WARNING: Physics Envy May Be Hazardous To Your Wealth!

The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems - and financial markets in particular - that are as predictive as those in physics. While this perspective has led to a number of important breakthroughs in economics, "physics envy" has also created a false sense of mathematical precision in some cases. We speculate on the origins of physics envy, and then describe an alternate perspective of economic behavior based on a new taxonomy of uncertainty. We illustrate the relevance of this taxonomy with two concrete examples: the classical harmonic oscillator with some new twists that make physics look more like economics, and a quantitative equity market-neutral strategy. We conclude by offering a new interpretation of tail events, proposing an "uncertainty checklist" with which our taxonomy can be implemented, and considering the role that quants played in the current financial crisis.Comment: v3 adds 2 reference

Assessing the vulnerability to price spikes in agricultural commodity markets

We empirically examine the predictability of the conditions which are associated with a higher probability of a price spike in agricultural commodity markets. We find that the forward spread is the most significant indicator of probable price jumps in maize, wheat and soybeans futures markets, a result which is in line with the “Theory of Storage”. We additionally show that some option-implied variables add significant predictive power when added to the more standard information variable set. Overall, the estimated probabilities of large price increases from our probit models exhibit significant correlations with the historical sudden market upheavals in agricultural markets

Modeling the impact of ocean circulation on chlorophyll blooms around South Georgia, Southern Ocean.

The northeast periphery of the Scotia Sea hosts one of the largest chlorophyll‐a blooms of the Southern Ocean. This bloom peaks to the northwest of the island of South Georgia, extending eastward for hundreds of kilometers. Although the Southern Ocean has many islands of similar size, South Georgia is ecologically one of the most significant: It not only sustains one of the Southern Ocean's largest and most diverse ecosystems but also constitutes its single most important region for biological carbon sequestration. While the exceptional nature of South Georgia's blooms has been recognized widely, both the physical processes that contribute to their fertilization and the reasons why these blooms are larger than those of other similar regions (e.g., Kerguelen or Crozet Islands) are poorly understood. We use the results of a high‐resolution ocean model to investigate the physical processes that mediate the entrainment of deep, iron‐rich waters into the surface layers of the South Georgia region. We show that the Southern Antarctic Circumpolar Current Front, the southernmost jet of the Antarctic Circumpolar Current (ACC), pumps iron‐enriched waters from the deep ocean onto the bottom layers of South Georgia's shelf. These waters are upwelled along the northern coast of the island and are then exported into the Georgia Basin, where topographically steered circulation shields them from the dispersive effects of local currents and eddies, thus allowing the bloom development

Normalized equilibrium in Tullock rent seeking game

International audienceGames with Common Coupled Constraints represent manyreal life situations. In these games, if one player fails tosatisfy its constraints common to other players, then theother players are also penalised. Therefore these games canbe viewed as being cooperative in goals related to meetingthe common constraints, and non cooperative in terms ofthe utilities. We study in this paper the Tullock rent seekinggame with additional common coupled constraints. We havesucceded in showing that the utilities satisfy the property ofdiagonal strict concavity (DSC), which can be viewed asan extention of concavity to a game setting. It not onlyguarantees the uniqueness of the Nash equilibrium but also of the normalized equilibrium

Establishing Nash equilibrium of the manufacturer-supplier game in supply chain management

We study a game model of multi-leader and one-follower in supply chain optimization where n suppliers compete to provide a single product for a manufacturer. We regard the selling price of each supplier as a pre-determined parameter and consider the case that suppliers compete on the basis of delivery frequency to the manufacturer. Each supplier’s profit depends not only on its own delivery frequency, but also on other suppliers’ frequencies through their impact on manufacturer’s purchase allocation to the suppliers. We first solve the follower’s (manufacturer’s) purchase allocation problem by deducing an explicit formula of its solution. We then formulate the n leaders’ (suppliers’) game as a generalized Nash game with shared constraints, which is theoretically difficult, but in our case could be solved numerically by converting to a regular variational inequality problem. For the special case that the selling prices of all suppliers are identical, we provide a sufficient and necessary condition for the existence and uniqueness of the Nash equilibrium. An explicit formula of the Nash equilibrium is obtained and its local uniqueness property is proved

A relocatable ocean model in support of environmental emergencies

During the Costa Concordia emergency case, regional, subregional, and relocatable ocean models have been used together with the oil spill model, MEDSLIK-II, to provide ocean currents forecasts, possible oil spill scenarios, and drifters trajectories simulations. The models results together with the evaluation of their performances are presented in this paper. In particular, we focused this work on the implementation of the Interactive Relocatable Nested Ocean Model (IRENOM), based on the Harvard Ocean Prediction System (HOPS), for the Costa Concordia emergency and on its validation using drifters released in the area of the accident. It is shown that thanks to the capability of improving easily and quickly its configuration, the IRENOM results are of greater accuracy than the results achieved using regional or subregional model products. The model topography, and to the initialization procedures, and the horizontal resolution are the key model settings to be configured. Furthermore, the IRENOM currents and the MEDSLIK-II simulated trajectories showed to be sensitive to the spatial resolution of the meteorological fields used, providing higher prediction skills with higher resolution wind forcing.MEDESS4MS Project; TESSA Project; MyOcean2 Projectinfo:eu-repo/semantics/publishedVersio

Reformulating classical and quantum mechanics in terms of a unified set of consistency conditions

This paper imposes consistency conditions on the path of a particle and shows that they imply Hamilton's principle in classical contexts and Schrödinger's equation in quantum mechanical contexts. Thus this paper provides a common, intuitive foundation for classical and quantum mechanics. It also provides a very new perspective on quantum mechanics.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/44577/1/10773_2005_Article_BF02114663.pd