10 January, 2009

The Decalogue And Financial Modeling

Whenever I am asked what my favourite films are, I think first of The Decalogue—even though it is not one film, but a set of ten short films. But what cinema! I like it more than anything else by Krzysztof Kieslowski—and I love the Three Colours trilogy—and revisit an episode from time to time when I have just an hour to spare, and am in the mood for something sublime.

A couple of days ago a friend came visiting, and she hadn’t seen The Decalogue before. So I popped in the DVD and we watched the first episode. I must have seen it four or five times before, but every time I enjoy it as much. Having seen it, we headed off to Borivali, from where she had to catch a train to Baroda. I had estimated that an hour and a quarter of travelling time would be enough to get there at that time of the night (from Andheri)—but hadn’t taken the petrol strike into account. Naturally, there were no autos on the road, just people everywhere trying to flag them down. Oops.

We got there in the end, thanks to my legendary resourcefulness—but had we missed it, the film would have seemed ironic in that context. If you’ve seen it, you know what I mean.

And so it’s apt that I should come across this today:

The Financial Modelers’ Hippocratic Oath
by Emanuel Derman and Paul Wilmott

~ I will remember that I didn’t make the world, and it doesn’t satisfy my equations.

~ Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.

~ I will never sacrifice reality for elegance without explaining why I have done so.

~ Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.

~ I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension.

You can read their full manifesto here. (Thanks, Mohit Satyanand, for the link.)

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My statistical analysis of the Best Asian Blog category in the 2008 Weblog Awards indicates that if the trend of the last 12 hours continues, India Uncut might end up in second place. My once-healthy lead is being eaten into rapidly. The competition is on for three more days, and people are allowed to vote once every 24 hours per computer they have access to, so vote now (and again tomorrow, etc) and change the basis of my analysis. Thank you!