But Mr. Li cut that corner by using prices for credit default swaps as a proxy for the actual data. This is basically equivalent to an actuary using the price

But Mr. Li cut that corner by using prices for credit default swaps as a proxy for the actual data. This is basically equivalent to an actuary using the price of life insurance to guess your life expectancy. It works fine, until someone closes the loop. If you read "The Greatest Trade Ever," one of the common themes is that the prices don't correlate the way they should--defaults don't affect CDS prices, for a while, then CDS prices overshoot, then defaults catch up.