The Math Formula That Lead To the Financial Crash

New submitter jools33 writes "The BBC has a fascinating story about how a mathematical formula revolutionized the world of finance — and ultimately could have been responsible for its downfall. The Black-Scholes mathematical model, introduced in the '70s, opened up the world of options, futures, and derivatives trading in a way that nothing before or since has accomplished. Its phenomenal success and widespread adoption lead to Myron Scholes winning a Nobel prize in economics. Yet the widespread adoption of the model may have been responsible for the financial crisis of the past few years. It's interesting to ponder how algorithms and formulas that we work on today could fundamentally influence humanity's future."

Comments

Re:Don't blame math

[superwiz]

No, don't blame greed. Empathy is 100% responsible for the crash. Greed has always been with us. It's nothing new. It's when those with empathy are given power... that's when feel-good-everyone-can-afford-what-they-can't-afford bubbles happen.