Modelling markets

Finance is a subject in which good modelling is vital. This entails understanding the technicalities of the markets involved, and making models of them. The most famous example is the Black-Scholes model, which has been the starting point for the subject for 30 years. However this standard model is being extended in many directions. Some of these extensions deal with the specifics of individual markets, such as fixed income products, or energy markets with their very particular behaviour. Another abandons the traditional stochastic process models, and replaces them with ideas from phsics and the new field of Complex Systems; we have an active collaboration with the econophysics group in Oxford led by Neil Johnson. A third new direction is that of behavioural finance, for which the 2002 Economics Nobel Prize was awarded, which recognises that investors do not always act as classical economic theory assumes. We are active in all these areas.

People working in this area within OCIAM are