Dr Bryan Roberts

This course is available on the BSc in Philosophy and Economics, BSc in Philosophy, Logic and Scientific Method and BSc in Philosophy, Politics and Economics. This course is available as an outside option to students on other programmes where regulations permit and to General Course students.

There are no prerequisites for this course; it is accessible to students of all backgrounds.

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 some of the philosophical issues underlying this practice.

10 hours of lectures and 10 hours of classes in the LT.

Weekly problem sets and short discussion questions submitted through Moodle and for review in classes.

Weekly essential readings will be provided on Moodle, selected individually from various book chapters and journal articles. Some indicative readings include:

- Derman, E. My Life as a Quant. Excerpts.

- Mirowski, Phillip. More Heat than Light. Misc. Excerpts.

- Norton, John D. Einstein for Everyone. Chapters 34-37 on Brownian motion and the origins of quantum theory.

- Weatherall, James O. The Physics of Wallstreet. Chapter 5, "Physics Hits the Street" on the discovery of the Black-Scholes Equation.

Exam (100%, duration: 2 hours) in the main exam period.