Danny
2008-09-09 00:20:44
BC, the methodology for these studies are similar to those used to estimate Value at Risk for derivatives. The main difference is that VaR has 99% probability of being correct and these studies have a confidence level of 95%. So the current sub-prime crisis is 5 times less likely than these studies being accurate. The issue is that like movement of underlying mortgages, deaths in Iraq aren’t random so the methodology is simply wrong especially if you generalise from 40 households to a country of 26.1 million.
