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DevonFangs
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March 19th, 2013, 11:17 am

QuoteOriginally posted by: GamalDevonFangs, how many quants work in model validation wordwide? Probably thousands. How many warnings did the industry get from MV about the infamous Gaussian copula before the crisis? Not a single one.And quite many people knew that the Gaussian copula was full of shit, I can show you the articles. I didn't price a single deal with the Gaussian copula, so my model validation was correct. But I was in FO then.No MV unit did validate the Gaussian copula correctly, ergo - MV doesn't validate models.Man, at that time you were already in FO not using Gaussian copula and I was just in college rolling joints. Must be the reason why I'm in MV now.
 
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Gamal
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March 19th, 2013, 11:23 am

You mean you're the only qualified model validator in the whole word? So you agree - one model validator worldwide is statistically insignificant.
 
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DevonFangs
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March 19th, 2013, 11:27 am

QuoteOriginally posted by: GamalDevonFangs, how many quants work in model validation wordwide? Probably thousands. How many warnings did the industry get from MV about the infamous Gaussian copula before the crisis? Not a single one.And quite many people knew that the Gaussian copula was full of shit, I can show you the articles. I didn't price a single deal with the Gaussian copula, so my model validation was correct. But I was in FO then.No MV unit did validate the Gaussian copula correctly, ergo - MV doesn't validate models.Anyway, MV is a control functions: if it's done in a decent way it can add value, otherwise it's yet another layer to make regulators happy. I never said it gets anywhere close to the FO in terms of creativity and money and possibly careers perspective. To be honest, I'm sick of all this risk management BS too. But why do you feel like you need to say all the time how much you despise MV people, instead of keeping things in the right perspective. For example, I systematically save the desk some time by designing tests that prevent regulators from coming to ask questions directly to them. Very rarely I go to the quants and bust balls about how shitty their model is. In my view, it's a depressing win-win consistent with the current status of the financial industry.
 
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DevonFangs
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March 19th, 2013, 11:28 am

QuoteOriginally posted by: GamalYou mean you're the only qualified model validator in the whole word? So you agree - one model validator worldwide is statistically insignificant.I didn't mean that! I said I was rolling joints
 
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Gamal
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March 19th, 2013, 11:37 am

QuoteOriginally posted by: DevonFangsBut why do you feel like you need to say all the time how much you despise MV people...Wrong. I don't despise MV people, those I know I respect very much and regret a lot that their above average skills are wasted. I mean only MV is wrongly positioned in most banks, be happy if it's not your case, it's an exception. Who is guilty? The same as usual - fat cats.
Last edited by Gamal on March 18th, 2013, 11:00 pm, edited 1 time in total.
 
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DevonFangs
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March 19th, 2013, 12:34 pm

QuoteOriginally posted by: GamalQuoteOriginally posted by: DevonFangsBut why do you feel like you need to say all the time how much you despise MV people...Wrong. I don't despise MV peopleMy bad, indeed you never said that.
 
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katastrofa
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March 19th, 2013, 1:21 pm

Gamal, do you think that if MV rejected Gaussian copula models, people wouldn't lose money on CDOs? I don't buy it.
 
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Gamal
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March 19th, 2013, 1:45 pm

QuoteOriginally posted by: katastrofaGamal, do you think that if MV rejected Gaussian copula models, people wouldn't lose money on CDOs? I don't buy it.I can tell you only about my experience - we've rejected the Gaussian copula, we didn't lose money on CDOs. The fund was disolved because the market evaporated and not because of losses. Of course, it wasn't about one or another model but the ability to identify risk factors of catastrophic characters - and the infamous Gaussian copula didn't have it.
 
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katastrofa
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March 19th, 2013, 1:57 pm

What did you use instead? Common sense?
 
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Gamal
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March 19th, 2013, 2:08 pm

Everybody used common sense, if you remember the atmosphere in the years 2007/2008, the crisis was in the air and everyone expected it. But common sense isn't enough to show how to behave - what to sell and first of all what to buy, people avoid buying at the edge of a crisis. We had a version of Poisson loss model. Actually it wasn't published then and I thought it was my invention. Quite probably it was.
Last edited by Gamal on March 18th, 2013, 11:00 pm, edited 1 time in total.
 
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DevonFangs
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March 19th, 2013, 2:08 pm

QuoteOriginally posted by: katastrofaWhat did you use instead? Common sense?The best contraceptive is abstinence.
 
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katastrofa
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March 19th, 2013, 3:05 pm

@GamalWas it something like this?
 
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Gamal
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March 19th, 2013, 3:16 pm

Exactly. And one of your compatriots published in Risk something very similar.
 
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DevonFangs
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March 19th, 2013, 3:50 pm

QuoteOriginally posted by: GamalExactly. And one of your compatriots published in Risk something very similar.Really? You used that? Woah! I like Brigo and Pallavicini, but I always had the feeling this was unimplementable mental masturbation.
 
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katastrofa
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March 19th, 2013, 4:16 pm

I think Brigo lost it when he proposed to create a market in CVA, with specialised insurers providing protection against counterparty default (think monoline insurance but on a much larger scale). When I asked him about the problem of information asymmetry, he said "yes, that's a problem which would need to be sorted out somehow".Gotta love the academics - anything goes, as long as the paper is publishable ;-)
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