14 Pages Posted: 22 Nov 2010 Last revised: 6 Dec 2010
Date Written: November 22, 2010
Theories deal with the world on its own terms, absolutely. Models are metaphors, relative descriptions of the object of their attention that compare it to something similar already better understood via theories. Models are reductions in dimensionality that always simplify and sweep dirt under the rug. Theories tell you what something is. Models tell you merely what something is partially like.
Keywords: financial models, theories, valuation, pricing
JEL Classification: G00, G12, G13
Suggested Citation: Suggested Citation