The disbursement of the sixth tranche was due to be approved in September 2011; however, the approval was suspended following findings that Greece would be unable to achieve its budget deficit target for both 2011 and 2012.
While financial models and stress testing methodologies are some of the tools that help us in dealing with the issue, they are based on observable market parameters. Oftentimes, the problem arises through the so called “illusion of knowledge” (Barber and Odean / 2001) – tendency to make stronger inference than warranted by the data.