Computer Model SNAFU
From the Financial Times (subscription required) but the the money quotes are
Goldman in $3bn bail-out of fund Goldman Sachs is to use $2bn of its own money to bail out its Global Equity Opportunities hedge fund in an embarrassing admission that its highly regarded computerised funds malfunctioned last week.The investment bank has raised a further $1bn from outside investors to support the $3.6bn GEO fund, which lost about $1.5bn when computer models failed to predict market turbulence.
Bad computer model. Bad model.
To the modelers (and Goldman Sachs) and the rest of the world please read
"Fooled by Randomness">
The Black Swan
Does this mean people have to give their bonuses back ?