Document Type : Research

Author

Assistant Professor of Finance and Accounting, Yazd University

Abstract

 
 
 The book, Physics of Finance, reviews the historical story of interactions between physics and finance. The author of the book describes how models of physics focus on financial issues in an intertextual way and seeks to demonstrate the proliferation of physical models in finance and how the quantitative analysis of Quants (quantitative financial analysts) - as an antecedent of the 2008-2007 financial crisis or not-, will shape the future of financial knowledge. In this paper, while introducing the whole structure of the book, its various aspects of form and content are criticized based on the concepts of intertextuality and interdisciplinary studies. The intertextual approach is a level of analysis that examines the relationship between physics (as text A) and finance (as text B), and the interdisciplinary view is a level of analysis that describes their relationship as two distinct disciplines. These two disciplines have their own subject, method, and purpose. Following these studies, the main advantage of the book are the narrative form, the historical, precise look, and its main drawbacks are to ignore the clear critique of behavioral economists and other quantitative financial critics into financial physics.

Keywords

Main Subjects

Aram, John D. (2004), “Concepts of Interdisciplinarity: Configurations of Knowledge and Action”, Human Relations, vol. 57, no. 4.
Black, Fischer and Myron Scholes (1973), “The Pricing of Options and Corporate Liabilities”, Journal of Political Economy, vol. 81, no.3.
Black, Fischer, Emanuel Derman, and William Toy (1990), “A One-Factor Model of Interest Rates and Its Application to Treasury Bond Options”, Financial Analysts Journal, vol. 46.
Catanach Jr., Anthony H. and Julie Anne Ragatz (2010), “2008 Market Crisis: Black Swan, Perfect Storm or Tipping Point?”, Bank Accounting and Finance, vol. 23.
Derman, Emanuel (2004), My Life as a Quant: Reflections on Physics and Finance, New York: John Wiley & Sons.
Friedman, Hershey H. and Linda Weiser Friedman (2010), “The Global Financial Crisis of 2008: What Went Wrong?”, in: Lessons from the Financial Crisis: Causes, Consequences, and Our Economic Future, New York: John Wiley & Sons.
Helleiner, Eric (2011), “Understanding the 2007–2008 Global Financial Crisis: Lessons for Scholars of International Political Economy”, Annual Review of Political Science, vol. 14.
Kahneman, Daniel (2011), Thinking, Fast and Slow, New York: McMillan.
Klein, Julie Thompson (1996), Crossing Boundaries: Knowledge, Disciplinarities, and Iinterdisciplinarities, Virginia: University of Virginia Press.
Klein, Julie Thompson and William H. Newell (1997), “Advancing Interdisciplinary Studies”, in: Handbook of the Undergraduate Curriculum: A Comprehensive Guide to Purposes, Structures, Practices, and Change, Michigan: Wayne State University.
Kuhn, Thomas S. (2012), The Structure of Scientific Revolutions, Chicago: University of Chicago Press.
Mandelbrot, Benoit and Richard L. Hudson (2007), The Misbehavior of Markets: A Fractal View of Financial Turbulence, New York: Basic Books.
Miller, Merton H. (1999), “The History of Finance”, The Journal of Portfolio Management, vol. 25, no. 4.
Reavis, Cate (2012), “The Global Financial Crisis of 2008: the Role of Greed, Fear, and Oligarchs”, MIT Sloan Management Review, vol. 16.
Reinhart, Carmen M. and Kenneth S. Rogoff (2008), “Is the 2007 US Sub-Prime Financial Crisis So Different? An International Historical Comparison”, American Economic Review, vol. 98, no. 2.
Rubinstein, Mark (2011), A History of the Theory of Investments: My Annotated Bibliography, New York: John Wiley & Sons.
Sornette, Didier (2017), Why Stock Markets Crash: Critical Events in Complex Financial Systems, Princeton: Princeton University Press.
Taleb, Nassim Nicholas (2007), The Black Swan: The Impact of the Highly Improbable, New York: Random House.
Thaler, Richard (2015), Misbehaving: The Making of Behavioral Economics, New York: W.W. Norton and Company.
Thaler, Richard and Cass Sunstein (2008), Nudge: The Gentle Power of Choice Architecture, New Haven, Conn: Yale Publications.
Thorp, Edward O. and Sheen T. Kassouf (1967) Beat the Market: A Scientific Stock Market System, New York: Random House.
Weatherall, James Owen (2013), The Physics of Wall Sreet: A Brief History of Predicting the Unpredictable, New York: Houghton Mifflin Harcourt.