Cruxellaneous

Chinese math whiz created the formula that caused the mortgage crash

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About ten years ago, a Chinese math whiz named David Li created a brilliant but simple formula. The formula supposedly measured how much risk a basket of mortgage bonds carried… and how likely it was the bonds would cause huge losses.

The formula was a revelation… and of Wall Street ran with the formula to justify all kinds of ridiculous investment products. This Wired article is a clearly written summary of why you should never bank of something not happening just because it hasn't happened before. It's also why a lot of mathematicians are unemployed.

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