LTCM did worse than average risk modeling because they assumed a bunch of assumptions about risks being normal distributed and thus thought that their investments were less risky than traders would commonly assume. See Nasim Taleb (I think the Black Swan) for more details.
The fact that the market currently implies an 80% chance of default suggests that default is well priced in by the risk models.
LTCM did worse than average risk modeling because they assumed a bunch of assumptions about risks being normal distributed and thus thought that their investments were less risky than traders would commonly assume. See Nasim Taleb (I think the Black Swan) for more details.
The fact that the market currently implies an 80% chance of default suggests that default is well priced in by the risk models.