Monday, January 21, 2008

Muhuhahahahaha – Are these people still employed?

A Practical Review and Test of Default Prediction Models

Did you predict the 37.3bn in defaults chaps? $5.3million per HOUR every HOUR for the last 300 days

The authors, members of Citigroup's Risk Architecture group, examine the benefits and limitations of two alternative classes of models for default risk assessment. The contingent claims analysis is a structural approach based on an option-theoretic view of a firm's equity and liabilities. But even CCA models often show poor power in predicting default events in precisely those cases where these models should hold strongest. By introducing additional credit information, hybrid models are able to overcome some of these limitations and increase model performance in the critical near-default region.

Posted by lvmreader @ 06:54 PM (484 views)
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One thought on “Muhuhahahahaha – Are these people still employed?

  • “By introducing additional credit information, hybrid models are able to overcome some of these limitations ”

    Basically what they do is they develop a model. They charge a lot of money. When things go pear shaped people ask why the model didn’t predict it. So what they do is they add data that shows that everything has gone pear shaped, so that the models results show that everything has gone pear shaped, and then they say “look. Our model is working. It just needed tweaking a bit”. Then they charge lots of money.

    I think they’re called financial experts.

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