CSCI 102: Introduction to Computational Modeling

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CSCI 102 Introduction to Computational Modeling

• Chapter 1 The Modeling Process

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• I am never content until I have constructed
  mechanical model of the subject I am studying. If
  I succeed in making one, I understand otherwise
  I do not.

I often say that when you can measure what you
are speaking about, and express it in numbers,
you know something about it but when you cannot
measure it, when you cannot express it in
numbers, your knowledge is of a meagre and
unsatisfactory kind it may be the beginning of
knowledge, but you have scarcely in your thoughts
advanced to the state of Science, whatever the
matter may be.
William Thomson, Lord Kelvin (1824 - 1907)
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• Radio has no future.

William Thomson, Lord Kelvin (1824 - 1907)
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• All models are wrong, but some models are useful

George Box (1919 - )
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What is Wrong with this Model? What is Useful
About It?
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Case Study Value at Risk

• 1 VaR of 1M On a given day, there is a 1
  chance that the value of your stock portfolio
  will fall by 1M.
• Lets build a model.

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Black Swan!

• To me, VaR is charlatanism because it tries to
  estimate something that is not scientifically
  possible to estimate, namely the risks of rare
  events.
• - Nassim Taleb

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