The Zen of Modeling

Risk modeling is as much art as it is science

The Zen of Modeling aims to capture the struggle for risk modeling beauty

1. An undocumented risk model is only a computer program
2. A risk model that cannot be programmed is only a concept
3. A risk model only comes to life with empirical validation
4. Correct implementation of an imperfect model is better than wrong implementation of a perfect model
5. In complex systems there is always more than one path to a risk model
6. There are no persistently true models but there are many persistently wrong models
7. Correlation is imperfectly correlated with causation
8. Nirvana is the simplest model that is fit for purpose
9. Hierarchical systems lead to hierarchical models. Uncertainty is highest at the top
10. Model assumptions are more vulnerable than model structure
11. Building risk models is easy, managing model risk is not
12. Models inherit their nature from their creators, but nurture from their use environment
13. Models don’t speak people’s languages. It is the responsibility of the modeler to translate to an understandable idiom
14. People don’t care about models, only about model outcomes. It is the responsibility of the modeler to be responsible.
15. Models closed in black boxes perish. Models live a healthy life when open and free.

Update May 2017: The Zen of Modeling has also been integrated into the Open Risk Manual to enable easier linking to the knowledge based developed there.