http://alephblog.com/2007/11/27/ten-chosen-items-from-the-current-market-troubles/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Fri, 25 May 2012 15:35:53 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://alephblog.com/2007/11/27/ten-chosen-items-from-the-current-market-troubles/comment-page-1/#comment-14830 Josh Stern Tue, 27 Nov 2007 14:28:11 +0000 http://alephblog.com/2007/11/27/ten-chosen-items-from-the-current-market-troubles/#comment-14830 Re: Point 9, estimating mortgage losses. The figure is believable to me also. Within the article, the author writes that part of it is connected with an estimate of 14% default rate on subprime, which is described as plausible but hedging on the pessimistic side of expected. But as far as I can tell, the ABX indices at markit.com which are so widely used predict a much higher rate of *loss* if/when they are construed as efficient prices. That "market" goes down day after and seems totally out of whack with reasonable assessments of fundamentals (as bad as those are), but yet is used in a lot of mark to market pricing. Re: Point 9, estimating mortgage losses. The figure is believable to me also. Within the article, the author writes that part of it is connected with an estimate of 14% default rate on subprime, which is described as plausible but hedging on the pessimistic side of expected. But as far as I can tell, the ABX indices at markit.com which are so widely used predict a much higher rate of *loss* if/when they are construed as efficient prices. That “market” goes down day after and seems totally out of whack with reasonable assessments of fundamentals (as bad as those are), but yet is used in a lot of mark to market pricing.

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