Rothschild Distinguished Visiting Fellow Lecture: Admitting Uncertainty: On the Role of Probability in Finance

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• Foellmer, H (Humboldt-Universitt zu Berlin)
• Tuesday 09 December 2014, 16:00-17:00
• Seminar Room 1, Newton Institute.

If you have a question about this talk, please contact Mustapha Amrani.

Systemic Risk: Mathematical Modelling and Interdisciplinary Approaches

Over the last decades, advanced probabilistic methods have played an increasing role in Finance, both in Academia and in the financial industry. In view of the recent financial crisis it has been asked to which extent the use of such methods has been part of the problem. We review some of the arguments and then focus on the pervasive issue of model uncertainty, or “Knightian uncertainty”. This will be illustrated by the interplay between “historical measures” and “martingale measures” in the standard framework of Mathematical Finance, by strictly path-wise arguments that eliminate probabilistic arguments altogether, and by the quantification of financial risk in terms of monetary risk measures.

This talk is part of the Isaac Newton Institute Seminar Series series.

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