Influence of Mathematical Models in Finance on Practice: Past, Present, and Future*

The mathematics of finance contain some of the most beautifut applications of probabitity and optimization theory. Yet despite its seemingly abstruse mathematics, finance theory over the tast two decades has found its way into the mainstream of finance practice. Today much of the applied financial research on the use of mathematical models tatces place within financial institutions. It was not always thus. The scientific breakthroughs in financial modeling both shaped and were shaped by the extraordinary fiow of financial innovation that coincided with revolutionary changes in the structure of world financial martcets and institutions during the past two decades. The paper covers that development with a focus on the future role of mathematical models in finance practice.