“”At the same time, significant gains in computing power allowed the creation of financial products with many more variables — and gave individual traders like Mr. Kerviel much more power to move them at lightning speed.
“Twenty years ago, it was hard to accurately price a corporate bond, let alone calculate credit spreads,” said David Munves, a managing director in the capital markets research group of Moody’s, who spent 10 years at Lehman. Even in the mid-1990s, he said, bond traders would use oversize calculators at their desks to figure out yields down to one-sixteenth and one thirty-second.
Now, he said, traders can call up databases that feature 400 fields for a single bond. Once-straightforward features like duration and yield are sliced a multitude of ways. “As you build more complex products, you get further away from real-world events, like actually having to sell these bonds,” he said.
I'm Drew Breunig and I obsess about technology, media, language, and culture. I live in New York, studied anthropology, and work in advertising technology.
These are reactions to things I feel are important.
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These are reactions to things I feel are important.
Follow me on Twitter.
