Risk Management

Here is an excellent NYT article that describes how Wall Street failed to adequately mange risk. It's a prime example of how models and statistics can be mis-used. It was human folly. The article shows how investment banking and insurance company managers ignored the coming storm signals and blindly followed a quantitative model and how this led to the financial meltdown. It was the equivalent of flying an airplane looking at only two instrument panels on the dash board and never scanning the horizon or factoring the short comings of instruments that you are using. In short a model is only as good as the person using it.

http://www.nytimes.com/2009/01/04/magazine/04risk-t.html?scp=1&sq=risk%20management&st=cse

Happy reading!