I remember that in a graduate class the professor told that among the important contributions of the theory was the BS formula. He never told us precisely what you wrote: P/L is in the tails. I wonder if he knew that LTCM went bust, while taking pride in being advised 'by two Nobel Prize recipients'.
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Yes. The tails.
LTCM went bust because they thought they new better than the market and they were very very greedy. Very.
There is no formula for the market. The EMH in its weak form is correct. Has not been proved, but it is like P!=NP. True.
I am dismayed but unsurprised that financail models get so much support here.
You get money by working. Investments are savings. Just because there is some fool driving a Ferrari does not make that untrue, you cannot see the rest of the finance geeks flipping burgers.
Greed. Hubris. Bankruptcy.