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

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Peter-2-2

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&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

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Peter Baston

Peter Baston

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Phil Henshaw-2

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

Peter Baston

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: [hidden email] [mailto:[hidden email]] 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

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