Beware too much reliance on models

Wanting to know the unknowable is an integral part of our human nature. We obsessively crave certainty even when it’s clearly impossible to obtain. This is particularly true when it comes to the securities markets. After all, didn’t Wall Street hire actual “rocket scientists” and physicists such as Fischer Black to try to value options and mortgage-backed securities? Now we have a whole generation of “quants” trying to apply the ordered world of mathematics to the chaos of Wall Street.