Jay
2009-01-02 07:39:45
Ms. Miller alludes to the risk models used to justify the leveraging. The Black-Scholes model is easily falsified by simple and not so simple statistical analysis of stock rates of return. The B-S model and its extension are at the heart of the options pricing models.
The value at risk VAR models are not calibrated from data. The whole tech enterprise was theoretical plus simulations.
The finance and economics professors who claimed that the models were based on sound science should be tried for grand theft. The irony is that the professor did not get rich the way the Wall Street tycoons did.
