About the Book

Now in paperback, "a compelling, accessible, and provocative piece of work that forces us to question many of our assumptions" (Gillian Tett, author of "Fool's Gold").Emanuel Derman was one of the financial engineers whose mathematical models became crucial for Wall Street. The reliance investors put on such quantitative analysis was catastrophic for the economy, setting off the ongoing string of financial crises that began with the mortgage market in 2007 and continues today. Here Derman looks at why people--bankers in particular--still put so much faith in these models, and why it's a terrible mistake to do so.

Though financial models imitate the style of physics and employ the language of mathematics, ultimately they deal with human beings. In physics, theories aim for a description of reality; in finance, at best, models can shoot only for a simplistic and very limited approximation to it. Physicists and economists have been too enthusiastic to acknowledge the limits of their equations in the sphere of human behavior--which of course is what economics is all about.

Describing the collapse of the subprime mortgage CDO market in 2007, Derman urges us to stop the naive reliance on these models, and offers suggestions for mending them. This is a fascinating, lyrical, and very human look behind the curtain at the intersection between mathematics and human nature.

Product Details

Media: Paperback Book, 231 pages

Language: English

Publisher: Free Press

Edition: Unknown

ISBN-10: 1439164991

Publication Date: Jul. 24th, 2012

ISBN-13: 9781439164990

Dimensions: 5.55 x 8.45 x 0.76 inches

Shipping Weight: 0.46 lbs

• Categories: Econometrics Mathematical Physics