Work the problem backwards.
How does the finance company measure the long, left tail of an uncentered event distribution, such that the losing deals are bounded? The run the system to the edge such that a tiny default queue develops. Then they have an estimate.
It is running the problem backwards because insurance companies measure bad events first, then estimate the yield necessary to keep total gains and losses bounded.
So we get these odd incentives when we work it backwards. The fire insurance company needs the occasional house to burn so that it can estimate, over the domain, how many houses will burn.
Free entry and exit. The sandbox queueing system allows this, losses become tiered. You do not go to zero, you go down one quant. It is a great idea, traders can work their prequals, they never get totally locked out. We accept defaults, cannot live without them.
Like my voting for a libertarian. You are all lucky, noise gets more votes.
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