Sunday, November 15, 2009

Fooled By Randomness

Surprise (Not): Madoff’s Results Were Generated Via a Randomizer
Defendants knew that all of this data was, for all intents and purposes,
randomly generated and assigned to purported trades by programs they created.
Defendants knew that this was unlike the [internal] House 5 system, on which trade blotter
came from actual executed trades and was verified through data received from
counterparties and clearing agencies. Some of the House 17 programs even included
randomness checks, i.e., code that analyzed program results to ensure they were
sufficiently random.
With apologies to Nassim Nicholas Taleb

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