Regensburg 2010 – wissenschaftliches Programm

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 15: Financial Markets and Risk Management I

SOE 15.4: Vortrag

Mittwoch, 24. März 2010, 17:30–18:00, H44

Macro- Econophysics: The first and second law of banking — •Jürgen Mimkes — Physics Department, Paderborn University

The first law of economics states that profits come from capital and labor. The second law confirms the existence of a production function. Both laws may be interpreted as bank rules:

1. a) The Stokes integral of the exact differential of capital is zero, capital cannot create capital. Capital can only be redistributed. b) Winning strategies of banks correspond to strategies of roulette, like doubling the stake after losing. Probability may force the player to pay his complete stock for doubling. The time for bankruptcy depends on the relation of stake and stock. In the financial world this time was 80 years, between 1929 and 2009. c) Profits can only come from long term investment in production e.g. at the stock market. d) Proper laws and tax policies will change the situation at banks and stock markets.

2. a) The production function of econophysics (entropy) is a measure of portfolio security. b) The product of returns and security is determined by the profit of the companies in the portfolio. Banks prefer the term risk, the inverse of security: high returns, high risk.