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Financial Models and Society

Villains or Scapegoats? Ekaterina Svetlova, University of Leicester, UK
This innovative book employs the social studies of finance approach which aims to enhance the dialogue between finance and sociology by addressing the blind spots of economic and financial theories. In so doing, it challenges the accusations made towards financial models in the aftermath of the last economic crisis and argues that they cannot be condemned indiscriminately. Their influence on markets and society is not straightforward, but determined by the many ways in which models are created and then used. Ekaterina Svetlova analyses the various patterns of the application of models in asset management, risk management and financial engineering to demonstrate that their power is far more fragile than widespread criticism would indicate.
Extent: c 224 pp
Hardback Price: $120.00 Web: $108.00
Publication Date: February 2018
ISBN: 978 1 78471 001 9
Availability: Not yet published
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  • eISBN: 978 1 78471 002 6

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  • Economics and Finance
  • Behavioural and Experimental Economics
  • Financial Economics and Regulation
  • Social Policy and Sociology
  • Sociology and Sociological Theory
This innovative book employs the social studies of finance approach, which aims to enhance the dialogue between finance and sociology by addressing the blind spots of economic and financial theories. In so doing, it challenges the accusations made towards financial models in the aftermath of the last economic crisis and argues that they cannot be condemned indiscriminately. Their influence on markets and society is not straightforward, but determined by the many ways in which models are created and then used. Ekaterina Svetlova analyses the various patterns of the application of models in asset management, risk management and financial engineering to demonstrate that their power is far more fragile than widespread criticism would indicate.

This unique and stimulating book furthers our understanding of the influence of financial models on markets and society more broadly. It will be of value to academics in the social studies of finance, economic sociology, philosophy of economics and political economy. It will also useful to practitioners who design and apply models within financial markets, regulators and policy-makers involved in the stability of financial markets, as well as any readers with a general interest in these areas.
‘Svetlova’s book is essential reading for anyone – scholars and practitioners alike – who truly want to understand how financial models shape modern financial markets. Her brilliant starting point– that markets function remarkably well despite widespread adoption of models that are necessarily limited – sets the stage for her key insight: that models are not followed blindly but wielded judiciously by savvy practitioners who collectively create a “culture of model use” that makes the otherwise incalculable “investable”.’
– Ezra Zuckerman Sivan, MIT Sloan School of Management, US

‘This book addresses the topical, but relatively untouched issue of the cultures in which financial models are used. Following a thorough analysis of empirical cases of the use of models in financial institutions, the author offers an important innovation by enriching the meanings assigned to the notion of ignorance. Readers in diverse disciplines, from finance, through sociology, social psychology and regulation studies will find this book relevant and illuminating.’
– Yuval Millo, University of Warwick, UK

‘Few issues are more important, and more often misunderstood, than the role of quantitative models in financial markets. Svetlova’s calm, balanced, and — above all — well-informed analysis of this issue will be highly influential.’
– Donald MacKenzie, The University of Edinburgh, UK
Contents: 1. Introduction 2. Models in finance: General considerations 3. From representation to performativity and beyond 4. Financial models in decision-making 5. Models in “decision-selling” 6. Conclusions and discussion References Index