Drawing inspiration from the works of Mathematician, Ian Stewart and his latest book title, “In pursuit of the Unknown”, we thought it would be apt to collect equations that totally revolutionized the world for what it is today.
In an interview with Professor Stewart, we realized just how valuable certain equations were. While they seem mundane and at times even dull, their true value comes to the forefront only when they are utilized in the right setting or environment. The beauty of a certain mathematical equation reveals itself when you learn how to solve them and the context within which they operate as integral parts.
Take for instance the derivative pricing equation also known as Black Scholes. Professor Stewart says it is a simple equation that was easy to understand. However, its true elegance came out when you tried using it because of the complexity of the system in which it had to be utilized. The fact that a single wrong equational use in the stock market can result in billions of dollars of loss makes equations a great idea but equally exciting too.
When people take such equations as law and build trillion dollar dreams on top of it, without properly considering the consequences, the outcome often is a crisis. The unfortunate part of such a crisis though is that they can be avoided if precautions are taking.
In his book, Professor Stewart looks at several equations that have helped shaped the current stock market, banking principles and strategies. Some are as simple as the Pythagoras theorem (yes this theorem does feature in banking circles) and some are complex to use like the Black Scholes.
You can purchase mathematician, Ian Stewart’s book here if you wish to read further and explore the deep recesses of banking and market equations.