Who could have guessed? The fantasy AAA-ratings of the CPDOs issued by Moody’s seem to have been based on a typo in the computer code used to compute the ratings!! According to FT (today), the ratings should instead have been four notches lower!
Again, common sense together with a basic knowledge of risks and returns in financial markets seems to have won over greed, overstretched models and naïve quants with their mechanical use of historical data.
And most importantly, I was right all along! :)
