“The Formula That Killed Wall Street”: The Gaussian Copula and Modelling Practices in Investment Banking (2014)
MacKenzie, Donald A. (Author)
Spears, Taylor (Author)
Social Studies of Science
Volume: 44, no. 3
Issue: 3
Pages: 393-417
Drawing on documentary sources and 114 interviews with market participants, this and a companion article discuss the development and use in finance of the Gaussian copula family of models, which are employed to estimate the probability distribution of losses on a pool of loans or bonds, and which were centrally involved in the credit crisis. This article, which explores how and why the Gaussian copula family developed in the way it did, employs the concept of `evaluation culture', a set of practices, preferences and beliefs concerning how to determine the economic value of financial instruments that is shared by members of multiple organizations. We identify an evaluation culture, dominant within the derivatives departments of investment banks, which we call the `culture of no-arbitrage modelling', and explore its relation to the development of Gaussian copula models. The article suggests that two themes from the science and technology studies literature on models (modelling as `impure' bricolage, and modelling as articulating with heterogeneous objectives and constraints) help elucidate the history of Gaussian copula models in finance.
...MoreSimilar Citations
Article
MacKenzie, Donald;
Spears, Taylor;
(2014)
“A Device for Being Able to Book P&L”: The Organizational Embedding of the Gaussian Copula
(/isis/citation/CBB001421178/)
Book
Gintis, Herbert;
(2009)
The Bounds of Reason: Game Theory and the Unification of the Behavioral Sciences
(/isis/citation/CBB001201375/)
Article
Šabanović, Selma;
(2014)
Inventing Japan's “Robotics Culture”: The Repeated Assembly of Science, Technology, and Culture in Social Robotics
(/isis/citation/CBB001421175/)
Article
Bailer-Jones, Daniela M.;
(2002)
Scientists' Thoughts on Scientific Models
(/isis/citation/CBB000502437/)
Article
Reichmann, Werner;
(December 2013)
Epistemic participation: How to produce knowledge about the economic future
(/isis/citation/CBB580792249/)
Thesis
Mayo, Lee Allen;
(2011)
Simulation without Replication: How Some Digital Computer Simulations Serve as Scientific Experiments
(/isis/citation/CBB001567307/)
Article
Mieke Boon;
(2022)
How Philosophical Beliefs about Science Affect Science Education in Academic Engineering Programs: the Context of Construction
(/isis/citation/CBB318372507/)
Article
Berman, Elizabeth Popp;
(2014)
Not Just Neoliberalism: Economization in US Science and Technology Policy
(/isis/citation/CBB001421198/)
Book
Qin, Duo;
(2013)
A History of Econometrics: The Reformation from the 1970s
(/isis/citation/CBB001212957/)
Article
Trevor Jackson;
(2020)
Between Independence and Impunity: The Theory of Proto-Central Banking After the Crisis of 1720
(/isis/citation/CBB536726846/)
Article
Patrice Baubeau;
Eric Monnet;
Angelo Riva;
Stefano Ungaro;
(2021)
Flight‐to‐safety and the credit crunch: A new history of the banking crises in France during the Great Depression
(/isis/citation/CBB619097743/)
Article
Mark Garrett Longaker;
William Rodney Herring;
(2020)
"Money is not a Pledge": Early Financial Genres, the Battle of the Banks, and John Law's Money and Trade Considered
(/isis/citation/CBB002251250/)
Book
Levy, Jonathan;
(2012)
Freaks of Fortune: The Emerging World of Capitalism and Risk in America
(/isis/citation/CBB001421761/)
Book
Rosicka, Janina Clark;
Andres, Charles Michael;
(2001)
Economic Transition in Historical Perspective: Lessons from the History of Economics
(/isis/citation/CBB000101780/)
Book
Jeffrey Sklansky;
(2017)
Sovereign of the Market: The Money Question in Early America
(/isis/citation/CBB762518399/)
Article
Ryan Walter;
(2019)
The Bullion Controversy and the History of Political Thought: Experience, Innovation and Theory
(/isis/citation/CBB945573337/)
Article
Le Maux, Laurent;
(2012)
The Banking School and the Law of Reflux in General
(/isis/citation/CBB001451817/)
Book
Youssef Cassis;
Giuseppe Telesca;
(2018)
Financial Elites and European Banking: Historical Perspectives.
(/isis/citation/CBB066634132/)
Book
Mark H. Rose;
(2018)
Market Rules: Bankers, Presidents, and the Origins of the Great Recession
(/isis/citation/CBB931094552/)
Book
Christopher Kobrak;
Joe Martin;
(2018)
From Wall Street to Bay Street: The Origins and Evolution of American and Canadian Finance
(/isis/citation/CBB898988875/)
Be the first to comment!