Ever since Bachelier’s PhD thesis in 1900, a theory of Brownian motion 5 years before Einstein, our understanding of financial markets has reasonably progressed. Over the past decades, financial engineering has grown tremendously and has regrettably outgrown our understanding. The inadequacy of the models used to describe financial markets is often responsible for the worst financial crises, with significant impact on everyday economy. From a physicist’s perspective, understanding the price for- mation mechanisms – namely how markets absorb and process information of thousands of individual agents to come up to a "fair" price – is a truly fascinating and challenging problem. Fortunately, modern financial markets provide enormous amounts of data that can now be used to test scientific theories at levels of precision comparable to those achieved in physical sciences.
This course presents the approach adopted by physicists to analyse and model financial markets. Our analysis shall, insofar as this is possible, always be grounded on the real financial data. Rather than sticking to a rigorous mathematical formalism, we will seek to foster critical thinking and develop intuition on the "mechanics" of financial markets, the orders of magnitude, and certain open problems.
- Teaching coordinator: Benzaquen Michael
- Teaching coordinator: Zakine Ruben