PH431      Half Unit
Physics and Uncertainty: From Quantum Jumps to Stock Market Crashes

This information is for the 2025/26 session.

Course Convenor

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One of the most surprising discoveries of 20th century physics is that enormous progress can be made by embracing our uncertainty, and modelling it using probabilistic techniques. This powerful thinking led to discoveries like the first evidence of the atomic hypothesis, that the matter is made of tiny atoms moving randomly about. It also paved the way for the discovery of quantum mechanics, our best theory of matter and energy. These techniques even spilled outside of physics, into places like the social and financial world, where similar techniques were applied.

This course is about some of the philosophical issues underlying the physics of uncertainty, and the kinds of issues they raise for the natural and social sciences.

Students in this course will explore some of the important conceptual and philosophical questions underlying physics and finance, like: How are assumptions about randomness compatible with observed forms of determinism? How is it possible to seek truth using statistical theories? 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? To what extent do such applications help to underpin how the prices of financial instruments are set?

This course will proceed at a conceptual level that is suitable for students of all backgrounds: no background in physics is needed, and there is no advantage to having one.

15 hours of seminars and 10 hours of lectures in the Winter Term.

This course has a reading week in Week 6 of Winter Term.

This year, the teaching will consist of a weekly in-person lecture and class, with one reading week included.

Students will be expected to produce one problem set weekly and one other piece of coursework in the WT.

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

- Malkin, Burton G. A random walk down Wallstreet, 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.

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

Exam (50%), duration: 120 Minutes, reading time: 5 minutes in the Spring exam period

Course participation (10%)

Essay (40%, 2000 words)

There are two summative assessments: a 2,500 word summative essay (40%) and an exam (50%). Alongside this, there is a 10% participation grade connected to the weekly problem sheets.

The exam for this course is an e-Exam, an invigilated in-person exam on the LSE campus in which, instead of completing your answers on a paper script, you use your own personal laptop to type your answers and submit electronically. e-Exam duration: 2 hours in the Spring exam period.