What's the secret formula that almost destroyed Wall Street?
by 
merry1 in a Texican COAT
ANSWERS: 4
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Greed and bonuses.
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Withhold very LARGE amounts of money. Money MUST be exchanged into something. Otherwise it is useless paperweights made out of paper.
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It's known as the Gaussian copula function... http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all The upshot was that Wall Street priced the risk of home mortgage defaults as though they were not correlated (e.g. if I default on my mortgage, that does not affect your mortgage). HOWEVER, they failed to account for events (many ARM loans adjusting at once, a slowdown of the housing market, etc.) that could cause MULTIPLE mortgages to fail at the same time. Once one of these events happened, the derivative financial instruments based on those assumptions "blew up". . . .
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I've heard that standard electronics formulas are equally applicable to societal/economic interactions. Wish I knew which variables were which...
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