Description
Book SynopsisAn understanding of the behaviour of financial assets and the evolution of economies has never been as important as today. This book looks at these complex systems from the perspective of the physicist. So called ''econophysics'' and its application to finance has made great strides in recent years. Less emphasis has been placed on the broader subject of macroeconomics and many economics students are still taught traditional neo-classical economics. The reader is given a general primer in statistical physics, probability theory, and use of correlation functions. Much of the mathematics that is developed is frequently no longer included in undergraduate physics courses. The statistical physics of Boltzmann and Gibbs is one of the oldest disciplines within physics and it can be argued that it was first applied to ensembles of molecules as opposed to being applied to social agents only by way of historical accident. The authors argue by analogy that the theory can be applied directly to e
Trade ReviewWe argue that similarlaws apply to assemblies of interacting economic agents for which repeatable experiments are also not always possible. The theory leads naturally to an understanding of a range of financial and economic phenomena. One central issue, namely that of non-equilibrium, is also discussed by drawing on recent ideas developed to explore the phenomenon in physical systems, which leads to new insights into the distribution functions of the interacting agents. It is our view that this approach, which combines both theory and empiricism, offers scope for further development and application. * John D. Williams, MathSciNet *
Table of Contents1. Introduction ; 2. Reading financial data ; 3. Basics of probability ; 4. Time dependent processes and the Chapman-Kolmogorov equation ; 5. The Langevin approach to modelling Brownian motion ; 6. The Brownian motion model of asset prices ; 7. Generalized diffusion processes and the Fokker-Planck equation ; 8. Derivatives and options ; 9. Asset fluctuations and scaling ; 10. Models of asset fluctuations ; 11. Risk ; 12. Why markets crash ; 13. Two non-financial markets ; 14. An introduction to physical economics ; 15. Laws of physical economics ; 16. Markets ; 17. A simple model of trade ; 18. Production and economic growth ; 19. Economics and entropy ; 20. Approaches to non-equilibrium economics ; 21. The distribution of wealth in society ; 22. Conclusions and outlook
