The formula that killed Wall Street

Abstract

Wall Street in the mid-1980s turned to the quants - brainy financial engineers - to invent new ways to boost profits. They and their managers, though laziness and greed, built a huge financial bubble on foundations that they did not understand. It was a recipe for disaster. The journalist Felix Salmon won the American Statistical Association's Excellence in Statistical Reporting Award for 2010, We reprint his article, first published as the cover story of Wired magazine, because it brilliantly conveys complex statistical concepts to non-specialists. © 2009 Condé Nast.