Tuesday, February 24, 2009

"TALENT RETENTION"???

I had a suspicion that the upper-management MOTU didn't really understand the mathematics behind CDOs and CDSs and Felix Salmon confirms this suspicion:
Another was that the quants, who should have been more aware of the copula's weaknesses, weren't the ones making the big asset-allocation decisions. Their managers, who made the actual calls, lacked the math skills to understand what the models were doing or how they worked. They could, however, understand something as simple as a single correlation number. That was the problem.

I also suspect that most of the people getting retention bonuses are the same idiots who didn't understand the math. (h/t Paul Kedrosky)

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