Derivatives and Other Mathematical Aberrations

Much ink is still to flow on the financial crisis of autumn 2008. It is difficult as yet to evaluate the extent of the damage and if we do venture some mid- or long-term forecasts in the pages of Futuribles, we do so only with the utmost caution. It seems, in fact, to have become virtually impossible to determine how things are going to develop in the financial sphere, since the players have lost all confidence in each other and, despite intervention on an unprecedented scale, the powers that be are finding it difficult to restore trust.
Analysts have remained cautious even on the deep causes of this crisis, given that those in the world of finance themselves still find it hard to understand how matters raced so far out of their control. Is mathematical modelling, which is a key element in the operation of global financial markets, in some way to blame for the current parlous situation, and, if so, to what extent? Pierre Papon inquires here into the significant role played by that modelling, demonstrating, in substance, that mathematical tools are undoubtedly very useful in the financial field, but that they have to be regularly submitted to both theoretical and practical testing.