Sunday, November 21, 2010

Video of the Trillion Dollar Bet in 5 parts

YouTube - The Black-Scholes Formula - 1/5:

The Trillion Dollar bet, which is based on the Long Term Capital Management story (when Genius Failed) , is a staple in my classes. Here is the first of 5 parts of the old PBS video.

HIGHLY recommended! The show is really two separate stories--on one on the history of the Black Scholes formula, and one on the Collapse of Long Term Capital Management.  (FWIW We  usually use the latter mainly in class but the whole thing is good!)

The moral of the story is that absolute adherence to quantitative models is what frequently gets you in trouble. Models are representations of reality and reality can often vary widely from the model.

Part 1, Part 2, Part 3Part 4, Part 5
Thanks to Zvi for the link (and reminding that I had promised to post this!)
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