Here's Prof. Peter Klein, showing us that there are people and personalities behind the current collapse. Some of them, of course, are economists and mathematical finance geeks.

A quick follow-up to Nicolai’s post on the copula function: See also this item on Gary Gorton’s role in the financial crisis, which includes Warren Buffett’s great line: “Beware of geeks . . . bearing formulas.” And items on Knightian uncertainty here and here.

And there’s this passage from Darren Aronofsky’s cult classic Pi:

Restate my assumptions: One, Mathematics is the language of nature. Two, Everything around us can be represented and understood through numbers. Three: If you graph the numbers of any system, patterns emerge. Therefore, there are patterns everywhere in nature. Evidence: The cycling of disease epidemics;the wax and wane of caribou populations; sun spot cycles; the rise and fall of the Nile. So, what about the stock market? The universe of numbers that represents the global economy. Millions of hands at work, billions of minds. A vast network, screaming with life. An organism. A natural organism. My hypothesis: Within the stock market, there is a pattern as well. . . . Right in front of me . . . hiding behind the numbers. Always has been.

This is before the speaker, the mathematician protagonist Max Cohen, goes literally insane. That’s what quantitative financial modeling can do to you.

[From Risk, Uncertainty, and Financial Markets]

2 Responses to “Risk, Uncertainty, and Financial Markets”

1. James

   25/02/2009 at 12:54 pm

   The science behind the collapse, namely copula

   http://www.wired.com/techbiz/it/magazine/17-03/wp_quant

2. stephenkinsella

   25/02/2009 at 1:21 pm

   Thanks James!