

All the Texts on Financial Engineering You Could Ever Want - steveplace
http://www.classiccmp.org/transputer/finengineer/

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physcab
There were some excellent shows on recently. One was a documentary on PBS
about the fall of Bear Sterns and then ended like an biography about Hank
Paulson. It was astounding how much the _personalities_ of the key players
involved effected the outcome of the financial mess.

Then last night I watched a special on CNBC that went into a lot of depth
about many of the different investment vehicles. Basically the take home was
that few people understood the underlying implications of all these esoteric
ways of investing in the mortgage market. Even Alan Greenspan admitted that
despite a strong mathematical upbringing and access to over 100 PhD's on a
daily basis, he understood little about what was going on.

It didn't take much for smart people with less than stellar integrity to game
the system.

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tmdg
I think that's a main issue. Many of these models are based on math that few
people understand. I don't think it necessarily is an issue of integrity, but
more an issue of traders and asset managers using the results of these
mathematical models without fully understanding the implications and risks.
They are, after all, probabilistic models and it seems like they weren't
treated as such.

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nazgulnarsil
exactly, people were just saying "well the model says it will work", and
didn't realize that the models they were using had huge assumptions hard coded
into them.

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mattjaynes
Looking at that list reminds me of walking through the power tools section at
Home Depot - full of tools I'd love to have an excuse to use someday, but
don't at the moment. It's still always fun to look though ;)

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jwesley
Very good collection, but wouldn't the value of this material have been much
higher before the financial crisis? It seems like the theories and methods
applied in these texts played a large part in the downfall of the financial
system. Mathematical models != financial markets. A lot of good math and
statistics for people interested in those areas, but it will probably be
decades until "financial engineering" loses the stigma of failure.

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jibiki
It took decades after Chernobyl for nuclear engineering to lose the stigma of
failure.

Sarcasm aside, I think that you are half right. Some of the financial
engineering stuff was genuinely wrong, and financial engineers will have to
figure out what.

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gaius
I've always been fascinated by how that works. Hindenberg pretty much killed
the Zeppelin industry, yet airliners crash all the time and no-one's afraid to
fly. The Titanic didn't herald the end of sea travel either. What's the
difference?

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tokipin
the hindenberg was a huge flying balloon filled with highly flammable gas

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gaius
And an airliner is a metal tube full of highly flammable liquid. What's your
point?

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tokipin
do you think people see airplanes as metal tubes full of highly flammable
liquid?

not to mention that balloon vs metal is already very unbalanced

