wilmott.com

I am reading this book and this quote is a deep thinking:
"In 2002, Montague and Berns reviewed the neurophysiological data and located a dopamine-receiving structure in the brain that seemed to translate reward response into neural activity in a manner eerily reminiscent of the famous Black-Scholes/Merton option pricing formula.""
"Did Homo sapiens already have the neurological equivalent of an option-pricing calculator in its head?"

Lo, Andrew W.. Adaptive Markets: Financial Evolution at the Speed of Thought (pp. 97-98). (Function). Kindle Edition. 

Fascinating hypothesis, but I’m sceptical about the level of rationality in human risk estimation (and I think it’s our statistical survival fitness, but it’s a different story). Look at various gambling biases, herd behaviours, emotional decisions or ego trips. So maybe our brain applies at best the BS formula wilh some Choquet probabilities.

But it’s definitely mind opening to think about it in the way the article presents.

I am reading this book and this quote is a deep thinking:
"In 2002, Montague and Berns reviewed the neurophysiological data and located a dopamine-receiving structure in the brain that seemed to translate reward response into neural activity in a manner eerily reminiscent of the famous Black-Scholes/Merton option pricing formula.""
"Did Homo sapiens already have the neurological equivalent of an option-pricing calculator in its head?"

Lo, Andrew W.. Adaptive Markets: Financial Evolution at the Speed of Thought (pp. 97-98). (Function). Kindle Edition. 

A very good book and so a few directions you might be interested in.

That paper by Montague and Berns is available online via Open Access:

Neural economics and the biological substrates of valuation

M&B full text (test) not sure if this will open, but you can get it via the link above.

Also, some years ago, there was a discussion here about risk and testosterone; a paper cited in that conversation was Coates and Herbert:

PNAS: Endogenous steroids and financial risk taking on a London trading floor

Endogenous steroids and financial risk taking on a London trading floor (2007) (pdf if it works)

In the Lo book, there are many papers cited and it is encouraging to see how much scientific research has become Open Access over the years.

Finally, you may be well aware, but the Santa Fe Institute has many lectures and resources on Complexity Theory:

Santa Fe Institute

Of the people who have worked on economics and financial markets, Doyne Farmer is noteworthy.

Doyne Farmer - SFI page

He has a new book that came out last spring: Making Sense of Chaos: A Better Economics for a Better World

You can catch lectures by him (and Andrew Lo) on YouTube, of course - pick and choose. They are often conversations or presentations that take a little while to warm up, but are quite good if you have an hour or two to spare.

Doyne has spoken at CQF events as well in the past few years.  I believe if you are a member of the CQF Institute, there might be access to recordings, but I'm not sure. Perhaps Paul can weigh in on how that works.

Thanks for bringing up an interesting subject and happy reading!

Thank you . 

"Emotion is a tool for improving the efficiency with which animals—including humans—learn from their environment and their past. We’re more efficient learners with emotions than without."

Lo, Andrew W.. Adaptive Markets: Financial Evolution at the Speed of Thought (p. 103). (Function). Kindle Edition. 

Doyne has spoken at CQF events as well in the past few years.  I believe if you are a member of the CQF Institute, there might be access to recordings, but I'm not sure. Perhaps Paul can weigh in on how that works.

From Randeep at the CQFi:

"We regularly swap the videos available to the latest CQFI talks and conferences.  We have been doing this for a while now, there is one there at the moment which is a panel discussion: Energy Options, Volatility, and Energy Transition with Dr. Ilia Bouchouev, Professor Doyne Farmer, and Professor Espen Haug"

Very nice - thank you Paul and Randeep.

I put together a little list of reading based in part on the References from Lo's book and also from my library.  This focuses on the economic and financial side, rather than the neuroscience, and some of the better, but mainstream financial press, rather than all of the papers he cites. However, I'm also including a link to an interesting paper that analyzes the quant meltdown of August 2007.  Seems like a long time ago now!

Finally, more on the Santa Fe Institute for any of you who are interested, they do have lectures open to the public,  as well as the "Complexity Explorer" program. I got involved with the CE program around 2021-2 (perfect time for immersion in such ideas) and it is worth the nominal fee ($500 or so?). I think some of you here would enjoy debating the ideas and methods presented there.

Last, but not least, Ergodicity Economics is a newer initiative, affiliated with the London Mathematical Lab.  Great people, interesting events. 

**
From the References in Lo's Adaptive Markets book:

Beinhocker, E. 2006. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Harvard Business School Press

Reinhart, C. M., and K. S. Rogoff 2009. This Time Is Different: Eight Centuries of Financial Folly. Princeton University Press
 
Soros, G. 1987. The Alchemy of Finance: Reading the Mind of the Market. Simon & Schuster
 
Von Neumann, J. and O. Morgenstern 1944. Theory of Games and Economic Behavior. Princeton University Press

BTW - he cites the Coates and Herbert paper, which is why I remembered it.
 
From my library:
 
Brown, A. 2012. Red-Blooded Risk: A Secret History of Wall Street. Wiley
 
Dalio, R. 2021. Principles for Dealing with The Changing World Order: Why Nations Succeed and Fail. Avid Reader Press
 
Das, S. 2011. Extreme Money: Masters of the Universe and the Cult of Risk. Financial Times Press
 
El-Erian, M. 2008. When Markets Collide: Investment Strategies for the Age of Global Economic Change. McGraw Hill
 
Ferguson, N. 2008. The Ascent of Money: A Financial History of the World. Penguin Books
 
Sornette, D. 2003. When Stock Markets Crash: Critical Events in Complex Financial Systems. Princeton University Press
 
Warsh, D. 2006. Knowledge and the Wealth of Nations: A Story of Economic Discovery. W. W. Norton & Company
 
Link to Khandani and Lo, What Happened to the Quants in August 2007?: Evidence from Factors and Transactions Data https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1288988
 
Santa Fe Institute – Complexity Explorer
https://www.santafe.edu/engage/learn/complexity-explorer
 
Ergodicity Economics
https://ergodicityeconomics.com/ with ties to the London Mathematical Laboratory https://lml.org.uk/