Crowdsourcing risk assessment

Discussion in 'Professional Trading' started by omegapoint, Jun 7, 2009.


    The ratings agencies have proven they can't be trusted. If you know your way around, then contribute to the knowledge base via Wiki.
  2. All that will do is turn ratings into an episode of "Survivor" - alliances and lies. Which is pretty much what we already have.

    Putting aside the issue that it isn't even theoretically possible, the reality is that it is in NO ONE'S interest to have complete and accurate assessment of risk - therefore it is extremely unlikely to happen.

    This might explain it better than I could. You can't possibly think that the ratings agencies as they operate now can't be improved upon. The videos first half is platitude, the second half of it will explain how they hope the paradigm will evolve to make for an improved approach to adding transparency to risk assessment
    that dominates now.
  4. Their argument is crap. First they point out that some people were saying "the truth" - then they claim we have a single-sourced information system. This is completely inconsistent.

    Effectively, all these guys are doing is wrapping EMH crap in a shiny new wrapper. The bottom line is that if we COULD accurately assess risks, the excess return on the investment would drop to essentially zero. Which makes the market useless, and is why it will not ever - cannot ever - happen.

    The current system (eventually) oversizes rewards for people who actually know what they are doing, and kills people who don't. Which is what is supposed to happen...

  5. They're not proposing to capture Risk out to the edges and put it in a bottle afterall they're still calling it Risk, just invoking an alternative to the kinds of incentivized erroneous ratings that contributed to the meltdown. Frankly I trust the basic concept more than the bedfellow approach that exists now ...courtside seats for AAA.
  6. It was not the ratings that caused the meltdown. It was common knowledge for anybody who bothered to look at it that the ratings were crap. The first loud warnings on this were a full 18 months before the shit hit the fan - this was not secret knowledge.

    The cause of the meltdown is that "investors" didn't want to believe it and bet the house the other way. The primary reason for this is that they're all playing with OPM and are therefore not "incentivized" to actually pay attention.

    The proposed "solution" will do nothing to solve that problem.
  7. You admit there is a problem and its with the ratings method as it exists? What the authors propose is too early to evaluate one way or the other but alternatives can't be bad; I like alternatives in pretty much every facet of my life. Did you actually watch the video all the way through? It seems to me the authors have uncovered a way to add transparency to evaluating investments where now theres an oligopoly that has rating cornered.
  8. No.

    The problem lies in how money - especially large money - is invested. The current ratings system is a symptom of that problem, not the "cause" of anything.

  9. How the money is invested? The idea is to have ratings that can be relied on, thats all. Nothing wrong with a little transparency.
    Unless it benefits you to have an investing public, the competition, that isn't well informed.
  10. sjfan


    (No qualm about the comments on rating agencies. This isn't about them, it's about this supposed crowdsourcing website idea).

    The website presents some API for financial data and an "area" for posting models. How does this do anything? SEC filings have been freely available not only through the SEC website, but also through yahoo and the likes. Moreover, the "big boys" don't systematically get filing ahead of the public. (otherwise it would be material and nonpublic info;).

    So what's the point this website? Just have filings in XML doesn't automatically make the 'crowd' any more competent in analyzing complex financial statements in GAAP (ie, why does this international company translate its foreign income this way and the other dude does something else? FRAUD? no, required GAAP classification accordingly to esoteric but reasonable rules)

    #10     Jun 8, 2009