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The great financial crisis has been marked by the failure of models both quali
tative quantitative .
2.Private profits and public losses.
3.In physics it's fairly easy to tell crackpots from the experts by the content
of their writings,without having to know their academic pedigrees.In finance it'
s not easy at all.
4.Three distinct ways of understanding the world: theories,models and intuition.
5.Theories and models are attempts to eliminate time and it's consequences, to m
ake the world invariant, so that present and future become one. We need models a
nd theories because of time.
6.To be dissapointed therefore requires time,desire and a model.
7.The air you breathe once you grow accustomed to it has no smell at all.
8.In life there isn't such an easy resolution.One has to treat people as resposi
ble for their actions,and yet also recognize that they can't help what they do.
9.Sleep is the interest we have to pay on the capital which is called in at deat
h;and the higher the rate of interest and more regularly it is paid,the further
the date of redemption is postponed.
10.We use models for envisioning the future and influencing it.
11.As time passes possibilities narrow.
12.When you model the economy and the market you are modelling high level abstra
13.Black Scholes model-How to estimate the value of an option in terms of stock
price risk.It provide a recipe for manufacturing a call by borrowing money to bu
y the shares back; equilibrium seeking system like physics of heat diffusion; it
tells you exactly how much stock you need to replicate the option's risk at any
instant,and given the stock price what would the option cost; it translates est
imates of volatility into option prices.
14.A theory is the linkage of outer with inner.
15.There is a gap between the model and it's object of focus.
16.A model is a caricature that overemhasizes some features at the expense of th
e others.
17.Practice to the point of automation-like competence is necessary.
18.Models are simplifications and simplifications can be dangerous.
19.Ethics is a worldview than a tightly reasoned argument.
20.Three primitive senses-pain,pleasure and desire.
21.Hope is the expectation of future pleasure when the outcome is unceratin and
22.Envy is pain at another's pleasure.
23.Men are conscious of their own desire but ignorant of the causes whereby that
desire has been determined.
24.Theory is adeqaute knowledge models are inadequate.
25.Understanding the world - particulars,generalities and intuition.
26.In finance many of it's variables are human sentiments.
27.Electric charge produces divergent E fields;electric currents produce curling
b fields;time-varying E fields produce curling B fields;time varying B fields p
roduce curling E fields.
28.In physics you were playing against the GOd who does not changes rules in fin
ance you were playing against god's creature who keep changing rules.
29.Love is a derivative of pleasure.
30.Price is the cost of the security.Value is what you think it's worth.
31.Value is determined by people and people change their minds.
32.In valuing a security best start is think about the currency to use for this
33.Best estimate of value is current price.
34.We define efficient market as one in which price is within a factor of 2 of v
35.PV is ill defined and FV is uncertain.
36.Physics models begin with current state of the world and evolve it into futur
e.Financial models begin with current perception about the future and use them t
o move back into present to estimate current values.And it is humans doing the p

.Chance does not treat everyone fairly.erceiving.Dumb beta and smart alpha. you must be willing to suffer the downside.if you want to have a shot at the upsid e. 37. 38.