Most of the actuaries I know (not all) only used this method as one more reference point to determine the value of the annuities etc. I am a little amazed that the PhD physicists from MIT at JPM and their risk managers etc applied it blindly to bond default valuations. Of course, it led to much bigger paychecks, so maybe they didn’t think too hard… “It’s hard to get a man to understand something, if his salary depends on him not understanding it.”

Oh, and all that stuff about the shadow banking system being the cause of all our problems? BS… It’s just a mechanism that transmits the problems through from one company to another. The underlying problem is very, very simple – overpriced assets against which too much money was borrowed. All the rest is simply the various consequences of that bad fundamental. And, yes, I understand how these derivatives were abused to help responsibility for prudent lending to go from front-line decisionmakers to very dispersed, to nothing. But they were only one piece of that. FNMA, the Fed, China, dumb investors, and others were at least as important.

Most of the actuaries I know (not all) only used this method as one more reference point to determine the value of the annuities etc. I am a little amazed that the PhD physicists from MIT at JPM and their risk managers etc applied it blindly to bond default valuations. Of course, it led to much bigger paychecks, so maybe they didn’t think too hard… “It’s hard to get a man to understand something, if his salary depends on him not understanding it.”

Oh, and all that stuff about the shadow banking system being the cause of all our problems? BS… It’s just a mechanism that transmits the problems through from one company to another. The underlying problem is very, very simple – overpriced assets against which too much money was borrowed. All the rest is simply the various consequences of that bad fundamental. And, yes, I understand how these derivatives were abused to help responsibility for prudent lending to go from front-line decisionmakers to very dispersed, to nothing. But they were only one piece of that. FNMA, the Fed, China, dumb investors, and others were at least as important.

Most of the actuaries I know (not all) only used this method as one more reference point to determine the value of the annuities etc. I am a little amazed that the PhD physicists from MIT at JPM and their risk managers etc applied it blindly to bond default valuations. Of course, it led to much bigger paychecks, so maybe they didn’t think too hard… “It’s hard to get a man to understand something, if his salary depends on him not understanding it.”

Oh, and all that stuff about the shadow banking system being the cause of all our problems? BS… It’s just a mechanism that transmits the problems through from one company to another. The underlying problem is very, very simple – overpriced assets against which too much money was borrowed. All the rest is simply the various consequences of that bad fundamental. And, yes, I understand how these derivatives were abused to help responsibility for prudent lending to go from front-line decisionmakers to very dispersed, to nothing. But they were only one piece of that. FNMA, the Fed, China, dumb investors, and others were at least as important.

My Manhattan Project

How I helped build the bomb that blew up Wall Street.

By Michael Osinski

I have been called the devil by strangers and “the Facilitator” by friends. It’s not uncommon for people, when I tell them what I used to do, to ask if I feel guilty. I do, somewhat, and it nags at me. When I put it out of mind, it inevitably resurfaces, like a shipwreck at low tide. It’s been eight years since I compiled a program, but the last one lived on, becoming the industry standard that seeded itself into every investment bank in the world….

http://nymag.com/news/business/55687/

My Manhattan Project

How I helped build the bomb that blew up Wall Street.

By Michael Osinski

I have been called the devil by strangers and “the Facilitator” by friends. It’s not uncommon for people, when I tell them what I used to do, to ask if I feel guilty. I do, somewhat, and it nags at me. When I put it out of mind, it inevitably resurfaces, like a shipwreck at low tide. It’s been eight years since I compiled a program, but the last one lived on, becoming the industry standard that seeded itself into every investment bank in the world….

http://nymag.com/news/business/55687/