Workshop 2013-14Workshop 2013-14Finance, Mathematics and PhilosophyFinance, Mathematics and PhilosophyEmiliano Ippoliti – Sapienza Università di RomaEmiliano Ippoliti – Sapienza Università di Romaemi.ippoliti@gmail.comemi.ippoliti@gmail.com

[1. finance]

Pi (π) (1998, 85 min) written and directed by Darren Aronofsky

connection

finance

mathematics

philosophy

- If, what, and how mathematics can be used to model financial dynamics

-what are the features of

financial dynamics

-impact of philosophy (method, description, hypotheses) on finance

and its mathematical modelling.

stock markets ?

transfer of money

information

connects economy and prices

several ways of connecting

along two dimensions

1.

what can be considered as

a piece of information

2.

how info is processed and evaluated

1.

polarity exogenous /endogenous

exogenous

data about economy

(from outside the markets)

determine prices and their variations

(see EMH)

endogenous

Limitless (2011, 105 min directed by Neil Burger)

Eddie: Well, it's a formula|with a complex method.

But, of course, research was|a component. Massive research.

I knew every helix of every scrap of DNA|in every company I bought.

Papers stacked like the Himalayas|in my office, and you know what?

Phil: The stocks went up.

E.: By a hair.

E.: Sure, the stocks rose, but who wants to do all that work for a shitty little uptake?

It's not the visceral kind of spike|you want in short term holdings so...

I dispensed with all the hard statistics and I went right to the rumor mill.

P.: So you bought your stocks based on what?The tom-toms beating in the street?

E.: Sure. Share prices aren't really|based on how a company works.

It's about|how mass psychology works.

So, if I found certain algorithms|in the perception of the stock...

P.: Pattern recognition.|That's your snake oil.

E.: Well, not everybody|understands the patterns.

And that gave me a little bit more of|an uptake, but it's just a parlor trick.

So then, I went on|to door number three.

P.: Are you really implying that you have|some sort of ultimate formula?

reactions about past prices’ variations

reactions about reactions

fractal account ( RMH)

2.

rationality

speed

efficiency

[2. price behaviours]

Nanex

2010 Flash crash

boom and bust (bubbles)

qualitative side

quantative side

[3. logic]

[4. rules of the stage]