What was the cause of the recent global financial meltdown? Big banks, greedy and stupid homeowners, Fannie Mae and Freddie Mac, investors, credit agencies, regulators, politicians?
Andrew W. Lo, director of the Massachusetts Institute of Technology Laboratory for Financial Engineering and affiliated with the Sloan School of Management, speaking at the National Science Foundation, says there is no one smoking gun on which to place the blame. In this lecture, Lo focuses on the role of the quants (or models) and makes the distinction of models and mania in trying to understand the ultimate sources of this crisis.
You will learn the arguments for and against the claim that complex financial securities and the mathematical models used to manage them should take the blame. Was it systematically programmed or just human nature? Is there anything we can do to stop financial crises in the future? Watch this fascinating to find out.
Don’t skip watching this if you think you’ll need to understand mathematics. Lo makes it all very easy to understand by replacing the elements of Collateralized Debt Obligations (CDO’s) with simple IOU’s in his presentation.
October 10, 2009Kill the Quants? Are Mathematical Models the Cause for Financial Crisis in the Global Economy?,