Models. Behaving. Badly.

Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life

Emanuel Derman

Recommended By

Book Synopsis

"Models. Behaving. Badly." by Emanuel Derman is a compelling exploration of the limitations and misconceptions of financial models. Derman, a renowned physicist-turned-Wall Street quant, delves into the world of mathematical models used in finance and exposes their inherent flaws.

In this thought-provoking book, Derman argues that models are imperfect representations of reality, often failing to capture the complexity and irrationality of human behavior. He reveals the dangers of blindly trusting models, recounting his personal experiences in the financial industry to illustrate the consequences of relying too heavily on these tools.

Through captivating anecdotes, Derman offers a critical analysis of the overreliance on quantitative models and explains why they often lead to disastrous outcomes. He challenges the prevailing belief that models can accurately predict the future, emphasizing the unpredictable nature of financial markets and human decision-making.

While examining the shortcomings of models, Derman also highlights the importance of their proper use. He advocates for a more nuanced understanding of models as useful tools that require constant scrutiny and adjustments. By embracing the uncertainties and limitations of models, Derman suggests that individuals can make more informed and pragmatic decisions in the realm of finance.

"Models. Behaving. Badly." compels readers to question the false sense of certainty provided by models and encourages a more thoughtful approach to financial decision-making. Derman's unique perspective and expertise make this book an essential read for anyone interested in understanding the intersection of mathematics, finance, and human behavior.

Explore More Books

See All
Livewired
The Complete Works of William Shakespeare
Raising Girls
Zen in the Art of Archery
The Inner Studio
Medieval Technology and Social Change
Thank You For Smoking
Jonathan Livingston Seagull
Savage News
Liberty Under Seige
The Breakthrough
Alpha Girls
The Great Escape
Solution Selling
The Great Transformation
The World
Oranges
Travels with Charley
That Used To Be Us
Powerful
The Unsettling of America
White Fragility
Active Inference
I, Robot
Outliers
Transmetropolitan
The House of Rothschild
Metaphors We Live By
The Secret of Fatima
The Power Broker
The Hour Between Dog and Wolf
Lean Solutions
Digital Gold
Zero to One
Long Walk to Freedom
No Filter
History and Geography of Human Genes
Meaningful Work
AI Superpowers
Howard Hughes
Free Women, Free Men
Second Foundation
Tenth of December
This Is Your Brain on Music
The Complete Calvin and Hobbes
The Back of the Napkin
Poor Numbers
Dominion
We Learn Nothing
Disruptor
Learning To Love Yourself
The Reasonableness of Christianity
The Works
Bull!
The Alchemy of Air
Hunger of Memory
Mind-Body Problem
The Pursuit of Wow!
The Strange Death Of Europe
Call Me Ted
The Middle Kingdoms
The Course of Love
The Future of Capitalism
Million Dollar Weekend
Lessons for the Living
The God That Failed
Walter Benjamin
Probability Theory
Pandaemonium
Watchmen
Finite and Infinite Games
Rick and Morty Book One
Your Dad Stole My Rake
Jack
When The Facts Change
The Prince
The Madness of Crowds
Me Talk Pretty One Day
Off The Record
The Harder You Work, The Luckier You Get
The Magic of Thinking Big
Success
The Emotion Code
How Nature Works
What's Our Problem?
A Cultural History of Physics
The Black Dahlia
The Essays of Warren Buffett
The Great Mental Models
Eating The Big Fish
Fate Is The Hunter
San Fransicko
Skunk Works
Letters To A Young Athlete
Capital Ideas
Nexus
The Utopia of Rules
The Columbian Exchange
The Graveyard Book
The Price We Pay