Age of reason or age of procedure?

The risk management industry's increasing use of sophisticated models and technology – when coupled with poor modelling choices – can cause problems. Stephen Blyth calls for a return to to judgement and reasoning, and a halt to proceduralism.

There have been significant advances in applied quantitative finance over the past decade. A generation of PhD graduates1 – who years earlier would have headed to Los Alamos, the European Organisation for Nuclear Research (CERN) or other research institutions – have ‘delivered’ for Wall Street: for example, implementing fast accurate solutions of complex models in interest rate and credit derivatives, and developing algorithms to harness ever-increasing computer power. Indeed, the scope and

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