Economics
Calculating the Cost of the Libor Scandal to Investors
Analysts devise ways to calculate how rate rigging hurt investors
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Paula Ramada, who earned a doctorate in economics at the Massachusetts Institute of Technology, says she knows how to calculate how much an investor lost when banks allegedly rigged benchmark interest rates. Now she just needs a team of analysts—and a client to fund the work.
Ramada is among a growing number of mathematicians and analysts trying to tackle a key question to emerge from the Libor scandal: If banks manipulated rates tied to $300 trillion in instruments ranging from mortgages to student loans, how much do the firms owe investors? With lawsuits wending through courts, the damage payments could climb into the billions of dollars.