Topoi 40 (4):771-781 (2020)
Authors |
|
Abstract |
I examine the role that mathematics plays in understanding and modelling finance, especially stock markets, and how philosophy affects it. To this end, I explore how mathematics penetrates finance via physics, constructing a ‘financial physics’, and I outline the philosophical backgrounds of this process, in particular the ‘philosophy of equilibrium’ and that of critical points or ‘out-of-equilibrium’. I discuss the main characteristics and a few weaknesses of these mathematizations of financial systems, notably econometrics and econophysics, and I compare the two ways, top-down and bottom-up, of building mathematical approaches to finance. The top-down approach is the most used and the most conservative. I argue that it guarantees a mathematical account, but it is less effective than the more difficult bottom-up approach, which is more appropriate and which may end up without a mathematical account of financial phenomena. I then consider two important issues raised by a mathematical approach to finance, that is, the performative and the reversing side of mathematics, and an ethics of mathematics. In the first case I argue that mathematics not only can be a performative device, but it also enables ‘reversing’ dynamics, that is, a mathematical model may become not a representational tool, but a device of social engineering—a mathematical way of investigating what are the initial conditions and processes needed to obtain an intended result. In the second case I argue that this specific relation between mathematical modelling and prediction raises an ethical question in finance, namely, a responsible construction and use of the mathematical models provided by a financial physics.1.From physics to finance: the mathematical way2.Finance, mathematics and the philosophy of equilibrium3.Finance, mathematics and critical points4.A mathematical access key?5.Performativity: the mathematical forging of finance6.An Ethics of mathematics in finance.
|
Keywords | No keywords specified (fix it) |
Categories | (categorize this paper) |
Reprint years | 2021 |
ISBN(s) | |
DOI | 10.1007/s11245-020-09706-1 |
Options |
![]() ![]() ![]() |
Download options
References found in this work BETA
Models in Science.Roman Frigg & Stephan Hartmann - 2006 - In Edward N. Zalta (ed.), The Stanford Encyclopedia of Philosophy. Stanford.
Credible Worlds: The Status of Theoretical Models in Economics.Robert Sugden - 2000 - Journal of Economic Methodology 7 (1):1-31.
Rethinking Logic: Logic in Relation to Mathematics, Evolution, and Method.Carlo Cellucci - 2013 - Dordrecht, Netherland: Springer.
Essays in Positive Economics. By Henry M. Oliver, Jr. [REVIEW]Milton Friedman - 1954 - Ethics 65:71.
View all 17 references / Add more references
Citations of this work BETA
No citations found.
Similar books and articles
Essays in Mathematical Finance and in the Epistemology of Finance / Essais En Finance Mathématique Et En Epistémologie de la Finance.Xavier de Scheemaekere - unknown
Quantification Machines and Artificial Agents in Global Finance: Historical-Phenomenological Perspectives From Philosophy and Sociology of Technology and Money.Coeckelbergh Mark - 2017 - In E. Ippoliti & P. Chen (eds.), Methods and Finance: A Unifying View on Finance, Mathematics and Philosophy. Cham: Springer. pp. 169-178.
Top-Down and Bottom-Up Philosophy of Mathematics.Carlo Cellucci - 2013 - Foundations of Science 18 (1):93-106.
The Applicability of Mathematics as a Philosophical Problem.Mark Steiner - 1998 - Harvard University Press.
Philosophy of Mathematics in the Warsaw Mathematical School.Roman Murawski - 2010 - Axiomathes 20 (2-3):279-293.
Towards a Philosophy of Applied Mathematics.Christopher Pincock - 2009 - In Otávio Bueno & Øystein Linnebo (eds.), New Waves in Philosophy of Mathematics. Palgrave-Macmillan.
Realism in Mathematics.Penelope Maddy - 1990 - Oxford, England and New York, NY, USA: Oxford University Prress.
The Heuristic Function of Mathematics in Physics and Astronomy.Stojan Obradović & Slobodan Ninković - 2009 - Foundations of Science 14 (4):351-360.
Methods and Finance: A Unifying View on Finance, Mathematics and Philosophy.E. Ippoliti & P. Chen (eds.) - 2017 - Springer.
Whether philosophers need contemporary mathematics?V. A. Erovenko - 2013 - Liberal Arts in Russia 2 (6):523--530.
Research Habits in Financial Modelling: The Case of Non-Normativity of Market Returns in the 1970s and the 1980s.Boudewijn De Bruin & Christian Walter - 2017 - In Emiliano Ippoliti & Ping Chen (eds.), Methods and Finance: A Unifying View on Finance, Mathematics, and Philosophy. Cham: Springer. pp. 73-93.
Analytics
Added to PP index
2020-04-10
Total views
23 ( #492,606 of 2,506,017 )
Recent downloads (6 months)
5 ( #139,885 of 2,506,017 )
2020-04-10
Total views
23 ( #492,606 of 2,506,017 )
Recent downloads (6 months)
5 ( #139,885 of 2,506,017 )
How can I increase my downloads?
Downloads