Quant Congress: Don't confuse models with reality, says Derman

Heavy criticism has been heaped on financial modelling since the beginning of the financial crisis. The Gaussian copula has been lambasted for underestimating credit tails, for instance, while the merits of using value-at-risk measures for bank risk management have also been called into question.

But the financial crisis was not purely the fault of models, said Derman. Models were ubiquitous in everyday life, he noted - right down to the simple calculation of how quickly it might take to travel t

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