Want to understand the formula that destroyed Wall Street?
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