candles said:
Thought some of you might find this documentary interesting. Its about an hr long.
http://bear.cba.ufl.edu/karceski/FIN7447/lectures/trillion dollar bet nova.wmv
Thank you for the link, it was interesting; if I remember correctly, that documentary was passed on TV (BBC1 or BBC2, can't remember) sometimes in 1999, or 2000, don't remember the exact date.
It is incredible how the best brains can make elementary mistakes; here are economists saying that profitable traders are lucky; and then, sombody who's been trading the markets successfully for 30 years shows up saying that economists are terrible traders.
And the final proof: LTCM went down because it never occurred to them to set a stop loss to their trades!
In my opinion, anybody who can trade successfully the markets for 30 years must be either damn lucky...or know a thing or two about the markets that economists don't!
I think that Black-Scholes is a terrific tool; but like everything else, it is up to the user to make the most of it - as the saying goes, if you have got a hammer, you tend to view every problem as a nail; guess what happens if you try to do the wahing-up...
LTCM was a financial Titanic, let's hope that lessons have been learnt - the markets cannot be cracked by maths alone, although they have got their use.
Eduardo
