Model-Free Methods in Valuation and Hedging of Derivative Securities

Were “the quants” to blame for the financial crisis of 2008? In narrow terms the answer appears to be “no” on the argument put forward by Alex Lipton, that the banks that survived were using the same models as those that failed. Be that as it may, it does seem that a contributory factor in the crisis was over-reliance on models that, in retrospect, had insufficient credibility.

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