2019: The Year of Courage (Part A)

This year, I mustered up the courage to document the truth that, perhaps, up to 90% of formal theoretical models in Financial Economics do not, in fact, yield any credible mathematical insights, rather, merely are processes shown to provide a good fit to a story that accompanied, or perhaps better still, preceded the model.

Every Mathematician worth his or her salt knows you always can find a process that fits a story. There are constant processes (which of necessity embed fixed points), linear processes, strictly convex processes, concave processes, and strictly concave processes.

If a story precedes a model, typically it can be rationalized by a mathematical process.

Whenever a formal theoretical model produces an interior or corner analytic solution, as opposed to a process as output, a formal theoretical model always produces new insights.

This is the case, because absent parameterization of a specific and well specified mathematical space that is layered on a financial economics challenge for arrival at a Mathematical Financial Space — a mathematical space within which all of the elements in the space that admit mathematical operations have a financial economics, as opposed to a mathematical character — arrival at an interior or corner analytic…