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Economist's View: links for 2009-01-03
The Big Picture: Risk Mismanagement & VaR
Paul Kedrosky's Infectious Greed: Going Hunting for the Wascally VAR
The Aleph Blog: Bicycle Stability Versus Table Stability — II
GalaTime: Readings: Manufacturing Collapse, India & ZIRP, Risk Mis-Management
links for 2009-01-03
Economist's View —
... futures - Andrew Gelman
In Obama’s Team, 2 Camps on Climate - NYTimes.com
Who Saw The Housing Bubble Coming? - Bruce Bartlett
Ignoring the Oracles - Real Time Economics
Rethinking urbanisation - voxeu.org
Central banks and financial crises: Lessons from Latin America - voxeu.org
For now, stick with the non-seasonal numbers - News N Economics
What Led to the Financial Meltdown - NYTimes.com
S&P Case-Shiller House Price ...
Risk Mismanagement & VaR
The Big Picture —
... Terrific l o n g article in the Sunday Times Magazine by Joe Nocera, titled Risk Mismanagement. Its all about how Wall Street developed and still uses VaR — Value at Risk. ...
Going Hunting for the Wascally VAR
Paul Kedrosky's Infectious Greed —
... single person has offered me an argument I haven’t heard.” “I think VaR is great,” said another risk manager. “I think it is a fantastic tool. It’s like an altimeter in aircraft. It has some margin for error, but if you’re a pilot, you know how to deal with it. But very few pilots give up using it.” Taleb replied: “Altimeters have errors that are Gaussian. You can compensate. In the real world, the magnitude of errors is much less known.” Read it.
...
Bicycle Stability Versus Table Stability — II
The Aleph Blog —
... An article in the New York Times quoted by Barry Ritholtz on risk management tells some very salutary lessons. Value-at-Risk, and other systems that rely on liquid tradable markets fail when bid-ask spreads widen. ...
Readings: Manufacturing Collapse, India & ZIRP, Risk Mis-Management
GalaTime —
Big Picture: Global Manufacturing Collapse
Jayanth Varma: India in a ZIRP world
NY Times: Risk Mismanagement
“Risk modeling didn’t help as much as it should have,” says Aaron Brown, a former risk manager at Morgan Stanley who now works at AQR, a big quant-oriented hedge fund. A risk consultant named Marc Groz says, “VaR is a very limited tool.” David Einhorn, who founded ...
Risk Management for Beginners
The Baseline Scenario —
... Joe Nocera has an article in today’s New York Times Magazine about Value at Risk (VaR), a risk management technique used by financial institutions to measure the risk of individual trading desks or aggregate portfolios. Like many Magazine articles, it is long on personalities (in this case Nassim Nicholas Taleb, one of the foremost critics of VaR) and history, and somewhat light on substance, so I thought it would be worth a lay explanation in my hopefully by-now-familiar Beginners style. ...
Weekend Links of Interest
In The Money —
... 2008 Most companies don't plan to cut jobs in 1st quarter Billionaire Blowups of 2008 GE Struggles to Keep AAA Rating Mortgage-Bond Spreads Narrow on Fed Plans Thousands of stores to disappear in '09 Mutual funds suffer $320bn outflow Unwinding of carry trades triggers the yen's surge A long NYT article on risk management Hoyer says stimulus unlikely before inauguration ...
Sunday links: down but not out
Abnormal Returns —
Hedge funds are down, but not out. (Barrons.com)
Why we keep falling for financial scams. (WSJ.com)
Warren Buffett put some $20 billion of cash to work in 2008. (Marketwatch.com)
The world’s leading investment ...
Risk Management
Economist's View —
I probably should have done more to highlight the
article on
risk management by Joe Nocera that appeared in the NY Times Magazine this
weekend. Fortunately, James Kwak and others have it covered:
Risk Management for Beginners, by James Kwak: Joe Nocera has an article ...
about Value at Risk (VaR), a risk management technique used by financial
institutions to measure the risk of individual trading desks or aggregate
portfolios. ...
VaR is a way of measuring the likelihood that a portfolio will suffer a large
loss in some period of time, or the maximum amount that you are likely to lose
with some ...
A New Year's Roundup, and What's Ahead
DealBook —
Happy New Year. It was a long, tough 2008, and we hope you got some well-deserved time off over the past week or two to rest up for what is likely to continue to be another rough couple of months (if not longer, if you believe Nouriel Rabini). Talk of the financial crisis and the Madoff Affair will continue this afternoon with a hearing on Capitol Hill to examine Bernard L. Madoff’s alleged Ponzi scheme and debate whether Wall Street’s regulators need to be overhauled. Members of the House Financial Services Committee are expected to hear testimony from the Securities and Exchange Commission’s inspector general, H. David Kotz, who is already looking ...
TODAY'S OPEN: UP
Millionaire Now! —
"S&P 500 futures rose 5.5 points to 933.90 and Nasdaq 100 futures added 8.75 points to 1,273.50. Dow industrial futures rose 65 points, as traders hunted for signs that the deterioration in the world economy will abate." ...
The Shadow Banking System (by Russell Roberts)
Cafe Hayek —
I recently finished Krugman's The Return of Depression Economics and the Crisis of 2008. I learned a great deal from the book. It is full of interesting narrative about recent international crises (Asia, Mexico, Russia, and the current mess) and for the most part it is thoughtful and even-handed about what really happened. Krugman takes a few cheap shots at free-market ideas but much of the time he is gives alternative viewpoints to his own and talks with nuance about how economists don't fully agree on what caused this problem or that one or what should be done in various crises. When writing about the current mess, he makes the ...
How Are Gliders Like Nuclear Deterrence?
Freakonomics —
In the years since the Cold War, the threat of imminent global thermonuclear war has receded in the popular imagination. Computer hackers are buying up abandoned missile silos. It's been almost a decade since a major Hollywood film revolved around a U.S.-Russian nuclear exchange. But that doesn't mean deterrence has succeeded in finally staving off nuclear war. Stanford University Professor Emeritus Martin Hellman, comparing his love of gliders with his interest in nuclear deterrence, wants to remind you that when a system is 99.9 percent safe but the remaining 0.1 percent contains an absolutely catastrophic ...
The Economics of Models
The Baseline Scenario —
... Economic and financial models have come in for a lot of criticism in the context of the global financial crisis, much of it deserved. One of the primary targets is models that financial institutions widely used to (mis)estimate risk, such as Value-at-Risk (VaR) models for measuring risk exposures (which ...
