In the aftermath of the financial crisis of 2007-2009, many statistical models based on Gaussian bell curves
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In the aftermath of the financial crisis of 2007-2009, many statistical models based on Gaussian bell curves to calculate probabilities, especially defaults, came under intense criticism. Many economists and financial experts have called for the revision of the use of Gaussian models, as the events of 2008 had a probability of happening only once in 10,000 years.
Write a critical essay (1500 words) comparing the arguments for and against the use of Gaussian models in finance, especially in regards to probabilities of defaults and volatility.
Related Book For
Money Banking and Financial Markets
ISBN: 978-0078021749
4th edition
Authors: Stephen Cecchetti, Kermit Schoenholtz
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