Quant Congress Europe: Quants urged to ditch equilibrium models
Equilibrium models do not represent real markets and need to be replaced with models that take explicit account of real capital flows, says Alex Langnau
Mathematical finance needs to abandon its reliance on models that assume the market is in equilibrium in the post-crisis world, according to Alex Langnau, global head of quantitative analytics at Allianz Investment Management.
Speaking at Risk's Quant Congress Europe conference in London today, Langnau said the assumption that markets were in steady equilibrium states was divorced from reality, and that an explanation of the way prices are formed by analysing capital flows is needed.
"We are
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