A structured product’s rating rests on how its loans are assumed to default together. When that assumption fails, the rating does.
Ask what a rating assumes about defaults happening together before trusting what it says about the pool.
Any question about 2008, about structured credit, or about why a highly rated instrument lost most of its value.
From The Big Short · 2015
Ask what period a model was fitted to, and whether that period contained the event you are worried about.
Any risk model, stress test or structured product that reports a probability of loss.
From Berkshire Hathaway's 2008 letter to shareholders · Warren Buffett
Seniority is a queue for losses; the thickness of the slices beneath you is your protection.
Any structured credit, securitisation or capital structure question, in an interview or on the desk.
From The Big Short · 2015