“QUANTS GONE WILD” - THE SUBPRIME CRISIS

``A key factor behind all this mess can be traced back to the mid-1970s, when Wall Street valuation methods became more sophisticated. Since then, the increased availability of data, Modern Portfolio Theory and the application of advanced mathematical techniques have combined to make “quant geeks” Wall Street’s newest heroes. Their impact spread in the 1980s as Value at Risk Models, led by J.P. Morgan, gave investment firms a false sense of security. In reality, such probability-based models are derived from past norms. However, to those that once in a while take the time to look up from their computer screens, world events have actually become increasingly uncertain, less predictable, and, as a consequence, ever more “event” driven.''