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Ratings notches: Difference between revisions
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Nevertheless a good example of the perils of a [[second order derivative]] measure of quality: at least if you expect your asset manager to be ''able'' to conduct fundamental financial analysis, she might be able to pick up something that the rating agencies had missed. Relying entirely upon them opens up the market to any bullshit artist who knows his ABCs — all right, and his Aa1-Aa2-Aa3s — to make quick coin in a sucker's market. | Nevertheless a good example of the perils of a [[second order derivative]] measure of quality: at least if you expect your asset manager to be ''able'' to conduct fundamental financial analysis, she might be able to pick up something that the rating agencies had missed. Relying entirely upon them opens up the market to any bullshit artist who knows his ABCs — all right, and his Aa1-Aa2-Aa3s — to make quick coin in a sucker's market. | ||
And as in the early part of the millennium, we saw regulatory capital ratios predicated on ratings, meaning anyone who could hoodwink gullible [[rating agency]] professionals with a sophisticated cashflow model could create financial instruments with the potential to detonate the financial markets as we know them. [[CDO|Just as well that never happened]]. | And as in the early part of the millennium, we saw regulatory capital ratios predicated on ratings, meaning anyone who could hoodwink gullible [[rating agency]] professionals with a sophisticated cashflow model could create financial instruments with the potential to detonate the financial markets as we know them. [[CDO squared|Just as well that never happened]]. | ||
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