The Financial Modeler’s Manifesto
We start our participation in this blog endorsing The Financial Modeler’s 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.
This Manifesto was proposed by Emanuel Derman and Paul Wilmott in January, 2009 as a response to the subprime mortgage crisis. Emanuel Derman is co-author of the model Black Derman Toy (BDT) and Paul Wilmott had written many books about quantitative finance.
Although the Manifesto is mainly focus to Quants it would also include Academics and Practitioners. For well known authors as Espen Gaarder Haug and Nassim Taleb (Option Traders Use (very) Sophisticated Heuristics, Never the Black–Scholes–Merton Formula, Feb. 2009), Practitioners generally are involved in option hedging, Quants writes pricing software and Academics provide consulting advice. While more implied persons endorse these proposals, less probable it will be that the mistakes of the past repeat again.
The full text of the Manifesto is available in: