At least now, title does not go as far as claiming that this is formula that _caused_ the crash, unlike this sensationalist piece[1]. The other popular formula

At least now, title does not go as far as claiming that this is formula that _caused_ the crash, unlike this sensationalist piece[1]. The other popular formula to pick on is Li's Gaussian Copula [2] that did not address tail risks and dynamics of assets' co-dependence. The important thing to remember is that finance is not physics and any model of reality is just that - model. As long as model's assumptions are close to reality, model works fine. It is failure to understand limitations or when assumptions do not hold any more that led to crash. Actually the over-reliance of quants on models like Black-Scholes or Gaussian copula is a testament to how well these models work (or should I say worked?) for specific market conditions. [1] http://www.guardian.co.uk/science/2012/feb/12/black-scholes-equation-credit-crunch http://www.guardian.co.uk/science/2012/feb/12/black-scholes-... [2] http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?curr...