All the Texts on Financial Engineering You Could Ever Want

Re:All the Texts on Financial Engineering You Could Ever Want by physcab on Thursday February 26, 2009 @02:43PM (#496292)

There were some excellent shows on recently. One was a documentary on PBS about the fall of Bear Sterns and then ended like an biography about Hank Paulson. It was astounding how much the personalities of the key players involved effected the outcome of the financial mess.

Then last night I watched a special on CNBC that went into a lot of depth about many of the different investment vehicles. Basically the take home was that few people understood the underlying implications of all these esoteric ways of investing in the mortgage market. Even Alan Greenspan admitted that despite a strong mathematical upbringing and access to over 100 PhD's on a daily basis, he understood little about what was going on.

It didn't take much for smart people with less than stellar integrity to game the system.

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Re:All the Texts on Financial Engineering You Could Ever Want by tmdg on Thursday February 26, 2009 @03:56PM (#496407)

I think that's a main issue. Many of these models are based on math that few people understand. I don't think it necessarily is an issue of integrity, but more an issue of traders and asset managers using the results of these mathematical models without fully understanding the implications and risks. They are, after all, probabilistic models and it seems like they weren't treated as such.

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Re:All the Texts on Financial Engineering You Could Ever Want by nazgulnarsil on Thursday February 26, 2009 @05:09PM (#496514)

exactly, people were just saying "well the model says it will work", and didn't realize that the models they were using had huge assumptions hard coded into them.

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