For those who haven't read it yet, the FT reports today that Moody's Investors Service gave incorrect AAA ratings to billions of dollars worth of a complex debt product because of a bug in its computer models.
Some senior staff within Moody's knew that products rated the previous year (i.e. 2007) had been given the top rating, and that after a computer coding error was fixed, their ratings should have been as much as four levels lower. As an extension, and my personal opinion, this is also why a broadly used backtest-engine should be preferred to the usual in-house one. Then again, I don't think all public backtesters fit the bill (you know what I mean). PS
