Validity Of Quantitative Models In Financial Industryin The Context Of The Financial Crisis

Slobodan Lakic and Aleksandar Zivkovic

Montenegrin Journal of Economics, 2010, vol. 6, issue 12, 77-91

Abstract: The consensus reached at the level of academic financial economists on efficient markets and rational behaviour of investors pointed, at least in the context of the current financial crisis, to the need of differentiating between dogma and facts. The breakdown of 'financialisation' is, among other things, a consequence of an absence of scientific insight into the behavior of investors and good knowledge of the functioning of institutions on the market. It is obvious that perfect markets represent a construction of economic theory. The principles of crucial mathematic theories and accounting techniques - institutionalised theory of the Nobel Prize winner, as well as its empirical test, will be the focus of analysis in this paper, starting from the hypothesis that the abstract character of proofs was the result of arbitrary assumptions and mathematical models.

Date: 2010
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