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Long-Term Capital Management: Difference between revisions
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{{a|devil|{{subtable|{{complex capsule}}}}}}What happens when you try to manage a [[Complex systems|complex system]] with [[Complicated system|complicated]] tools. | {{a|devil|{{subtable|{{complex capsule}}}}}}What happens when you try to manage a [[Complex systems|complex system]] with [[Complicated system|complicated]] tools. | ||
See also: Hubris. and {{ | See also: Hubris. and {{author|Charles Perrow}}’s super book, {{br|Normal Accidents}}, which wasn’t really about the financial markets but sure could have been. | ||
LTCM was a [[hedge fund]], founded in 1993, and stuffed to the gunwhales with splendid brainboxes and Nobel prize-winners, including at least one of the team who “solved” the problem of how to accurately price options with the [[Black-Scholes option pricing model]]. LTCM used their braininess, and the [[Black-Scholes]] model, to engage in [[leveraged]] [[arbitrage]], ultimately doing the world the large favour of testing the [[Black-Scholes]] model to destruction. | LTCM was a [[hedge fund]], founded in 1993, and stuffed to the gunwhales with splendid brainboxes and Nobel prize-winners, including at least one of the team who “solved” the problem of how to accurately price options with the [[Black-Scholes option pricing model]]. LTCM used their braininess, and the [[Black-Scholes]] model, to engage in [[leveraged]] [[arbitrage]], ultimately doing the world the large favour of testing the [[Black-Scholes]] model to destruction. | ||