Random Thoughts

this post is about credit derivatives, a topic which my FORM professor has been teaching for the past 3 classes. he is teaching a method of valueing credit default swaps which is based on a theoretical method, and quite frankly, which is used by nobody. all the major investment banks use simulation to value those products, because the theoretical models take many assumptions which are not applicable in real life.

the question is, why the hell is the professor teaching those concepts which he also knows very well that his students are not going to use when they go out in the industry? in my opinion, spending time on those concepts is nothing less than wasting time, both for the professor and his students. we could have spent that time more fruitfully reading about some simulation techniques which are actually used in the industry.

just imagine if the prof decides to ask a question based on these models in the exam. why should a student suffer if he knows that the model being taught by the prof is all worthless? it is tantamount to making a student believe that the earth is flat just because by believing so, he will get good marks in the exam. it is very, very detrimental to the intellectual progress of the students. for i remember, that Einstein had once said, that the biggest challenge in front of human being is not to do big, but to dream big. if one tries to conform others' dreams at this early stage itself, how can one expect them to bring their innovative ideas to fruit in this real world ?