A (fairly) understandable explanation of the math behind the market meltdown

This article is somewhat mathematical but I am sure it still hugely simplifies the logic that led us astray. If you are a pop-math-head like me you will find it interesting:

"For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels." (from Recipe for Disaster: The Formula that Killed Wall Street)


Posted on March 7, 2009 and filed under Life, Technology.