June 21, 2009

Risk Manageemnt without markets

The real test of risk management is provided by the financial Darwinism of the markets. By reading market signals about products--pricing of assets, pricing of insurance on those prices--banks develop models that can inform them about risk. By reading market signals about their own financial health--their cost of capital, their borrowing cost, the cost to insure their debt, the willingness of customers to enter into trades--risk managers get a view about the risks of their own portfolios and the strength of the business model.

-- John Carney.

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June 14, 2009

Macroeconomics considered harmful

Most work in macroeconomics in the past 30 years has been useless at best and harmful at worst.

-- Paul Krugman.