Fundamental Insight

One striking example is to consider the familiar price/earnings ratio which is a commonly used indicator of share valuation. In fact it is not a ratio at all, it is a period of time - being the number of years of the current years earning per share taken to repay the share price. This allows derivation of a quantifying the pricing of earnings growth.

Mathematical Process

Although certain markets and instruments ( fixed interest, options etc) allow for definitive quantitative analysis others do not (e.g. equities, commodities etc). By using the methods derived from physics phenomenology, it is possible to derive useful quantification of a variety of financial processes (e.g. share repurchases).

Estimation and Measurement

The key process of physics is the employment of ever more efficient methods of estimation and measurement to optimise the description of real world phenomena and so enable predictions based on previously accumulated data. For instance, triangulation is a simple method of improving the accuracy of distance predications, and can be adapted to financial parameters.