Task:
On Models & Theories- including Spinoza's Theory of Emotions as Derivatives and the Black-Scholes Option Pricing Model
The full article is here: https://www.quantnet.com/emanuel-derman-fischer-black
Read the above short article and:
1. Given models are fundamentally metaphors and using the materials you have learned in this class, try to provide a metaphor that can become a basis for a Behavioral Finance model. For example, refer to the examples given in the article including Schopenhaue's on sleep. Sleep is the interest we have to pay on the capital which is called in at death; and the higher the rate of interest and the more regularly it is paid, the further the date of redemption is postponed.
2. You all know that the Prospect Theory has been accepted as a theory, the most solid theory yet, in the Behavioral Finance literature. Your next task in this CP is to identify a Model (as defined by Derman) and tell the class why it is a Model.