Wednesday, November 26, 2008

Blame Game now it’s the Quants that did it

After the Crash: How Software Models Doomed the Markets

Quants - lapsed physicists and mathematical virtuosos were the ones who both invented these oblique securities and created software models that supposedly measured the risk a firm would incur by holding them in its portfolio. Without the formal requirement to maintain debt ceilings and capital reserves, the commission had freed these firms to police themselves using risk tools crafted by cadres of quants. ...the quant community needs to undertake a search for better models [too right!] —perhaps seeking help from behavioral economics, which studies irrationality of investors’ decision making, and from virtual market tools that use “intelligent agents” to mimic more faithfully the ups and downs of the activities of buyers and sellers.

Posted by mountain goat @ 01:28 PM (1655 views)
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3 thoughts on “Blame Game now it’s the Quants that did it

  • This is the source of the problem. Corporations dictated the quant circles to create models that support their growth objectives but these models are so complex that nobody could understood them so everyone fell into it! We are paying the price for the next 15 years now because negative growth was not part of the equation…

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  • Sad how a once great magazine has turned into a rag…

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  • All these problems are based on one assumption – independent identically distributed (i.i.d.)

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