[nikkev]

I keep hearing/seeing statements like this when that is not the case. Models are inherently simplifications of the real world. I don't think the problem was with the math or anybody's understanding of it but more a result of the innate complexities of the market. The people at Goldman Sachs for example maybe knew about their exposure to the mortgage backed securities but they were unaware of the exposure of all the other firms in the industry. Also, a number of people expected and made a lot of money from the crash, although nobody expected it to be as bad as it was (again nobody had an accurate gauge of the exposure), it's not a lack of intelligence that drove firms but greed they were making so much money that they considered it foolish to stop and think what would happen and based on the aftermath they really have no incentive to. They suffered for a while but the government made every effort to assist them and now a few years later the market is back to record highs until the next inevitable crash.