Usually the physics guys are just doing trading problems. Looking at the greeks and figuring out new ways to define a product. Like our current mortgage problem. What started out at the beginning of Clinton, (where did you think he got that money for the debt?) of plain securitization of the S&L crap, got differentiated, until we have no idea who owns a mortgage of what part of that mortgage. Or how many derivatives there are off that mortgage.
Now, they look for ways to create new products off of anything. Weather, etc. So we are talking about new ways to trade the same old, same old.
That is what they use math or physics guys for. They have to figure out a new derivative, then test it in models.
But you can go back to simple 1980s option arbitrage for the average 10 year old that starts calculus.
Ren
