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April 28, 2012 03:05 pm

The Math Formula That Lead To the Financial Crash


New submitter jools33 writes "The BBC has a fascinating story about how a mathematical formula revolutionized the world of finance — and ultimately could have been responsible for its downfall. The Black-Scholes mathematical model, introduced in the 70s, opened up the world of options, futures, and derivatives trading in a way that nothing before or since has accomplished. Its phenomenal success and widespread adoption lead to Myron Scholes winning a Nobel prize in economics. Yet the widespread adoption of the model may have been responsible for the financial crisis of the past few years. It's interesting to ponder how algorithms and formulas that we work on today could fundamentally influence humanity's future."

Read more of this story at Slashdot.


Original Link: http://rss.slashdot.org/~r/Slashdot/slashdot/~3/HiMnvKtblFc/the-math-formula-that-lead-to-the-financial-crash

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