Thursday, April 4, 2013

Physics Envy on Wall Street?

A fascinating story about the fallacy behind the rigor of Wall Street Quants and regulators' feeble attempts to manage them.  John Breit, the former head of Risk Management at Merrill Lynch, explains why successful risk management requires human spies gathering intelligence more that quantitative models which try to ape the hard sciences like physics.  It also includes a damning portrayal of how disconnected and isolated the senior management of financial institutions are from the real risk taking activities of the firms they lead.