My Life as a Quant

Why Physicists Go to Wall Street

Physics is perhaps the most demanding, most revealing science. The nature of gravity, of radio waves, of electricity and magnetism is not self-evident. Diligent physicists revealed it. The modern mystique of physics reached its apogee with Einstein’s intuitive experiments. But how and why did physics make its way to Wall Street? Finance has little in common with electricity, light or other forces of nature, which are what they are regardless of what people think of them. But finance is what it is only because - and as a consequence of - how people think of it. Little about money and finance is immutable. Yet, in recent years, physics has become an integral part of the financial world. More surprisingly, the study of financial economics has become part of the world of physics.

Wall Street firms learned to court physicists because these scientists deal with change over time, a key factor in the markets. Physicists measure change in extremely sophisticated ways. This ability became important to financiers when the stable and highly regulated post-WWII economic order broke down. Only physicists had the mathematical tools and modeling expertise...