The Potential Perils of Over Dependency on One Single Formula!

The Potential Perils of Over Dependency on One Single Formula!

How Wall Street's Favorite Equation Became a Financial Weapon

What if the next global financial meltdown isn't triggered by war, politics, or some shady billionaire-but by a forgotten math formula you probably scribbled down in Finance 101?

In this episode, John Lincoln exposes the shocking truth behind the Black-Scholes equation-a Nobel Prize-winning formula that Wall Street worships like gospel but understands like a bad horoscope. Originally crafted in the 1970s to price stock options, this seemingly elegant bit of math has quietly become one of the most dangerous financial tools ever created.

From nearly crashing the market in 1987, to vaporizing billions in the 1998 LTCM collapse, to fueling algorithmic chaos in the 2010 Flash Crash, and even playing a shadowy role in the 2021 Archegos debacle-this formula has a resume more explosive than a hedge fund on margin calls.

We'll explore how financial institutions still use Black-Scholes in their trading systems, risk models, and AI algorithms-despite it being built on wildly unrealistic assumptions like "markets are rational" and "volatility is stable." Spoiler: they're not.

And yes, if you're wondering… these guys did win a Nobel Prize for it. Because in the world of high finance, nearly destroying the global economy earns you champagne and a gold medal.

This isn't just a story of math-it's a story of hubris, automation, and blind faith in broken models. It's about what happens when we put absolute trust in equations designed for a world that doesn't exist-and then automate that trust with high-frequency trading bots.

Whether you're a finance geek, an investor, or just someone with a retirement account you'd like to keep intact, this episode is your one-stop crash course on how the financial system could quite literally crash-again-thanks to a 50-year-old math formula still embedded in Wall Street's core.

Brace yourself. This rabbit hole has decimals, derivatives, and a dangerous dose of delusion.

Follow John Lincoln on:
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