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One simple proxy: implied volatility of put options. Since put option buyers only make money when the stock falls--dramatically, and quickly--they are the most
by byrneseyeview 17y ago
One simple proxy: implied volatility of put options. Since put option buyers only make money when the stock falls--dramatically, and quickly--they are the most effective way to bet that someone is cooking the books.
- joubert 17y agoHow would they know the books are being cooked?
- byrneseyeview 17y agoHow would a rating agency? The options traders have money on the line; the rating agency is betting its reputation--which means it can exploit mispricings in the reputational marketplace by doing a bad job and hiring good PR people and lobbyists. This is the purest, most cynical way to explain ratings agencies in general.