Ontogeny recapitulates phylogeny March 4, 2014 at 12:50 pm
Ontogeny recapitulates phylogeny, or ORP, was a hypothesis in evolutionary biology whereby it was conjectured that an organism’s development (ontogeny) will take it through each of the adult stages of its evolutionary history (phylogeny). The word `recapitulates’ is important: this isn’t a strict repeat, and it can include secondary development, variation, even omission (think Beethoven Op. 31 No 2 or the Brahms Piano Quintet). Thus we are not saying that from egg to chicken we get a fish, a lizard-like reptile and an ancestral bird; merely that there may be echoes of one or more of these in a chick.
Noahpinion recently pointed out that ORP is more common in model building than in infant development. He was talking about macro, but it’s a sensible strategy in finance too: you start off with a correlated random walk model, for instance, then change the copula or add stochastic volatility or something. That made me think about the design risk of this process: if you want to hack up a Heston model in a hurry, starting from a quanto model probably isn’t a bad idea; but if you want to do something more novel, then it can lead you down a blind alley. There’s also the efficiency issue: something designed from scratch is likely to be much more efficient than code that has been modified from an earlier application.
When model building, then, think before you modify. Evolution has dead ends too, and you don’t want a model that is the equivalent of a bird with teeth.