82,891
edits
Normal distribution: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 15: | Line 15: | ||
This seems an obvious lesson; the JC feels less patronising about stating it since failure to heed it led to the collapse of [[LTCM]] ''and'' the [[global financial crisis]]. This from someone who really should have known better: | This seems an obvious lesson; the JC feels less patronising about stating it since failure to heed it led to the collapse of [[LTCM]] ''and'' the [[global financial crisis]]. This from someone who really should have known better: | ||
{{Quote| | {{Quote|{{viniarquote}} | ||
:—David Viniar, Chief Financial Officer, [[Goldman]]}} | :—David Viniar, Chief Financial Officer, [[Goldman]]}} | ||
''Twenty five'' [[Standard deviation|standard deviations]]. That makes [[LTCM]]’s feeble ''ten'' sigma event seem a virtual certainty. We have it on good authority that the probability of a 25 standard deviation move is 1.309 x 10<sup>130</sup>. <ref>Good [https://www.nottingham.ac.uk/business/who-we-are/centres-and-institutes/gcbfi/documents/cris-reports/cris-paper-2008-3.pdf paper on this from Nottingham University].</ref> That looks a big number, but to a lay person, it doesn’t really have the same impact as writing it out, so let’s do that: | ''Twenty five'' [[Standard deviation|standard deviations]]. That makes [[LTCM]]’s feeble ''ten'' sigma event seem a virtual certainty. We have it on good authority that the probability of a 25 standard deviation move is 1.309 x 10<sup>130</sup>. <ref>Good [https://www.nottingham.ac.uk/business/who-we-are/centres-and-institutes/gcbfi/documents/cris-reports/cris-paper-2008-3.pdf paper on this from Nottingham University].</ref> That looks a big number, but to a lay person, it doesn’t really have the same impact as writing it out, so let’s do that: | ||