Quants

Fascinating documentary about ‘quants’ and their role in the 2008 crash.  Quants built models to predict the likelihood of default of mortgages that had been bundled into Collateralized Debt Obligations (CDOs).  Those models did not adequately address the correlation between defaults: they did not account for the situation where many mortgages default simultaneously.  This is what happens when you test a model with an inadequate range of historical data, or when you do but you discard the inconvenient truths that they reveal.

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