I met with one of my professors today. For some background, he is a professor in the mathematics department who studies statistics (specifically kernel density estimation and nonparametric curve estimation). We were talking about other professor’s research, and I mentioned I was interested in stochastic calculus and mathematical finance. He looks at me and says, quietly so no one else can here, “It doesn’t work. You can’t accurately model financial behavior; it just doesn’t work.”
This really got me thinking. Why did he say this? Surely stochastic processes, like Brownian motion, play a heavy role in mathematical finance. Unfortunately, it made me second guess studying anything like this. Any thoughts?
Thanks in advance.