What Caused the Financial Crisis

by rrusczyk, Dec 9, 2008, 2:07 AM

In my Excel, when I type

=-2^4


Excel gives me

16


I've seen some people say that the over-reliance on computer models cause a lot of financial problems.

What if it was all just a sign error?

(Yes, I'm being mostly facetious. But seriously, it really seems like Excel should get this one right.)

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4 Comments

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Although, given the spectacular (and spectacularly publicized) demise of NASA's Mars Climate Orbiter, I wouldn't put a simple sign error past anyone.

by Osud, Dec 9, 2008, 3:29 AM

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It looks like an odd interpretation of order of operations- that's clearly being read as (-2)^4.

Back in college, one assignment in a numerical analysis class I had was to run a calculation through various calculation engines to detect roundoff error. One of the systems I used was an old (Mac OS 9) version of Excel, and I got a very odd result. When I presented this to the professor (William Kahan, a leading expert on this sort of thing), his reaction was something like "They shouldn't be doing that!".

The specific issue was that certain subtraction results close to zero were rounded to exactly zero, at a resolution slightly coarser than floating point numbers away from zero.

by jmerry, Dec 9, 2008, 7:16 AM

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This has driven me crazy for a long time. It's really poor. I run into it a lot when I'm writing a gaussian:

= exp(-x^2/2/sigma^2)

I've had to make it a habit to write the astonishingly ugly

= exp((-1)*x^2/2/sigma^2)

Agreed that it's very weird that Excel does this.

by sandor, Dec 9, 2008, 4:22 PM

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Same thing happens in Mac's Numbers. :(

by paulancka, Feb 19, 2009, 4:38 AM

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