I became a big fan of the Monte Carlo method when I watched an economist torture a problem until he found a way to turn it into the heat equation, a differential equation he knew how to solve. He made so many bogus assumptions that the answer was pretty much worthless. But, hey, he could claim he had a closed form solution!
No. It was another bit of social science. I have other problems with Black-Scholes, but they're not as strong. One friend told me that for all of the problems, it offered a relatively neutral way to arb between different strike prices of the same security.
