Mohammed El Erian, the stud fund manager of the Harvard Endowment wrote a nice comment piece in today's FT. He suggested that a way to avoid future systemic financial shocks due to failures of groups investing in the ever-growing complex financial instruments (CDOs for example) is to educate all the parties involved in the party.
According to him the three parties involved: the institutions that come up with these models, the end users to whom the ultimate risk is shifted to, and the credit rating agencies that rate these models should all be equally educated in these instruments. Today apparently the later two have limited knowledge of the instruments.
It does make sense to me. My intial response after reading 1/5th of his column was that if someone wants to look at a new career in the financial sector, working for a credit rating agency in the short-term after having a MFE type education would be ideal. Wouldn't probably pay-off initially but a 3-4 year stint at a rating agency (Fitch/Moody's) would place you in a nice position to go work for anyone after that.
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