Model Building and Problem Solving: A Case from Libor Market Derivatives

In my paper I focus on the growth of knowledge in finance from an heuristic viewpoint and I propose the analysis of two different knowledge-advancing strategies usually adopted at the frontier of knowledge, i.e. problem-solving and model-building. I show how these two strategies, even though both effective in the short-run, nonetheless provide descriptions of the target object and which are different in their descriptive and knowledge-advancing depth. In order to do so, I propose a case study borrowed from the modelling activities in the Libor market.