{"id":615539,"date":"2009-12-28T10:45:00","date_gmt":"2009-12-28T15:45:00","guid":{"rendered":"tag:blogger.com,1999:blog-12853770.post-5294613296005141593"},"modified":"2009-12-28T10:53:44","modified_gmt":"2009-12-28T15:53:44","slug":"why-cdos-cant-be-priced","status":"publish","type":"post","link":"https:\/\/mereja.com\/index\/615539","title":{"rendered":"Why CDO&#8217;s Can&#8217;t be Priced"},"content":{"rendered":"<p>Paper of the day:<\/p>\n<p><a href=\"http:\/\/www.cs.princeton.edu\/~rongge\/derivative.pdf\">Computational Complexity and Information Asymmetry in Financial Products<\/a> Arora, et al.<\/p>\n<p>via <a href=\"http:\/\/blogs.reuters.com\/felix-salmon\/2009\/12\/28\/its-impossible-to-price-a-cdo\/\">Felix<\/a>. Interesting passage from his commentary:<\/p>\n<blockquote><p>&#8230;the solution to model risk isn\u2019t more complex models, its less reliance on models altogether. And anybody who applied a simple smell test to the mortgages underlying the CDOs in question \u2014 rather than deciding instead to trust various quants both in-house and at the ratings agencies \u2014 would have come to the right conclusion without any computing power at all.<\/p><\/blockquote>\n<p>In other words, strategic thinking beats statistical thinking here too.<\/p>\n<div class=\"blogger-post-footer\"><img width='1' height='1' src='https:\/\/blogger.googleusercontent.com\/tracker\/12853770-5294613296005141593?l=bottlerocketscience.blogspot.com' alt='' \/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Paper of the day: Computational Complexity and Information Asymmetry in Financial Products Arora, et al. via Felix. Interesting passage from his commentary: &#8230;the solution to model risk isn\u2019t more complex models, its less reliance on models altogether. And anybody who applied a simple smell test to the mortgages underlying the CDOs in question \u2014 rather [&hellip;]<\/p>\n","protected":false},"author":288,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[4821],"tags":[],"class_list":["post-615539","post","type-post","status-publish","format-standard","hentry","category-news"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9NivD-2A83","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/posts\/615539","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/users\/288"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/comments?post=615539"}],"version-history":[{"count":0,"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/posts\/615539\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/media?parent=615539"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/categories?post=615539"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.com\/index\/wp-json\/wp\/v2\/tags?post=615539"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}