August 9, 2011
Standard & Poor's is the Al Capone of modern financial markets. For many years, we went along with their protection racket: we paid the firm, and they made sure we knew which investments were safe. They got involved in politics, spending incredible sums to lobby the government for support, and eventually were mandated into perpetuity [...]
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August 9, 2011
The most interesting thing about yesterday's market action was the behavior of the Treasury market: It rose. If the market collapse was really about investors reacting negatively to the United States' new, lower credit rating, why on earth would replace their stocks with a direct investment in that very same government? We can only know [...]
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Inferred ratings and modelling teacher comments
June 24, 2009Another aspect of my conversation dealt with inferred ratings, a problem I've crossed before in other areas. There are two primary cases in which this arises: censored data and self-selection bias. In the first case of censored data, a problem is caused by the ratings system not eliciting useful responses. An example is a system [...]