Accountants and Engineers

[skthewimp]

I'm currently reading Nassim Nicholas Taleb's Fooled by randomness. Have read some fifty pages so far. Like his later book The Black Swan, this too contains totally awesome fundaes. And contrary to reports that I've heard, it's extremely easy reading. Either it's because of my familiarity with derivatives or because I'm just coming off Chaos by

Comments

[arvindn]

dude, don't make things that look like links but aren't :)

click. nothing happens. click. nothing.

MUST.. RESIST.. CLICKY.. INSTINCT

[skthewimp]

oops
sorry
i think that underlining was by mistake (pressed ctrl+U instead of ctrl+I)

anyways i've inserted the links now

[anonymous]

"Sometimes one wonders if the tight RBI regulations that prevent the development of new complex products are a conspiracy by the CAs to retain control of their turf"

Interesting statement :) However, conservatism is the better part of valour and if the market is not mature enough, I suppose some regulation is perfectly okay.

- Middle

[anonymous]

Forgot to add... In my opinion getting in more engineers will not really solve the problem. They may appear to have the qualifications, but few people understand these models at an intuitive level. Therefore, setting in some regulations and preventing the headache is better I suppose.

[skthewimp]

the government has no business in dictating how conservative firms need to be

tight regulations on banks taking deposits is ok - after all the govt. guarantees these deposits. but the govt has no business tightly regulating the rest. let them lose their moeny if htey want to.

[bjbalaji]

aahh the blood boils at this putdown of my community...:((((

remember LTCM??....weren't the geeks there from an engineering background?..time for a street fight i say..:)

[skthewimp]

seems like ID has already sprung to your defense

i'm not saying that engineers have done everything right. just that they don't claim to be doing everything right all the time.

accountants are TRAINED to be conservative, and not take risks. that's what they claim to do. and you see what they've achieved.

[skthewimp]

fair point about the normal distribution thing
i agree that it's a complete fraud. in fact a lot of "advanced financial engineering" is complete fraud. and the biggest fraud of them all is the Black-Scholes formula. wtf is a "lognormal" distribution? the only reason they chose it is because it gives a nice closed form solution that enables you to get a nobel prize.

when i made the original point i was talking about simple hedging instruments. that a large number of accountant types (like those who need a calculator to add 10% to 7.5) might find it tough to understand simple concepts such as the yield curve. and thus get end up getting into extremely unfair swaps.