quantative analysis

Fed considers QE 2.0

This explains why the dollar dropped so much yesterday.

(Reuters) - The Federal Reserve is discussing re-entering the mortgage-backed securities market later this year if its buying power is needed to hold down interest rates, Market News said on Tuesday in a story citing Fed officials.
The $5 trillion agency mortgage-backed securities market may weaken when last year's biggest buyer, the Federal Reserve, ends its $1.25 trillion agency MBS purchasing program at the end of the first quarter of 2010.
Fed officials, however, "are prepared to contemplate changes if need be, depending on conditions in the economy, housing finance and in financial markets more broadly," Market News said in a story written by Steven Beckner.

A Quant Speaks Out

Bloomberg not only quoted a financial math geek in this article but also alerted us that one of them is a bloggin' fool.

Financial markets have grown too dependent on mathematicians who use models to anticipate price moves and need to start injecting common sense into the equation, said Paul Wilmott, a London-based author and quantitative finance instructor.

“There is too much mathematics in this business,” Wilmott, author of “Paul Wilmott on Quantitative Finance,” said in a Bloomberg Radio interview. “I just want people to stop and think for once.”

Wilmott, based in London, has warned that so-called quants who use mathematics to forecast how markets will behave can overlook errors in the models, leading to flawed predictions.