{"id":2592,"date":"2009-02-25t09:35:11","date_gmt":"2009-02-25t14:35:11","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=2592"},"modified":"2024-11-19t21:35:00","modified_gmt":"2024-11-20t02:35:00","slug":"the-bad-math-that-killed-wall-street","status":"publish","type":"post","link":"\/\/www.g005e.com\/2009\/02\/25\/the-bad-math-that-killed-wall-street\/","title":{"rendered":"the bad math that killed wall street"},"content":{"rendered":"

here’s what sunk your 401(k).<\/strong><\/p>\n

\"http:\/\/www.wired.com\/images\/article\/magazine\/1703\/wp_quant4_f.jpg\"<\/p>\n

\n

david x. li’s gaussian copula function was first published in 2000. investors exploited it as a quick\u00e2\u20ac\u201dand fatally flawed\u00e2\u20ac\u201dway to assess mortgage risk.<\/p>\n

today, though, as dazed bankers, politicians, regulators, and investors survey the wreckage of the biggest financial meltdown since the great depression, li is probably thankful he still has a job in finance at all. not that his achievement should be dismissed. he took a notoriously tough nut\u00e2\u20ac\u201ddetermining correlation, or how seemingly disparate events are related\u00e2\u20ac\u201dand cracked it wide open with a simple and elegant mathematical formula, one that would become ubiquitous in finance worldwide.<\/p>\n

for five years, li’s formula, known as a gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. with his brilliant spark of mathematical legerdemain, li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.<\/p>\n

his method was adopted by everybody from bond investors and wall street banks to ratings agencies and regulators. and it became so deeply entrenched\u00e2\u20ac\u201dand was making people so much money\u00e2\u20ac\u201dthat warnings about its limitations were largely ignored.<\/p>\n

then the model fell apart. cracks started appearing early on, when financial markets began behaving in ways that users of li’s formula hadn’t expected. the cracks became full-fledged canyons in 2008\u00e2\u20ac\u201dwhen ruptures in the financial system’s foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.<\/p>\n

via wired<\/a>.<\/em><\/p>\n

\"\"<\/div>\n","protected":false},"excerpt":{"rendered":"

here’s what sunk your 401(k).<\/p>\n","protected":false},"author":17,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"129943,129835,129856,136485,136532,137220","_relevanssi_noindex_reason":"","footnotes":""},"categories":[5],"tags":[252],"class_list":["post-2592","post","type-post","status-publish","format-standard","hentry","category-outlook","tag-recession"],"acf":[],"yoast_head":"\nthe bad math that killed wall street - 卡塔尔世界杯常规比赛时间<\/title>\n<meta name=\"description\" content=\"actionable intelligence for tax, accounting, and financial professionals\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"\/\/www.g005e.com\/2009\/02\/25\/the-bad-math-that-killed-wall-street\/\" \/>\n<meta property=\"og:locale\" content=\"en_us\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"the bad math that killed wall street - 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