INSIGHTS: Market Crises Can the Physics of Phase Transitions and Symmetry Breaking Tell Us Anything Useful?

Vineer Bhansali

Volume 7, Number 3, Third Quarter 2009

This paper addresses aspects of the current financial market crisis by drawing analogies from the physics of phase transitions. If such an analogy is indeed appropriate, then the evolving dynamics of financial markets might have characteristics that the traditional models of finance will not be able to handle, requiring the need for a fresh perspective on modeling and investment decision making.