<p>Meh, I was trying to be loose with my definitions so I wouldnt have to define what my words were. (ie what a derivative is).</p>
<p>And I personally believe that the LTC example is in no-way related to the current state of affairs; it is an unrelated event. sorry. I do however agree that the concept of modeling Wall Street is overall a dumb idea IF you are trying to make a profit. The first thing you are taught in financial economics 101 is that you CANNOT accurately predict the behavior of the market based on past trends.</p>
<p>Nevertheless, the Black Scholes equations, in my opinion, was a brilliant idea, and a good example of how powerful a scientific background can be in economics. Find a PDE that can be reduced to the Schrodinger equation and you might get the next Nobel in economics. </p>
<p>And to clarify, if it seemed like I were stating otherwise, studying economics in one way with a scientific mind is one thing, but trying to apply your results to the finance realm is likely to destroy millions. </p>
<p>If LTC is not enough for you, my financial markets and modeling professor likes to remind everyone that Isaac Newton died in a poor house because he got caught up in the stock market.</p>