Dissecting Subprime - A lesson learned
MikeR on Aug 22 2008 at 9:13 am | Filed under: Economics, MikeR's Page
The Economist
Interesting article about the roots of the problem. What I found fascinating was this root cause.
the historical accident of a very low loss rate during the early history of subprime mortgage foreclosures in 2001-2002.
This is the reminder that “accidents” continue to happen and that our best models are always suspect. Lesson learned - events will continue to occur that challenge conventional thinking and assumptions. Some short term data (an accident) led investors to believe there was less risk and uncertainty.
This idea can be extrapolated to all models that try to describe large complex systems - like AWG.
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