{"id":1218,"date":"2009-03-03T21:10:10","date_gmt":"2009-03-04T02:10:10","guid":{"rendered":"http:\/\/onthe8spot.com\/?p=1218"},"modified":"2009-03-03T21:10:10","modified_gmt":"2009-03-04T02:10:10","slug":"repost-recipe-for-disaster-the-formula-that-killed-wall-street","status":"publish","type":"post","link":"http:\/\/onthe8spot.com\/index.php\/2009\/03\/03\/repost-recipe-for-disaster-the-formula-that-killed-wall-street\/","title":{"rendered":"-rePost-Recipe for Disaster: The Formula That Killed Wall Street"},"content":{"rendered":"
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\"FHM<\/a><\/dt>\n
Image by SUPERL0L0<\/a> via Flickr<\/dd>\n<\/dl>\n<\/div>\n<\/div>\n

Thanks to Paul Wilmott<\/a> for the pointer<\/a> here<\/a>. I learned a lot from this article by Felix Salmon<\/a> and its somewhat fun to read!<\/p>\n

In the world of finance, too many quants see only the numbers before them and forget about the concrete<\/a> reality the figures are supposed to represent. They think they can model<\/a> just a few years’ worth of data and come up with probabilities<\/a> for things that may happen only once every 10,000 years. Then people invest on the basis of those probabilities, without stopping to wonder whether the numbers make any sense at all.
\nAs Li himself said of his own model: “The most dangerous part is when people believe everything coming out of it.”
\nRecipe for Disaster: The Formula That Killed Wall Street<\/a>.<\/p><\/blockquote>\n

\"Reblog<\/a>