Session 09



Finance is not a hard science. A hard science is a science with a powerful predictive capability.

Soft sciences begin with a descriptive stage, and then go on to being a toolbox of rules and applied principles. That's where Finance is.

Physics became a hard science with Descartes, Galilée and Newton, in the XVIIth century.

Medicine became a hard science with Pasteur in second half of the XIXth century.

Finance as well as Economics are still at the stage of being toolboxes. One of the problem is that they depend very much upon human psychology and in particular upon attitudes toward expectations (a phenomenon very difficult to formalize and make into a predictive theory).


What we do know : the seven most important ideas in Finance (from Brealey and Myers)


What we do not know : ten unsolved problems in Finance


For a good general presentation of the evolution of ideas in Financial theory :