The Emergence of Econophysics: A New Approach in Modern Financial Theory

Abstract

Financial economics and mathematical finance are the two traditional scientific disciplines that constitute modern financial theory. Although they still largely dominate modern financial theory, in the past few years a new “player” has increasingly been making itself felt and could lead to a rethinking of some of the theoretical foundations of modern financial theory. This new player is econophysics. Econophysics is a very recent movement that is beginning to interest increasing numbers of financial practitioners. To date, no history of econophysics has been produced. This article aims at filling this gap. It analyzes the theoretical foundations of econophysics and their connections with the history of financial economics. It also explores the reasons underlying the emergence of econophysics and explains how econophysics has become the third component of modern financial theory.