jiujai

agree.. every finance / econ / math / stat u grad know in college that all those model has assumptions. i've lot of fds work in finance, exec senior level in those big banks in mess.. Those finance guys are smart people and shouldn't forget that.. more likely "temporary memory lost"

This guy model is obviously assuming the CDS spread is calculated with current data, hence the CDS price following the risk. So any product bases on it should have a mechanism to adjust the risk with latest CDS price. Well.. math and stats can always be twisted from it original form to tick commoner ...