"Complicated" in financial engineering gets a bad rap much like it does in software engineering. The enemy isn't complexity, it is abstractions which make the complexity illegible.
-
-
Show this thread
-
The world largely misdiagnoses the 2008 financial crisis as being a result of complexity, incidentally. The underlying fault was in simple debt instruments (mortgages) in a really straightforward fashion (inability to pay as agreed). The flow-forward of the losses was complex.
Show this thread
End of conversation
New conversation -
-
-
And by "other things" you mean things like subprime residential mortgages?
-
Subprime residential mortgages have exactly the same capital structure as regular residential mortgages, on an asset level: common equity (what you own) and senior debt (what the bank owns). Similar on a bundled level, too.
- 4 more replies
New conversation -
-
-
I think where those with a tech-primary-experience can misdiagnose is in issues of liquidity versus solvency. I’m wary of complicated capital structures because they get highly illiquid at the wrong times particularly if in novel assets/markets. Tech doesn’t solve that.
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.