Quants...

There has been a lot of talk about Quants and financial Modeling.

There is a new book out about the Quants. I just got it in the mail.

http://www.amazon.com/Quants-Whizzes-Conquered-Street-Destroyed/dp/0307453375/ref=sr_1_1?ie=UTF8&s=books&qid=1266539953&sr=8-1

The Economist is running this story today, Its an excellent piece like all the stuff coming out of the Economist.

Number Crunchers Crunched
http://www.economist.com/specialreports/PrinterFriendly.cfm?story_id=15474075

The story had this one breathtaking graphic.



The default probabilities and correlations that were used in pricing the risk in the hundreds of billions of CDO's were so off its tragic. The Gaussian Capula function that was used to price these CDO's are still being used today in other securitized objects.

I have stated before that human behavior can not be modeled even by the smartest of people using the best computers. Its beyond the intellectual capability of man and machine combined.

http://tradersutra.blogspot.com/2009/10/kill-quants-but-dont-forget-congress.html

http://tradersutra.blogspot.com/2009/03/aig-quants.html