Models, Theories and Derman

I’ve started to ready Emanuel Derman’s “Models.Behaving.Badly.” The distinction that Emanuel is attempting to develop in the first chapters, that is between a model and a theory, strikes me as the difference between a demonstrative science, that is a science that seeks knowledge through causes, and an intermediate science that typically proceeds along the lines of analogy. Particularly, mathematical physics and quantitative finance are intermediate sciences, that is they are a mixture of a demonstrative science (natural philosophy and economics) and mathematics.

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