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Long article in Wired about the derivative formula that created these credit default swaps and other crap that helped melt down the economy.
There's an excellent reply to the article:
"Been in the biz for 25 years. ... First lesson: NEVER put money into a black box; if you don't understand it [the formula] completely, don't do it." Well, an awful lot of people did not understand it. Minor changes in the input caused huge changes in the risk factors, and it was roundly ignored.
And here we are.
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all
There's an excellent reply to the article:
"Been in the biz for 25 years. ... First lesson: NEVER put money into a black box; if you don't understand it [the formula] completely, don't do it." Well, an awful lot of people did not understand it. Minor changes in the input caused huge changes in the risk factors, and it was roundly ignored.
And here we are.
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all
