Taking Risk Bonus: Part two of our interview with "My Life as a Quant" author Emanuel Derman

The latest in our podcast series features Emanuel Derman, author of My Life As a Quant and formerly the head of the Quantitative Risk Strategies group at Goldman Sachs. In part two, Derman discusses common modeling misconceptions that he encountered during his time in industry, as well as lessons learned about the human element in financial modeling.

Derman addresses the difficulty of creating models from the standpoint that you cannot model the complexity of the real world. He discusses how, due to complexity, it can be best to use a variety of models rather than depend upon a single one:

The world is much more complicated than the model…to shoehorn the world into the model you have to get rid of a lot of things. I think the thing is actually to use a whole bunch of models, even to value the same product....There are at least three or four different ways you could model the same effect…all of the models are different and there isn’t really one true one.

Derman also talks about his time at Goldman Sachs, from the context of what he believes were the greatest lessons learned and the best practices he followed in his work there.

To hear more from Emanuel Derman, listen to our entire interview on iTunes. You can also listen to the full audio online, or read a transcript of the interview.

Did you miss part one?