Financial Modelers' Manifesto

Paul Wilmott and Emanuel Derman have come out with a Financial Modelers' Manifesto.
Financial Modelers' Manifesto document
This Financial Modelers' Manifesto is a great read, especially for investors who sometimes place too much confidence in using model to evaluate financial assets and predict financial outcomes.

Excerpt from the Manifesto:

The Modelers' Hippocratic Oath
~ I will remember that I didn't make the world, and it doesn't satisfy my equations.
~ Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.
~ I will never sacrifice reality for elegance without explaining why I have done so.
~ Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.
~ I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension.


Before this Oath, there is a manifesto.
Among many things,
it talks about :
why CDO’s model went wrong; There is no right model; Examples of a good model (Black-Scholes model of options valuation); limitations of model.. etc..

Great read !

No comments:

Post a Comment

Related Posts with Thumbnails


The opinion post on this blog is personal and is not an inducement to buy or sell any investment products. The author of this blog will NOT be held responsible for any losses incurred due to the reliance on any content of this blog for investment decisions.