Risking

Abstract

In the models studied in earlier chapters, we used past and present information to make predictions about the future. While these predictions are useful, we know that they are not going to be exactly correct! Why might that be? Nothing in life happens in a completely predictable way. In any modeling, there is always some uncertainty—some aspect that we cannot perfectly predict. That is partly because all models are oversimplifications, and partly because even the best model may be disturbed by some small random event (the proverbial flap of a butterfly’s wings in Brazil that sets off a tornado in Texas; see Definition 4 on page 162).