Hacker News new | past | comments | ask | show | jobs | submit login

Yes, all (ex) AAA-rated derivatives of subprime mortgages are highly correlated. No, that (in itself) does not make them more risky. You just do not want to invest %100 of your portfolio in them.

E.g. U.S. Government debt is currently AAA rated. But all bonds and treasuries are highly correlated: in five years either 0% or 100% of US Gov debt will still be AAA.




Yeah, it's somewhat similar to weather predictions for nearby areas. If the weather forecast predicts 10% chance of rain for Palo Alto, and the same for East Palo Alto, Mountain View, Atherton, etc., the expected outcome is not that it will rain in exactly 10% of those places. It will probably rain in close to 0% or close to 100% of them.




Consider applying for YC's Summer 2025 batch! Applications are open till May 13

Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: