So where were the quants?
(Credit: Fred R. Conrad/The New York Times)
That's what has been running through my head as I watch some of the oldest and seemingly best-run firms on Wall Street implode because of what turned out to be really bad bets on mortgage securities.
Before I started covering the Internet in 1997, I spent 13 years covering trading and finance. I covered my share of trading disasters from junk bonds, mortgage securities and the financial blank canvas known as derivatives. And I got to know bunch of quantitative analysts ("quants"): mathematicians, computer scientists and economists who were working on Wall Street to develop the art and science of risk management.
They were developing systems that would comb through all of a firm's positions, analyze everything that might go wrong and estimate how much it might lose on a really bad day.
We've had some bad days lately, and it turns out Bear Stearns, Lehman Brothers and maybe some others bet far too much. Their quants didn't save them.
I called some old timers in the risk-management world to see what went wrong.
(...)
in http://bits.blogs.nytimes.com/2008/09/18/how-wall-streets-quants-lied-to-their-computers/?pagemode=print (http://bits.blogs.nytimes.com/2008/09/18/how-wall-streets-quants-lied-to-their-computers/?pagemode=print)