On February 12th, Richard Bookstaber was kind enough to brave the city’s first snowfall of the year and come speak with the masters students of Courant’s Financial Mathematics program. A veteran among Wall St. firms and hedge funds, Dr. Bookstaber presented the students with a vivid insider’s account of some of modern history’s most fantastic financial crises.

 

As he explains in his most recent book, A Demon of our Own Design, the increasing complexity of certain financial instruments combined with the leverage used by many fund managers has been affecting the interrelationships between many traded securities, most notably those which have historically had nothing to do with each other. What is unfortunate, he adds, is that this changing dynamic is generally not exposed until there is severe market turmoil and it becomes all too apparent that historical analysis has its shortcomings in estimating the frequency of those dreaded “one in a thousand” events.–CASEY O’MEARA ‘08