Canada’s contribution to the financial crisis

The formula that started it all

David Li was schooled at the Universities of Waterloo and Laval. He got his start in finance with CIBC. And a decade ago, the math whiz came up with a
major breakthrough. He wrote a formula, known as the Gaussian copula function, that offered up a way to measure and parcel up risk in pooled bond
markets.  It was simple and beautiful. So much so that it fuelled an entirely new, massive financial industry. But in Wall Street’s greedy hands, the limits of his formula (and Li’s own warnings) were largely ignored. Models eventually collapsed and so did financial markets. Wired helps explain how it all happened.


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