3 ms·

Sounds like the financial version of dark matter

• lordnacho 4y ago
  A fudge factor that makes your models agree with observation? Yeah, pretty much. I was never an expert in CDS so I always wondered if other people had better ways of dealing with it. But nobody I've come across has ever offered anything other than 40%.
• WastingMyTime89 4y ago
  It’s not necessarily. A peculiarity of finance as a field of study is that a lot of the people studying finance only care about direct applications and a lot of the people teaching finance had this mindset when they learnt. It’s easy to end up with some poorly taught material. If you carefully looked at the model which gave rise to the equation you are considering, there probably is a very tangible meaning to the figure everyone is ball parking.
  • itronitron 4y ago
    >> there probably is a very tangible meaning to the figure everyone is ball parking 40 is awfully close to 42
• curiousgal 4y ago
  Not really. Quants modelled stochastic recovery rates and they saw that it doesn't really add much. Fixed recovery rates work just fine.