You are, of course, correct and clear in all your points but I would just like to add one theme. These carefully constructed arbitrage positions only work out if the counter party can meet their obligations. If they can only do so because of their arbitraged position against yet another party ad infinitum then you end up with a house built from a deck of cards just waiting for any major event to knock the whole thing down.

The problem is that the methodology was, and as far I can tell still, completely is completely assailable

Essentially this involves making a bet justified by a set of assumptions, in particular that market movements are distributed over a Gaussian curve. You then insure yourself in case your forecasts *and* assumptions are wrong. Arbitrage protects you if your forecasts are wrong.

However, you aren't covered if your insurer made the same assumptions as you about how markets move and can't now pay out your insurance.

The maths may be unassailable given it's assumptions but that doesn't make it correct in the real world

I assume you know all this stuff and we're just exchanging alternative explanations - if not then I do strongly recommend reading Taleb. He's not just an academic - be personally made millions out of the late 80's and the late 90's market crashes

Read the Black Swan by Nissam Nicholas Taleb

The essential issue is that models, such as Black-Scholes, that are used to price options assume that the market's movements are distributed according to a Gaussian distribution.

They aren't - it's a power law

The difference is huge

50% of all gains in the stock market in the last 50 years happened on 10 individual days and Black-Scholes says that this can never happen even once in a life time

I'd mod that up if I could JoshuaZ - thanks for the link

Language is much more strange than most people realise.

I speak some Thai and it is really difficult for English speakers to grasp

Imagine - no word for yes or no. Verbs don't change their form for person or tense.

In English we only really have 'it' as the third person singular. In French they have 'il' (masculine it) and 'elle' (Feminine it). In Thai they have literally different hundreds of pronouns for stuff like 'things with handles', 'long thin things', 'containers', 'things with limbs that are not people'

Language is so much more diverse than you would imagine if you don't study it.

Interestingly, this does not make the Sapir–Whorf hypothesis (http://en.wikipedia.org/wiki/Linguistic_relativity) true.

The structure of the language has little, if any, relationship to the deeper mental understanding of the 'way things work'

I don't have the reference to hand but I recall there is a South American tribe which don't have words for left and right as most languages do. There words are equivalent to "Up Valley" and "Down Valley" Similarly, if I recall correctly, there's a Native American language that uses before and behind as an analog for time but the other way around to most languages. Their analogy is that you know the past and you can see what it in front of you so forward = the past. You can't see behind you and you don't know the future so behind = the future

There's great deal of evidence that our mind generates causal explanations for almost anything and that the slower rational mind is very bad at filtering these out. Read Daniel Kahneman's Thinking Fast, Thinking Slow or watch his Google Tech Talk http://www.youtube.com/watch?v=CjVQJdIrDJ0&context=C476fca8ADvjVQa1PpcFO5Md3nBcGBLbvoCdA7c_n4yXmeOadMOtw=

The quote from the BBC article says "Even more interesting, there are hints that humans may have taken over the kill at an early stage."

The headline for the BBC article "Woolly mammoth carcass may have been cut into by humans"

The headline of the linked story "YOUNG MAMMOTH LIKELY BUTCHERED BY HUMANS"

I especially like the excited all-caps style

I am sure that I have re-read many more books than I have failed to read

For a more general purpose online learning platform Moodle is certainly worth looking into. I haven't used it in anger for a few years now but it appears to be active.

Waterloo Fortran IV - now THAT is an obscure reference. Pretty sure that I only ever coded a couple of programs in WATFIV