Tag Archives: model error

Exponential decay models

All models are wrong, some models are more wrong than others. The streetlight model Exponential decay models are quite common.  But why? One reason a model might be popular is that it contains a reasonable approximation to the mechanism that generates the data.  That is seriously unlikely in this case. When it is dark and … Continue reading

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Highlights of the London Quant Group Technology Day

A summary of the high points of the day. Factor models and optimization Three of the talks formed a theme: factor models of variance — especially as applied to portfolio optimization. The basic problem is that variance matrices are created with error.  A variance matrix is a key input to (some) portfolio optimizations.  The optimizer … Continue reading

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