Thu 1 Jan 2009
Paul Wilmott is a pretty big name amongst Quants, and it is amusing to read his blog. He recently wrote a little blurb on economic models, and the economists who should give back their Nobel Prizes… The problem is economists who trick themselves into the mistake of adding complexity to a model in the theory that it improves accuracy…
We don?t need more complex economics models. Nor do we need that fourteenth stochastic variable in finance. We need simplicity and robustness. We need to accept that the models of human behaviour will never be perfect. We need to accept all that, and then build in a nice safety margin in our forecasts, prices and measures of risk.