The Algorithmic Collateral Problem
- James W.
- 3 days ago
- 1 min read
A Manhattan office tower lost 33% of its value in 4 years. No structural damage. The building didn't change. Market conditions changed.
If your AI credit model was trained during the rising-value years (2015-2020), it learned: office buildings go up. When asked to evaluate the same building in 2024, it's working with a pattern that no longer exists.
This is the algorithmic collateral problem: AI models confidently assigning valuations based on historical patterns that may not persist.
How are you validating your CRE credit models against market regime changes? That's ACRGA-VALIDATE.
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