Doug wrote: > Models can be illuminating. But the > way they're often used in the markets > is to: 1) try to beat the market, > which is impossible over the longer > term, 2) hedge against risk, which > though it makes sense a lot of the > time, is prone to go haywire when > most needed, in a financial crisis, > and also dulls participants' sense of > risk, producing a kind of moral > hazard, and 3) to bury toxic shit in > structured securities that almost no > one but their makers understand. > Hubris and fraud cause problems.
The point in my long posting is that *all* these phenomena result from specific economic structures, not from quant modeling. Ultimately, profit making, fraud, etc. are not caused by quant modeling. We should see below (or beyond) the fetish.
