The Formula That Killed Wall Street - The Gaussian Copula - Wired - Felix Salmon (Updated) The reference of this post is an article is from Wired magazine, it's by Felix Salmon, who you might know from Seeking Alpha, the article is interesting in its depth (it has none!).

The article is being commented on LinkedIn this morning but it reflects a zero level understanding of the Gaussian Copula (the subject of the article), which then maybe reflects why "the wizards of wall street" got it so drastically wrong, its nothing to do with the technique, its just that they did not understand 1) what it is for and 2) how it does what it is for. Certainly the WIRED article reflects no understanding of either in a parable about a kindergarten (says all that is necessary, really).

Lloyds Banking Group raised 6.75 billion US dollars last week in 2 and 3 year money of government guaraunteed liqudity last week. You may have noticed that Microsoft also raised 3.75 billion dollars in its first ever issuance on the debt capital markets last week, too; a sum which it immediately promised it was not going to use to buy SAP!! As Piper Jaffray comment in their Debt Capital Markets Update: "The high-yield primary market continues its strong run, with new-issue volume for the second quarter to date nearly twice that of the first quarter of 2009, at $23 billion versus $13 billion. In May alone, more than $11.8 billion has been priced to date, with a $3 billion backlog."

This morning I could be back at school or University, reading this; "City traders are braced for turmoil in UK financial sector stocks this week, when the Federal Reserve releases results of health checks on 19 US banks on Thursday. At least two big banks are believed to have failed the "stress tests"." from here; http://www.theherald.co.uk/business/news/display.var.2506081.0.markets_braced_for_results_of_banking_stress_tests_in_us.php

The REvolutions blog understates the content reference beautifully; "The presentations from the R/Finance 2009 conference are now available". I posted a comment having read the presentations; "The quality of these presntations is second to none, this collection is a web resource, which should be mandatory reading in any bank credit risk department or asset manager worldwide.

“Risk management at BBVA –new focus and structure.”

The ten maxims of the risk function at BBVA:

Every Wednesday morning at 9.30am, five BBVA board members gather at the Spanish bank’s head office in Madrid. For the following three hours, they review new loans and discuss broader risks that might affect the bank’s operations. In 2007, they met a total of 74 times.

Sales of beer down 6.8% in the first quarter of 2009

WIESBADEN – As reported by the Federal Statistical Office (Destatis), the beer producing and storing establishments in Germany sold 20.7 million hectolitres of beer in the first quarter of 2009. That was a decrease of 1.5 million hectolitres (–6.8%) from the corresponding period of the previous year.

This is an edited extract from ‘Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe’ by Gillian Tett.

THE END OF THE LINE FOR THE RATINGS AGENCIES?

http://www.bloomberg.com/apps/news?pid=20670001&sid=a6NdKd8CfR2A

“We know the spreads are more accurate than ratings”

Client Advice - Crowding Out.

DE: Building industry in February 2009: Value of orders received down 17.5% from the previous year

By Steven Husk, FRSGlobal, published at finextra.com

In April, the Bank for International Settlements has published three new papers which develop the body of knowledge (the theory forge, as we like to call it) in the topic of Credit Risk analytics, stress testing and Economic Capital quantification.

United States Government Accountability Office - Review of Regulators’ Oversight of Risk Management Systems

FINANCIAL SECTOR PRO-CYCLICALITY

LESSONS FROM THE CRISIS

From the the official communique issued at the close of the G20 London Summit, the only reference to "Impaired Assets", is paragraph eight;-

The European Central Bank Research Bulletin has a New design, for enhanced readability and a better presentation of ECB research work. The half-yearly release of the Research Bulletin (RB) is a convenient way to stay informed about the most interesting and recent results from ECB research. Each issue presents 2-3 topics.

The Topics this month are:

This paper proposes a method to incorporate information from Dynamic Stochastic General Equilibrium (DSGE) models into Dynamic Factor Analysis. The method combines a procedure previously applied for Bayesian Vector Autoregressions and a Gibbs Sampling approach for Dynamic Factor Models. The factors in the model are rotated such that they can be interpreted as variables from a DSGE model. In contrast to standard Dynamic Factor Analysis, a direct economic interpretation of the factors is given.

On some key research issues in Enterprise Risk Management related to economic capital and diversification effect at group level