Wired Editor's Algorithm of Credit Doom ; City Spy Cityspy@Standard.Co.Uk [Edition 2]
Evening Standard - London › February 12, 2009
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Summary
DIGITAL evangelist Chris Anderson, editor of American technology magazine Wired and author of The Long Tail, has an explanation for the credit crunch. Everyone knows the banks mispriced risk but Anderson is fascinated how they came to make this error.
He says the credit markets got out of control because they relied too much on a mathematical algorithm called the Gaussian copula model. A quantitive analyst, called David X Li, is credited with developing the Gaussian model to help price up collaterised debt obligations at the start of this decade. As a result, the volume of CDOs and other assetbacked mortgage securities being traded increased dramatically. And the rest, as they say, is history. Quite whether it's fair to blame Li is another matter. But Anderson says the maths "genius" has now gone to live in China.See the full content of this document
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Wired Editor's Algorithm of Credit Doom ; City Spy Cityspy@Standard.Co.Uk [Edition 2]
The editor of Wired...
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