13 Sep 2009
What wasn’t recognized was the importance of a different species of risk — liquidity risk,” said Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University. “When trust in counterparties is lost, and markets freeze up so there are no prices,” he said, it “really showed how different the real world was from our models.
—
Had a long discussion about this last night with my Columbia classmates; people aren’t always rational, and people make the trades that move the markets.
Unboxed - Creating Quant Models That Are Closer to Reality - NYTimes.com
