tag:blogger.com,1999:blog-3046071861494986299.post165698190943437682..comments2023-08-26T05:08:54.898-07:00Comments on Magic, maths and money: The mathematical equation that caused the banks to crash (?!?)Tim Johnsonhttp://www.blogger.com/profile/06952723922503939504noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-3046071861494986299.post-48853079355911913942013-08-06T15:58:14.107-07:002013-08-06T15:58:14.107-07:00I also saw this BBC documentary on LTCM which thro...I also saw this BBC documentary on LTCM which throws a bit of light on how BS model and its variations were misused and abused by traders. I think what that documentary was trying to say was that Dynamic Hedging was responsible for he crash ! also they gave examples how Black Scholes was used to hedge and price non-equity claims which was certainly neither suitable nor recommended by original model itself. <br />However I agree that BS model was not direclty linked to the market crash we saw back in 2007. That had got to do more the US Sub prime credit market which later turned into a global credit crises. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3046071861494986299.post-62377657758961850762012-02-21T13:09:44.775-08:002012-02-21T13:09:44.775-08:00Fortunately, dynamical systems theory is a wide fi...Fortunately, dynamical systems theory is a wide field and the harm in suggesting it may have useful application to finance might only be in the failed tenure attempts of a small number of academics. My sense is that the benefits of dynamical systems and "chaos" will largely be the descriptive qualities journalists will use to communicate with an interested public. It probably won't catch on like catastrophe theory did in the 1970's.<br /><br />In the near term, mathematicians will continue to have at least one influence on economics and finance, in that they can debunk pseudo-mathematical arguments presented in the marketing of new but silly investing ideas. I wish they had spoken up sooner about Gaussian copulas back around 2005!Richardhttps://www.blogger.com/profile/09996616015558672676noreply@blogger.comtag:blogger.com,1999:blog-3046071861494986299.post-3889163812370180232012-02-19T13:17:03.487-08:002012-02-19T13:17:03.487-08:00Keynesianism was the cause. A recession is natural...Keynesianism was the cause. A recession is natural, due to money = debt since 1600. Keynesianism disturbs the natural occurring recessions, leading to ripples that lead to bigger and bigger super recessions. Basically Keynesianism switches dozens of naturally occurring smaller recession cycles for delayed bigger ones eventually leading to a very delayed big one (Second Great Depression), that is about to come. What pattern is better for us? Time will tell. Warren Buffett and baby-boomers don't mind, keynesianism worked out well for them in the end.John Short ad sinorazumhttps://www.blogger.com/profile/06294518362102475267noreply@blogger.comtag:blogger.com,1999:blog-3046071861494986299.post-13444755828269556852012-02-17T06:22:51.972-08:002012-02-17T06:22:51.972-08:00Simply put in, writers (even if highly-recognized ...Simply put in, writers (even if highly-recognized mathematicians) and journalists need to simplify in order to stupefy and sell.<br />Simplification does not require or imply correctness, though!<br />This approach is as wrong as saying that the Schroedinger Eq lead to the Atomic bomb, or that a logistic function leads to birth control....Physikuzhttps://www.blogger.com/profile/04406017416506710674noreply@blogger.com