Jargon in finance is obscurant in nature. For example: CAPE ratio = Cyclically-Adjusted Price/Earnings Ratio. Take how much the stock is, divide it by the amount of money it makes, throw a coefficient on it, get a Nobel Prize in Economics.

Fundamentally there's no there there. "Derivatives" in finance are anything where you're not directly trading something. A contract to buy the stock later at a certain price is a "futures option" and also a "derivative." When they talk about "the velocity of money" that's not a derivative, that's a greek symbol used in deep macroeconomic analysis.

Lehman Brothers, Long Term Capital Management, The Great Depression, it all boils down to "someone was expecting to get paid and didn't." For purposes of finance, "Joe owes me $10" is the same as "I have $10." That was the basic peril of WWI: Germany figured they could make France pay for the war once they conquered them and France was dependent on Germany paying once they lost. Meanwhile the French owed the British and the French and British owed the Americans (Lloyds of London informed Parliament in 1913 that, regretfully, should the Royal Navy sink any members of the German merchant fleet, Lloyds would have to cut checks). Prior to the actualization of assorted parties' inability to pay, all that war debt was assets. And as soon as you decide you're never going to get paid, that's a "write down." We still can't call it a loss because apparently then we have to feel bad.

Worse, "being in debt" is called "leverage" in finance. A "highly-leveraged" hedge fund is a daring bunch of swashbucklers out to make lots of money without having a phatty war chest. They're also a bunch of debtors buying stocks with other people's money on the assumption they're smart and will pay the money back in spades. That's the other dumb thing - the higher your leverage, the more interest people will charge you which means the more money they make from lending you money.

The riskier you act, the wealthier you get. Until you write down your margin debt and bread lines erupt on Wall Street.

"Borrowing money to bet on things" is fundamentally how markets work. All the rest of it is hand-waving. And so long as people get paid back around the amounts they're expecting, it works. As soon as someone starts losing money, everyone starts losing money because it's a highly-correlated, interconnected mess.

This is why I'm mostly interested in what they're modeling, not how they modeled it. It sounds like they're basically taking a number series - the S&P over time - and curve-fitting. Which is basically a selective application of order to chaos that allows you to go "look I predicted the future!" when in fact you predicted the past.