Re: [FRIAM] Greenspan - Bad data hurt Wall Street computer models - NYTimes.com

[Phil Henshaw]

Well, OK, "bad data" is a "smoking gun" for why the regulators didn't see it
coming. One question is why it looks like people are finding so very
many different "smoking guns" that show signs of having been just used to
shoot ourselves in the foot.   

 

The common thread for me is our deeply mistaken common purpose and 'standard
practice'.   Everyone's objective was to offer, promise and insure the
stability of continual multiplying returns.The big bit of "bad data"
that spoils that is that the physical system that was needed to support that
endless financial multiplication, was showing emerging diminishing returns.


 

The data was actually plentiful, though, hidden only by the people who
didn't see the question!

 

Phil Henshaw  

 

From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf
Of peter
Sent: Friday, October 24, 2008 7:20 PM
To: The Friday Morning Applied Complexity Coffee Group
Subject: [FRIAM] Greenspan - Bad data hurt Wall Street computer models -
NYTimes.com

 

http://www.nytimes.com/external/idg/2008/10/23/23idg-Greenspan-Bad.html?scp=
2
<http://www.nytimes.com/external/idg/2008/10/23/23idg-Greenspan-Bad.html?scp
=2&sq=greenspan%20tsunami%20models&st=cse>
&sq=greenspan%20tsunami%20models&st=cse

The two most fascinating paragraphs are below / its also fun to note the
federal sentencing guidelines now take into account the financial impact
amount of fraud which means our merry Quants could be doing multi lifetimes
in the pokey

But at a hearing
<http://www.idg.com/www/rd.nsf/rd?readform&u=http://oversight.house.gov/stor
y.asp?ID=2256>  held today by the House Committee on Oversight and
Government Reform, Greenspan acknowledged that the data fed into financial
systems was often a case of garbage-in, garbage-out.
Business decisions by financial services firms were based on "the best
insights of mathematicians and finance experts, supported by major advances
in computer and communications technology," Greenspan told the committee.
"The whole intellectual edifice, however, collapsed in the summer of last
year because the data inputted into the risk management models generally
covered only the past two decades a period of euphoria."
He added that if the risk models also had been built to include "historic
periods of stress, capital requirements would have been much higher and the
financial world would be in far better shape today, in my judgment."

It was unclear from Cox's testimony just what sort of regulatory changes he
was suggesting. But he said that the SEC is now engaged in "aggressive law
enforcement

-- 



Peter Baston

IDEAS

 <http://www.ideapete.com/> www.ideapete.com

 

 


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[FRIAM] Greenspan - Bad data hurt Wall Street computer models - NYTimes.com

[peter]

http://www.nytimes.com/external/idg/2008/10/23/23idg-Greenspan-Bad.html?scp=2&sq=greenspan%20tsunami%20models&st=cse

The two most fascinating paragraphs are below / its also fun to note the 
federal sentencing guidelines now take into account the financial impact 
amount of fraud which means our merry Quants could be doing multi 
lifetimes in the pokey

/
/

/But at a hearing 
 
held today by the House Committee on Oversight and Government Reform, 
Greenspan acknowledged that the data fed into financial systems was 
often a case of garbage-in, garbage-out.
Business decisions by financial services firms were based on "the best 
insights of mathematicians and finance experts, supported by major 
advances in computer and communications technology," Greenspan told the 
committee. "The whole intellectual edifice, however, collapsed in the 
summer of last year because the data inputted into the risk management 
models generally covered only the past two decades a period of euphoria."
He added that if the risk models also had been built to include 
"historic periods of stress, capital requirements would have been much 
higher and the financial world would be in far better shape today, in my 
judgment."

/

/It was unclear from Cox's testimony just what sort of regulatory 
changes he was suggesting. But he said that the SEC is now engaged in 
"aggressive law enforcement/


--

Peter Baston

*IDEAS*

/www.ideapete.com/ 





FRIAM Applied Complexity Group listserv
Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org