Category Archives: Risk Management

How Greenspan Got it Wrong

NYT: Flaw in Free Markets: Humans First, those models assume that rewards depend only on absolute performance, but in the real world, payoffs are often tightly linked to relative performance. When a valuable new piece of information becomes available to … Continue reading

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New Models for Not-So-Efficient Markets and Risk Management

NYT: Wall Street’s Math Wizards Forgot a Few Variables But the real failure, according to finance experts and economists, was in the quants’ mathematical models of risk that suggested the arcane stuff was safe. The risk models proved myopic, they … Continue reading

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Back to Business as Usual? Great Reading

WSJ: Finance Reform Falters as Shock of '08 Fades NYT: A Year after a Cataclysm, Little Change on Wall Street Perhaps the best indicator of Wall Street's revived exuberance is its continued pursuit of exotic financial engineering. The market for … Continue reading

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Everyone is Talking About This Krugman Article. A Must Read.

NYT: How Did Economists Get It So Wrong? Another view (thanks, Steve) The National Interest: The Last Temptation of Risk Refutation of Krugman: Download 2009-9-10 krugman_response

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Maybe Risk Doesn’t Approximate a Normal Distribution After All…

Download 2009-9-8 Some Funds Stop Grading on the Curve – WSJ.com Last year, a typical investment portfolio of 60% stocks and 40% bonds lost roughly a fifth of its value. Standard portfolio-construction tools assume that will happen only once every … Continue reading

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