The Equation That Broke the Economy: How the Misuse of Gaussian Copula Led to the Financial Crisis
The financial crisis of 2008 was one of the most devastating economic events in modern history. In the aftermath, many people were left wondering how something like this could happen, and who or what was to blame. This book explores one of the key factors that contributed to the crisis - the misuse of a mathematical equation called the Gaussian Copula.
The Equation That Broke the Economy delves into the history and development of the Gaussian Copula, which was originally designed to help bankers and investors manage risk in the complex world of financial derivatives. However, as the book reveals, the equation was soon adopted by the mortgage industry to turn risky adjustable-rate mortgages into seemingly safe and profitable securities. This was done by packaging the mortgages together into pools and then slicing them into tranches, with each tranche having a different level of risk.
But the problem was that the Gaussian Copula, as it was used by the mortgage industry, did not accurately capture the risks of the underlying assets. Instead, it created a false sense of security and allowed financial institutions to take on too much risk. When the housing market began to collapse and homeowners started defaulting on their mortgages, the entire system came crashing down.
Through meticulous research and interviews with key players in the industry, The Equation That Broke the Economy exposes the flaws and shortcomings of the Gaussian Copula, and shows how its misuse contributed to the financial crisis. The book also explores the larger cultural and systemic issues that allowed such an equation to be misused in the first place, including the role of greed, deregulation, and a lack of accountability in the financial industry.
Overall, The Equation That Broke the Economy is a thought-provoking and accessible exploration of a complex and important topic.
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The Equation That Broke the Economy delves into the history and development of the Gaussian Copula, which was originally designed to help bankers and investors manage risk in the complex world of financial derivatives. However, as the book reveals, the equation was soon adopted by the mortgage industry to turn risky adjustable-rate mortgages into seemingly safe and profitable securities. This was done by packaging the mortgages together into pools and then slicing them into tranches, with each tranche having a different level of risk.
But the problem was that the Gaussian Copula, as it was used by the mortgage industry, did not accurately capture the risks of the underlying assets. Instead, it created a false sense of security and allowed financial institutions to take on too much risk. When the housing market began to collapse and homeowners started defaulting on their mortgages, the entire system came crashing down.
Through meticulous research and interviews with key players in the industry, The Equation That Broke the Economy exposes the flaws and shortcomings of the Gaussian Copula, and shows how its misuse contributed to the financial crisis. The book also explores the larger cultural and systemic issues that allowed such an equation to be misused in the first place, including the role of greed, deregulation, and a lack of accountability in the financial industry.
Overall, The Equation That Broke the Economy is a thought-provoking and accessible exploration of a complex and important topic.
The Equation That Broke the Economy: How the Misuse of Gaussian Copula Led to the Financial Crisis
The financial crisis of 2008 was one of the most devastating economic events in modern history. In the aftermath, many people were left wondering how something like this could happen, and who or what was to blame. This book explores one of the key factors that contributed to the crisis - the misuse of a mathematical equation called the Gaussian Copula.
The Equation That Broke the Economy delves into the history and development of the Gaussian Copula, which was originally designed to help bankers and investors manage risk in the complex world of financial derivatives. However, as the book reveals, the equation was soon adopted by the mortgage industry to turn risky adjustable-rate mortgages into seemingly safe and profitable securities. This was done by packaging the mortgages together into pools and then slicing them into tranches, with each tranche having a different level of risk.
But the problem was that the Gaussian Copula, as it was used by the mortgage industry, did not accurately capture the risks of the underlying assets. Instead, it created a false sense of security and allowed financial institutions to take on too much risk. When the housing market began to collapse and homeowners started defaulting on their mortgages, the entire system came crashing down.
Through meticulous research and interviews with key players in the industry, The Equation That Broke the Economy exposes the flaws and shortcomings of the Gaussian Copula, and shows how its misuse contributed to the financial crisis. The book also explores the larger cultural and systemic issues that allowed such an equation to be misused in the first place, including the role of greed, deregulation, and a lack of accountability in the financial industry.
Overall, The Equation That Broke the Economy is a thought-provoking and accessible exploration of a complex and important topic.
The Equation That Broke the Economy delves into the history and development of the Gaussian Copula, which was originally designed to help bankers and investors manage risk in the complex world of financial derivatives. However, as the book reveals, the equation was soon adopted by the mortgage industry to turn risky adjustable-rate mortgages into seemingly safe and profitable securities. This was done by packaging the mortgages together into pools and then slicing them into tranches, with each tranche having a different level of risk.
But the problem was that the Gaussian Copula, as it was used by the mortgage industry, did not accurately capture the risks of the underlying assets. Instead, it created a false sense of security and allowed financial institutions to take on too much risk. When the housing market began to collapse and homeowners started defaulting on their mortgages, the entire system came crashing down.
Through meticulous research and interviews with key players in the industry, The Equation That Broke the Economy exposes the flaws and shortcomings of the Gaussian Copula, and shows how its misuse contributed to the financial crisis. The book also explores the larger cultural and systemic issues that allowed such an equation to be misused in the first place, including the role of greed, deregulation, and a lack of accountability in the financial industry.
Overall, The Equation That Broke the Economy is a thought-provoking and accessible exploration of a complex and important topic.
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The Equation That Broke the Economy: How the Misuse of Gaussian Copula Led to the Financial Crisis
The Equation That Broke the Economy: How the Misuse of Gaussian Copula Led to the Financial Crisis
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Product Details
| BN ID: | 2940185733226 |
|---|---|
| Publisher: | Iman Nasser |
| Publication date: | 02/28/2023 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| File size: | 69 KB |
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