Informative & Fun: James Owen Weatherall's Physics Of Wall Street Is A Hit
What's important to note, however, is that these models—mathematical, economic, or science-based—are not fool-proof. The Telegraph review makes note of Weatherall's keen perception of this important fact—that models of anything are approximations and must be treated as such. As Weatherall explains in an opinion piece in The Financial Times, investors blamed the math behind a portfolio insurance model for major market crashes. However, he is quick to note that blaming math models is an easy way out. "The trouble with [mathematical] models arises not because they can sometimes fail but because they are often built in ways that force us to trust them implicitly," he says. You should use these models—such as the Black-Scholes model associated with portfolio insurance—as a tool in your strategy. But, Weatherall warns, it should never be the whole story. As these models were designed to operate on normal trading scenarios, should a market go haywire—you need to be prepared with other strategies to prevent a massive crash.
In his book and his captivating talks, Weatherall provides an accessible account of the forces that shapes today's financial markets. He also presents a unique perspective on the way these markets operate today, and uncovers the intriguing connection between physics and Wall Street stock markets. With a knack for making the complex superbly comprehensible, Weatherall (a physicist, philosopher, and mathematician) shows us how we can use these new discoveries to strengthen our economic models and stabilize Wall Street.