Meet the Canadian whose big idea felled Wall Street
Math whiz proposed applying this statistical formula to credit risk, and financial meltdown ensued
Li's model sidestepped the problem of trying to correlate all the variables that determine risk. Instead, it based its assumptions on the historical dips and swells of the market itself. In essence, Li used the past to map the future. Full Story »
Posted by Kaizar Campwala
The Wa;ll Street traders didn't want to understand Mr. Li's formula and have to admit that it only predicted based on past experience -- it did not take into consideration possible future risks.The traders were able to mint money from it for themselves -- so no one wanted to ask hardquestions.