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P!

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Perhaps because I started my career in 1987 trading defaulted and restructured bank loans during the LDC Crisis, I have spent the last 30 years as a finance history junky...

The world's worst quant?

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Good article. I think (hope) that sovereigns are less susceptible to the corrosive effects of credit derivatives and "Merton" modelling than corporates. In the case of corporates, the quants naively use stock price as a proxy for corporate asset value: and hence stock price vol as a proxy for asset vol. This causes a credit death spiral as volatile, falling stock prices imply worse credit which leads to more stock shorting. Thankfully spot FX and short term interest rates are close enough to reality for this effect to be dampened by "real money" buying. (E.g. purchasing power parity provides a soft boundary to FX weakness in open economies.)