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Explore the role of probability in finance through this Rothschild Lecture delivered by Professor Hans Follmer from Humboldt University of Berlin. Delve into the increasing importance of advanced probabilistic methods in both academic and industrial finance over recent decades. Examine the critical question of whether these methods contributed to the recent financial crisis. Focus on the pervasive issue of model uncertainty, or "Knightian uncertainty," and its implications. Discover the interplay between "historical measures" and "martingale measures" in the standard framework of Mathematical Finance. Investigate strictly path-wise arguments that eliminate probabilistic approaches entirely. Learn about the quantification of financial risk using monetary risk measures. Gain insights into systemic risk and interdisciplinary approaches to mathematical modeling in finance during this hour-long lecture from the Isaac Newton Institute for Mathematical Sciences.
