from Amazon
Monday, March 23, 2009
Credit Derivatives
Non-sports post.
Great article from three years ago from Mark Whitehouse of the WSJ:
Others are less sanguine. “The events of spring 2005 might not be a true reflection of how these markets would function under stress,” says the annual report of the Bank for International Settlements, an organization that coordinates central banks’ efforts to ensure financial stability. To Stanford’s Mr. Duffie, “The question is, has the market adopted the model wholesale in a way that has overreached its appropriate use? I think it has.”
• Blogging
Great article. I came across it last week when it was linked to from this article, which is also very good.
http://www.portfolio.com/business-news/2009/03/03/Formula-That-Killed-Wall-Street?page=1
To tie this subject in with sports analysis…
In one sense, sports is a really, really bad way to learn about statistics in the real world. I’d submit that most people know what they do about stats, probabilities, and predictions from sports (including gambling) in one way or another. Not just stat-heads like us, but most guys out there.
But sports (and gambling) have known bounds and the risks are known and quantified (little to no uncertainty). In football, the field is always level and 100 yds long. You always get 4 chances to make 10 yds, and every single game is 60 minutes long. The other team is also limited to 11 players on the field.
The predictable boundary conditions of sports just don’t exist in the real world. When we export what we’ve learned about sports into things like politics, business/finance, or even war, we’re bound to get burned.