The Department of Justice will have a tough time proving that Standard and Poors “inflated” its bond ratings.
The US Department of Justice has launched a civil law suit against the rating agency Standard & Poors, alleging “S&P issued inflated ratings that misrepresented the securities’ true credit risks” and that “S&P falsely represented that its ratings were objective, independent, and uninfluenced by S&P’s relationships with investment banks when, in actuality, S&P’s desire for [...]
The bond trader’s fallacy
A few weeks ago one of us was sitting beside a retired bond trader at a luncheon. Both interlocutors being interested in probability and its applications in business, there ensued a disagreement about whether in a sequence of coin flips the flips were independent. The bond trader argued that anyone who believed they were not [...]
Lance Armstrong doping case and bond defaults show challenges of probabilistic reasoning
In an earlier blog post (here) we wrote that, given the evidence available to us at the time, Lance Armstrong was probably not guilty of doping. The main line of our argument was that hundreds of doping tests from certified laboratories using accepted procedures had not found dope. We restricted the evidence to this, in the [...]
Why you cannot measure risk
In 2008, Collateralized Debt Obligations (CDO) that had been given very high ratings by the credit rating agencies collapsed. The rating agencies got blamed for faulty ratings. Once a mining association gave a coal mine the “Safest Mine Award.” One month later the mine blew up and killed 32 miners. The award is based on [...]
Can China’s credit rating agency do a better job than its rivals?
An AAA rating is not “wrong” because the security later defaults.
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