From a footnote in the paper I’m currently reading:
“The cubic drift of our share process is also closely related to that of the stochastic Ginzburg-Landau diffusion used in superconductivity physics to model phase transitions.”
You know, there really should be a ban on physicists going to work in mathematical finance…
Ah, but now with the drama that has occurred (and will continue) on Wall Street because of financial engineering – the question is – how many physicists and related propeller-heads are going to be invited back.
The black-box mystery products, when cracked open, appear to bear nasty gifts.
Still, I think your smart to focus on finance and making money. Begging for research funding just doesn’t seem to be the best way of going about getting things done.
BTW, hi.
Will,
the “drama” you’re probably referring to has its roots more in lax credit oversight, excessive leverage, and plain old fear & greed than in “Wall Street” hiring physicists and related “propeller-heads” (thank you!) to model derivative prices. Only a small fraction of hedge funds is based on purely algorithmic strategies (“quant-only”), and only a small fraction of those uses anything else than linear regression. Algorithms can and do fail, but so do people, and in most cases it’s not the algorithms that are making the ultimate decision where to put the money.
You’re right, I misspoke – I thought about that after I posted. What I would say is that those quants involved contributed to the problem (but yes, did not cause it).
Here’s a good reference article – https://www.technologyreview.com/Biztech/19530/?a=f (Now pay only!?!? grrr)
PS – the quants being referred to are not the algorithmic traders, AFAIK.
PPS – and to Shanes post – that is comedy