Jim Devine wrote: > But standard economic theory is not like quantum mechanics at all even > though both give an important role to randomness.
a few years ago someone in the financial "mathematics" business discovered i do physics and programming, and asked me if i would be interested in applying some ideas in quantum field theory to the pricing of options. these new QFT models were supposed to be better at handling market volatility than the traditional schemes because they had randomness and finite jumps "built into the theory from the start". being a curious fellow, i decided to sit down for 3 sessions and see what all the hub bub was about. and i vainly sought for any physics while he tried to convince me there was gold in them thar hills. finally he figured out i was more interested in physics than in making money on this, and we stopped meeting. a few weeks ago i bumped into mr. financial math and we had a chat. i asked if he ever got the codes up and running for the "theories" we had discussed. why yes, he answered, he found some really good programmer to implement the models and now they are up and running and in place. everything is good. so i asked, how could he tell if the models were implemented "correctly", on what basis did he evaluate whether the pricing on the options was "good" or "correct" or "optimal", whether it handled market volatility any "better" than any other pricing scheme, QFT-based, prayed-based, or otherwise. he looked at me and gave me a nice big warm smile, and said, the codes run and give the clients prices for options, and the clients still make money and the codes are new, so all is good. when the clients tire of these codes and think something else is needed to reinvigorate their business (or profits, or whatever it is they do over there), they will want other codes, and evaluate them similarly. i'll leave you decide whether this is anything like a physical science with the words changed. Les _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
