the physics of wall street - james owen weatherall

[...]... between the time the option is sold and the time it expires, the price of the underlying security will fall beneath the strike price If that happens, the seller wins the bet — that is, makes a profit on the option The option buyer, meanwhile, is betting that at some point the price of the underlying security will exceed the strike price, in which case the buyer makes a profit, by exercising the option... all of the stages of manufacturing of the polymer in parallel That is, instead of waiting until the team fully understood the first stage of the process (say, the chemical reaction by which the polymer was actually produced) and only then moving on to the next step (say, developing a method for spinning the polymer into a fiber), teams worked on all of these problems at once, each team taking the others’... shadow — shot up over the site of the 1889 World’s Fair In the north, at the foot of Montmartre, a new cabaret called the Moulin Rouge had just opened to such fanfare that the Prince of Wales came over from Britain to see the show Closer to the center of town, word had begun to spread of certain unexplained accidents at the magnificent and still-new home of the city’s opera, the Palais Garnier — accidents... and the overall productivity of that firm (Tinbergen famously argued that a company would become less productive if the income of the highest-paid employee was more than five times the income of the lowest-paid employee — a rule of thumb largely forgotten today.) Unlike in physics, where one often works with full-blown theories, mathematical economics deals almost exclusively with models By the time the. .. problem Along the way, they established the foundations of the modern theory of probability One of the things that Pascal and Fermat’s correspondence produced was a way of precisely calculating the odds of winning dice bets of the sort that gave de Méré trouble (Cardano’s system also accounted for this kind of dice game, but no one knew about it when de Méré became interested in these questions.) They were... toward a full-fledged theory of probability The most notable of these came at the behest of another gambler, a French writer who went by the name of Chevalier de Méré (an affectation, as he was not a nobleman) De Méré was interested in a number of questions, the most pressing of which concerned his strategy in a dice game he liked to play The game involved throwing dice several times in a row The player... at the University of Paris, but without drawing a salary The cruelest reversal of all came in 1914 Early that year, the Council of the University of Paris authorized the dean of the Faculty of Science to create a permanent position for Bachelier At long last, the career he had always dreamed of was within reach But before the position could be finalized, fate threw Bachelier back down In August of. .. years, the price of the stock will be somewhere in a given range is given by the area underneath the curve — so, for instance, the area of the shaded region in plot (b) corresponds to the probability that the stock will be worth somewhere between $60 and $70 in five years The shape of the plot depends on how long into the future you are thinking about projecting In plot (c), the dotted line would be the. .. statistical thermodynamics One of the central aims of thermodynamics is to offer a description of how the behavior of particles, the small constituents of ordinary matter, can be aggregated to describe larger-scale objects A major part of this analysis is identifying variables like temperature or pressure that don’t make sense with regard to individual particles but can nonetheless be used to characterize their... would now call the random walk model The term model made its way into economics during the 1930s, with the work of another physicist turned economist, Jan Tinbergen (Samuelson was the second Nobelist in economics; Tinbergen was the first.) The term was already being used in physics, to refer to something just shy of a full physical theory A theory, at least as it is usually thought of in physics, is an . or otherwise) without the prior written permission of the publishers of this book. National Library of Australia Cataloguing-in-Publication data Weatherall, James Owen. The Physics of Wall Street: . Publications THE PHYSICS OF WALL STREET James Owen Weatherall is a physicist, philosopher, and mathematician. He holds graduate degrees from Harvard, the Stevens Institute of Technology, and the University. graduate training in state -of -the- art academic theories — never before a prerequisite for work on the Street. Others were outsiders, with backgrounds in fields like mathematics or physics. They came armed