Documenting Assumptions and Limitations in Financial Modeling
Documenting assumptions and limitations in financial modeling is crucial for ensuring the transparency and reliability of the model's predictions. By explicitly stating the underlying assumptions and identifying potential limitations, financial professionals can build confidence in the model's results and make more informed decisions based on its output. This documentation serves as a valuable tool for both the model creators and users, enabling them to understand the model's boundaries and interpret its results with appropriate caution.
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