Valid for: 2013/14
Decided by: Education Board B
Date of Decision: 2013-04-10
Elective for: F4, F4-tf, F4-fm, I4, I4-fir, Pi4, Pi4-fm
Language of instruction: The course will be given in English
Why do banks and consulting firms hire an ever larger number of
physicists? - Because the methods of statistical physics are
becoming more and more important in economics. This course is an
introduction to this quickly expanding field. The emphasis will be
on the understanding of concepts and ideas and their universal
applicability.
The course aims at giving, first, insight into the general merit
that methods from statistical physics and chaos theory have in the
economical sciences, second, the ability to critically evaluate the
potential and the limits of scientific transfer and, third, an
intuition for the large impact that quantitative methods can have
in a fast developing interdisciplinary field.
Knowledge and understanding
For a passing grade the student must
Competences and skills
For a passing grade the student must
Judgement and approach
For a passing grade the student must
Some introductory remarks about statistical physics
Basic concepts and mechanisms in the economy and in the capital markets: arbitrage, stocks, financial derivatives, options, portfolio, risk management
Statistical models for stock markets: classes of Brownian motion, stochastic processes, probabilities and distributions, limit theorems, physics interpretation
Black and Scholes theory for options: diffusion equations, Ito?s lemma, quantitative risk management, hedging
Correlations between stocks: impact on risk management, random matrices, formal similarities to quantum chaotic systems in physics
Controversial and speculative theories: Can one predict market crashes? Are there similarities between market crashes and earth quakes?
Grading scale: TH
Assessment: The exam is written, the students work on problems which require calculations and to a lesser extent description and explanation. This exam determines the grade/mark.
Required prior knowledge: Basic calculus, linear algebra and fourier transforms.
The number of participants is limited to: No
Course coordinator: Professor Sven Ă…berg, sven.aberg@matfys.lth.se
Course homepage: http://www.matfys.lth.se/education/FMF170