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The Quants: How math whizzes nearly destroyed Wall Street

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The Quants: How math whizzes nearly destroyed Wall Street
Wall Street traders traditionally make decisions by following intuition and looking at the fundamentals of the market. But by the turn of the century, a group of math whizzes relied increasingly on quantitative investing- pairing complex analytical formulas with high-speed computers to predict the future of the stock market. These "quants" made billions with their strategy, and nearly destroyed the world's financial markets when it all went wrong in the 2007 housing meltdown. Neglecting to account for human influence, their funds took a big hit when outcomes that were supposed to happen once in 10,000 years happened three days in a row. Scott Patterson talks with Larry Mantle about how this highly profitable yet highly risky form of trading took over Wall Street.

Wall Street traders traditionally make decisions by following intuition and looking at the fundamentals of the market. But by the turn of the century, a group of math whizzes relied increasingly on quantitative investing- pairing complex analytical formulas with high-speed computers to predict the future of the stock market. These "quants" made billions with their strategy, and nearly destroyed the world's financial markets when it all went wrong in the 2007 housing meltdown. Neglecting to account for human influence, their funds took a big hit when outcomes that were supposed to happen once in 10,000 years happened three days in a row. Scott Patterson talks with Larry Mantle about how this highly profitable yet highly risky form of trading took over Wall Street.

Guest:

Scott Patterson, author, The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It (Crown Business). He is a staff reporter for The Wall Street Journal.