How Wall Street Lied to its computers

Mr. Hansell, a writer of this article, said he watched many big firms fallen down due to bad bets on mortgage securities.He spent thirteen years to cover trading and finance, so he had to know about quantitative analysts ("quants"). This system estimates how much they might lose on the worst case events. However, Mr. Hansell thinks that Bear Stearns, Lehman Brothers, and other firms bet too much, and “quants” did not save them. He expected that Wall Street bosses ignored the warnings signs, which risk machines found on certain problems, to keep the more profits. In fact, most Wall Street people said risk management computer models basically underestimated the risk of the mortgage securities that is partly correct. The reason is that Leslie Rahl said people who operate risk management systems choose program to informs optimistic and simplified data for their convenience.If they try to trick on their risk management system, it is tricking to their companies. It does not mean that the computer systems solve the problems if they choose right risk management programs and put the right information in the systems. However, that is the mandatory and basic thing to do. Ms. Rahl mentioned that to run that systems, we need people who are honest and have enough experiences in real markets.

(http://bits.blogs.nytimes.com/2008/09/18/how-wall-streets-quants-lied-to-their-computers/?scp=2&sq=risk%20management&st=cse)