No Free Lunch

New asset classes like junk bonds and subprime mortgages initially promised high returns without too much risk. Many investors were surprised to find that the risk premium was insufficient to provide for actual losses when they came. Modelers need to adjust for incomplete investment cycles that include only the positive part (e.g., high spreads) but not the defaults and liquidity crises typical at the end of a cycle. By Max Rudolph

There are no comments yet.

Please log in to write the first comment.