Wall Street Math for Engineers

March 1, 2009 at 4:49 pm | Posted in Rants, Technology | Leave a comment

I recommend this fascinating Wired article on the mathematical background that led to the current financial crisis. Although I believe that mathematics is itself an abstract intellectual construct, when it is applied without any validation or confirmation to reality (as is done in engineering, physics, and as should have been done in finance), you are asking for trouble.

The financial “engineers” performed sensitivity analysis on the Cupola function itself, to see how small changes in the input data affected the price; they saw the results, and unlike real engineers (i.e. those not asked to put on their management hat), set them aside in denial.

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