Monthly Archives: May 2012

Graceful Failure and JPMorgan’s Loss

The biggest challenge facing regulators and politicians following the financial crisis is to engineer a regime that allows graceful failure for systemically important financial firms. Failure is, ironically, one of the great strengths of a market-based economy – the creative … Continue reading

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Personal Income and Consumption

Summary I have argued for some time that a robust recovery will occur after households adjust spending downwards. The “savings rate” in the U.S. has risen since the financial crisis, but this reflects changes in taxes, not changes in household … Continue reading

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Risk, Black Swans, and Brown Turkeys

The mathematics of volatility and VaR alone are just not enough for understanding risk in today’s environment. We are living in extraordinary times – probably the most extraordinary in three generations. (Don’t get me wrong – I’m not arguing that … Continue reading

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JPMorgan Chase loss seems to be an idiosyncratic trading loss

The JPMorgan Chase loss seems to be a plain-vanilla trading loss – unfortunate and bad news, but not a sign of something more serious in the financial system. Bad as they are, we have lived with these kind of trading … Continue reading

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Rights and Wrongs of Value at Risk (VaR)

With the loss announced by JPMorgan Chase last week there are, once again, loud and varied denunciations of Value at Risk or VaR. Unfortunately, such talk sheds little light upon and often shows misunderstanding of the underlying issues. Take the … Continue reading

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JPMorgan Chase loss and idiosyncratic vs. systemic risk

The loss announced by JPMorgan Chase last week raises many interesting questions, one being the distinction between idiosyncratic and systemic risk. The distinction between idiosyncratic risk versus systemic risk (and idiosyncratic vs. system events) is vitally important because the sources … Continue reading

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Quantitative Risk Management

Published by Wiley in May 2012, this book presents a road map for tactical and strategic decision-making designed to control risk and capitalize on opportunities, covering the techniques and tools used to measure and monitor risk. These techniques and tools … Continue reading

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