The software models in question estimate the level of financial risk of a portfolio for a set period at a certain confidence level. As Benoit Mandelbrot, the fractal pioneer who is a longtime critic of mainstream financial theory, wrote in Scientific American in 1999, established modeling techniques presume falsely that radically large market shifts are unlikely and that all price changes are statistically independent; today’s fluctuations have nothing to do with tomorrow’s—and one bank’s portfolio is unrelated to the next’s. Here is where reality and rocket science diverge.Unfortunately, it appears that no one will need to take responsibility for their actions, or be held accountable, since we are handing out bailout money with bothering to demand it.
Speaking of which, I could use a bailout myself. I know there have been lapses in judgment, and losses, but I assure you that my management is ready to do what it takes to use someone else's funds to my advantage. Really.