Finance
dS = δQ / T
dS: change in entropy of an economic system
δQ: Let δQ be an element of the value given up by the body to any banker/financier during its own changes
T: An Absolute Return value
- The increase in the return of a product is equal to the amount of return added by the underlying instrument minus the amount lost to the issuing entity. (First law)
- It is impossible to convert capital completely into value in an economic process. (Kelvin's law)
- Potential return generally cannot flow spontaneously from an instrument at lower yield to an instrument at higher yield. (Clausis statement)
- In a product, a process that occurs will tend to increase the total entropy of the aggregate capital. (Second law)
- As financial innovation approaches zero, all value-extracting processes cease and the entropy of the system approaches a minimum value. (Third law)
- Risk can neither be created nor destroyed. It can only change forms. (Conservation of probability)
- In any process in an isolated system, the total risk and return remains the same.
