4 ms·

What about the guy played by Christian Bale in The Big Short[0]? Surely his models were not BS. [0] https://en.m.wikipedia.org/wiki/The_Big_Short_(film) https:

• nradov 7y ago
  The thing is, it's impossible to tell the difference between clever and lucky even in retrospect. It's entirely possible that his models were BS. Even a broken clock is right twice per day.
  • foldingmoney 7y ago
    It's not impossible to tell the difference between a lucky guess and a well-designed model, although in finance you can often be right for the wrong reasons or wrong for the right reasons. The issue is that the things you're trying to model are usually extremely complex and dynamic, in a way that's fundamentally unlike most sciences where the objects of analysis obey more or less immutable laws. So it's less like trying to model where a kicked ball will land in a football game, and more like trying to model where the ball will be after 30 seconds of passing and running. But Michael Burry wasn't doing that, and his models weren't wrong. He correctly saw that the characteristics of the mortgage contracts that were being put into MBSs invalidated the assumption of uncorrelated defaults that were being used in the banks' and ratings agencies' models.
  • sjg007 7y ago
    They uncovered the large systemic threat with credit default swaps and made a bet.