.

Students in this course will explore some of the most important conceptual and philosophical questions underlying physics and finance, like: How are assumptions about randomness compatible with observed forms of determinism? What does it mean to be an atom? How does the quantum world differ from the everyday world? What explains why physical models have unexpected applications in finance? What role should analogy play in physical and financial modelling?

The course will proceed at a conceptual level that is suitable for students of all backgrounds. We begin by introducing the concept of atoms and of the random walk, and investigate the role it played in the development of quantum theory and particle physics. We then explore how random walks and other models used in physics are applied in financial models, and analyse some of the philosophical issues underlying this practice.




What you’ll do

There will be two versions of this course in 2015/6: PH232, for undergraduate students, and PH431 for postgraduate students.

PH232 is available to students on our BSc in Philosophy and Economics, our BSc in Philosophy, Logic and Scientific Method and our BSc in Philosophy, Politics and Economics. The course will also be available to General Course students and as an outside option to students on other programmes where regulations permit.

PH431 is available to students on our MSc in Philosophy of Science and as an outside options to students on other MSc programmes.

This is a half-unit course, meaning that it will run for one term. Teaching will consist of 10 hours of lectures and 10 hours of classes in the Lent Term (11 Jan – 24 March). Each lecture will introduce a different topic and you will have the chance to discuss each of these topics in class groups of no more than 15 students.

Each week, you will be given a problem set to complete as well as short discussion questions to be submitted via Moodle (the LSE’s Virtual Learning Environment). This is formative work and will not count towards your overall course mark, but is intended as preparation for the final 2 hour exam to be sat at the end of the Summer Term.

Weekly essential readings, selected individually from various book chapters and journal articles, will be provided on Moodle but if you’d like to get a head start here are some indicative readings for you to take a look at over the summer:

  • Derman, E. My Life as a Quant
  • Mirowski, Phillip. More Heat than Light
  • Norton, John D. Einstein for Everyone (especially Chapters 34-37 on Brownian motion and the origins of quantum theory)
  • Weatherall, James O. The Physics of Wallstreet (especially Chapter 5, “Physics Hits the Street” on the discovery of the Black-Scholes Equation)