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Death by the Numbers

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Science  26 Feb 1999:
Vol. 283, Issue 5406, pp. 1244-1247
DOI: 10.1126/science.283.5406.1244

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In the clandestine world known as arbitrage, traders try to ride the internal dynamics of the market to make money whichever way the Dow goes. Hundreds of quantitative economists, mathematicians, and former physicists have been putting their skills to work in the field. The strategy seemed foolproof--until last summer's Russian financial crisis, when firms hemorrhaged billions. Was the debacle due to mathematical hubris?