Published online by Cambridge University Press: 04 June 2010
Physicists are currently contributing to the modeling of ‘complex systems’ by using tools and methodologies developed in statistical mechanics and theoretical physics. Financial markets are remarkably well-defined complex systems, which are continuously monitored – down to time scales of seconds. Further, virtually every economic transaction is recorded, and an increasing fraction of the total number of recorded economic data is becoming accessible to interested researchers. Facts such as these make financial markets extremely attractive for researchers interested in developing a deeper understanding of modeling of complex systems.
Economists – and mathematicians – are the researchers with the longer tradition in the investigation of financial systems. Physicists, on the other hand, have generally investigated economic systems and problems only occasionally. Recently, however, a growing number of physicists is becoming involved in the analysis of economic systems. Correspondingly, a significant number of papers of relevance to economics is now being published in physics journals. Moreover, new interdisciplinary journals – and dedicated sections of existing journals – have been launched, and international conferences are being organized.
In addition to fundamental issues, practical concerns may explain part of the recent interest of physicists in finance. For example, risk management, a key activity in financial institutions, is a complex task that benefits from a multidisciplinary approach. Often the approaches taken by physicists are complementary to those of more established disciplines, so including physicists in a multidisciplinary risk management team may give a cutting edge to the team, and enable it to succeed in the most efficient way in a competitive environment.
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