[pgwhalen]

Is it really that we didn’t know how the models behaved in certain market structures, or that we were feeding them the wrong inputs?

[MR4D]

The former. LTCM blowup in the late ‘90’s is a perfect example of a generally correct trade, but the market moving against them long enough to force insolvency.

Apparently, none of the Nobel prize winners thought to model out that particular adverse condition.

Bunch of smart people + one missed market condition = failure (eventually).