View Full Version : Jesse - Notes from Underground

02-01-09, 07:50 AM

This article just strengthens my own belief. The derivative mess is just amazing. As I mentioned in another thread, I was involved in a small way in 1996- 1998 (when I retired). I developed a equity linked annuity tied to the SP 500. We would pay out after 7 years an amount based on the highest point reached the SP 500 reached on each of the seven anniversaries. I priced this with a large model, and then Lehman took almost all of the risk. The pricing was reasonable if you ignored the outliers, but .....