Research (Česká spořitelna)
World markets  |  February 27, 2013 10:36:01, updated

Who rules the markets? Excel!!


I came across a report from the workshop of JP Morgan, who investigated the reasons why, in 2012, the bank reported a loss from its own investments.

While reading the report, for example, we find that the loss grew from June last year to nearly six billion U.S. dollars, even though the models JP Morgan showed that, conversely, decreases the risk of loss. Who is the culprit? Culprits are plenty. But yet it surprisingly turned out to be only two.

It's the Lord, and the Lord Excel Workbook.

I quote from the report "For example, the model worked through a series of Excel files where the data had to be supplemented and then manually copied from one file to another, manually."
"... Error in Excel caused the model failed to identify synthetic credit portfolio losses of $ 400 million in one day."

"Specifically, after deduction of the old from the new rates, Excel fraction divided by the sum instead of average model as originally intended. This error probably caused the volatility was reduced twice, which also reduced the risk assessment. "

Another article on this topic then truthfully says that Excel has become one of the largest, most powerful programs in history. Incredible opportunities it allows the quantitative analysis, working with databases, hundreds of thousands of records, while a user-friendly environment. Was his user friendly interface the stumbling block. Because it is used by everyone. And therefore it uses a lot of people wrong. Excel is so simple that it is used by people without programming knowledge, Excel does not require constant medical student access and documentation.

Will think of a Czech proverb about good servant and a bad master?

Due to its massive deployment, therefore do not be surprised that Excel can move the financial world, causing tremendous loss.

I could paraphrase Lord of the Rings: "... and Excel to rule them all." Reigns to you?

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