Physics and Finance

5 credits

Syllabus, Master's level, 1FA361

A revised version of the syllabus is available.
Code
1FA361
Education cycle
Second cycle
Main field(s) of study and in-depth level
Mathematics A1N, Physics A1N
Grading system
Fail (U), Pass (3), Pass with credit (4), Pass with distinction (5)
Finalised by
The Faculty Board of Science and Technology, 8 March 2018
Responsible department
Department of Physics and Astronomy

Entry requirements

120 credits in science/engineering including Mechanics III and Quantum physics

Learning outcomes

After completing the course the student should be able to

  • apply concepts and methods from physics to problems in finance,
  • solve constrained optimization problems,
  • find optimal controllers for simple dynamical systems and objectives,
  • formulate stochastic differential equations and solve them using a number of methods,
  • asses the limit of validity of commonly used models based on Gaussian white noise,
  • analyse time series data and make statistical forecasts.

Content

Portfolio theory and constrained optimization. Relations between stochastic differential equations, Fokker-Planck, and Black-Scholes equation. Regression models, time series and forecasting. Bubbles, crashes, fat-tails and Levy-stable distributions. Path integrals in physics and finance. Introductory optimal control theory.

Instruction

Lectures

Assessment

Hand-in assignments.

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