Stochastic models: The need for greater transparency

Stochastic models are widely used for many purposes and, in particular, are highly effective as a means of illustrating the trade-off between investment risk and reward. However, for the most part, they remain a mystery. Their workings are opaque. They are "black boxes" which users are asked to take on trust. Generally, users are provided with so little information that they should probably question why they believe the output from stochastic models and why they are basing important financial decisions on it.   Unique advantages The reason for using stochastic models and their...