Failure of computer models of big firms another reason for financial meltdown – Goldman lost lost about $1.5bn when computer models failed to predict market turbulence
Sam Adelton
Aug. 14, 2007

This is another tip of the iceberg. The computer models that predict market directions and volatility are getting clobbered with new sets of derivatives, market infrastructure changes, and above all, explicit volatility of the market.

Goldman’s GEO fund lost about $1.5bn when computer models failed to predict market turbulence. Many Wall Street firms are at a major loss. They just do not know what to do.

The computer programs are written and then tested through simulation. The simulation was obviously inadequate to replicate the real market volatility.

There is a run in the market place from borrowing. The GEO fund of Goldman faced a meltdown when their competitors ran from borrowing, dumped stocks on the market for reasons nothing to do with the fundamentals, or the technical status of the market.

The trend is now clear. Higher carry trade rate is cutting on the profitability of these firms.

The derivatives are so wide spread that no model can predict market movements so easily. This is another reason why the meltdown is accelerating so fast.

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Failure of computer models of big firms another reason for financial meltdown – Goldman lost lost about $1.5bn when computer models failed to predict market turbulence
Sam Adelton
There is a run in the market place from borrowing. The GEO fund of Goldman faced a meltdown when their competitors ran from borrowing, dumped stocks on the market for reasons nothing to do with the fundamentals, or the technical status of the market.
READ MORE>>

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