Thursday, January 8, 2009

Models Are Models.

The Financial Modelers' Manifesto By Paul Wilmott and Emanuel Derman

Wilmott speaks up. This guy knows his financial mathematics very, very well (100s of papers and a successful vol-arb fund under his belt). " All models sweep dirt under the rug. A good model makes the absence of the dirt visible. " " I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension. "

Posted by 51ck-6-51x @ 05:32 PM (624 views)
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2 thoughts on “Models Are Models.

  • Word to the wise:

    With all mathematicalmodels is that there are certain conditions under which they dramatically fail. And relying solely on mathematics to analyse economics is foolish as economics is about the interaction of not-entirely-rational beings (humans).

    Past success on an “arb” fund is no guarantee that the models are correct or that he is a good trader. I’ll dare to say it: it could have been luck.

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  • W4u, Paul Wilmott would agree with your comment, as do I – any outcome could be luck! However, if you read the post you will probably realise why your comment was redundant.

    I wish I’d read comment 2 before it was removed!

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