What Math and Physics Can Do for New Financial Thinking

Between the mathematics Wednesday and the physics Friday, I have an easy part today. This is a link worthy of your attention: Eric Weinstein: What Math and Physics Can Do for New Economic Thinking - In my title I have replaced economy by finance.

Not surprisingly the interview is about the great financial crisis of 2008 and about the catastrophic misuse of sophisticated models (they fell into the hands of people who did not understand them).
I wrote about this in When Three Rights Make A Wrong - about innovation risk or even model abuse. Knowingly or not - I am not going to touch the ethical or legal aspects here, but the traps.

They start in the declaration phase, when transforming textual description into models and end at the result interpretation. In the middle we have the operational traps. We want to elucidate those problem solving steps in quant finance. With the UnRisk Academy, the book, the mathematics and physics posts here, the UnRisk magazine to come in April-14, and live workouts.

The solution is not to give up on models - they must become better. We will continued assess their fitness for purpose and perfect their algorithmic representation. We constantly ask the key question: what is the use of more complicated models, if their additional information get lost in the numerical jungle?