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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 .....
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 .....