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The Zen of Modelling

Risk modeling is as much art as it is science

The Zen of Modeling aims to capture the struggle for risk modelling beauty

  • An undocumented risk model is only a computer program
  • A risk model that cannot be programmed is only a concept
  • A risk model only comes to life with empirical validation
  • Correct implementation of an imperfect model is better than wrong implementation of a perfect model
  • In complex systems there is always more than one path to a risk model
  • There are no persistently true models but there are many persistently wrong models
  • Correlation is imperfectly correlated with causation
  • Nirvana is the simplest model that is fit for purpose
  • Hierarchical systems lead to hierarchical models. Uncertainty is highest at the top
  • Model assumptions are more vulnerable than model structure
  • Building risk models is easy, managing model risk is not
  • Models inherit their nature from their creators, but nurture from their use environment
  • Models don't speak people's languages. It is the responsibility of the modeler to translate to an understandable idiom
  • People don't care about models, only about model outcomes. It is the responsibility of the modeler to be responsible
  • Models closed in black boxes perish. Models live a healthy life when open and free

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