Only a crazy person would have a mathematical model just running – (and) you go off fishing.
Robert C. Merton
The eruption of the financial crisis has been accompanied by a chorus of criticism aimed at the financial products deemed to have created the problems. Criticism has been levelled even at financial innovation itself. Disputes about the benefits of innovation in finance are not new. The new is always suspect, and easy to blame.
To say anything meaningful about financial innovation, it is at least necessary to start with an idea of what financial services provide to an economy. Robert Merton, one of the most important financial innovators of the past generation, identified six main ...