Tweets

  • Sun Apr 30
    Anybody know if there any recorded bubbles before theTulip Mania?
  • Sat Apr 29
    RT @LSE_SRC: Workshop on #Networks in Macro & #Finance on 19 June https://t.co/9iyaLDgOmv Places are limited. Register now. Free to attend.
  • Sat Apr 29
    The fuzziness of the macroprudential agenda and the interplay of political pressures may undermine monetary policy. https://t.co/ERKGGSw4dn
  • Wed Apr 26
    RT @BarrySchachter: "risk management has become all about standards and reporting regulation. I officially give up on [it] as an exciting f…
  • Wed Apr 26
    European Bank Executives Push Back at Regulators https://t.co/2vhorbUQ6Z
  • Wed Apr 26
    Are Traders Getting an Early Glimpse at U.K. Government Data? Currency Markets Suggest Yes. https://t.co/wkGX3Qjr7A
  • Tue Apr 25
    RT @MacroPru: @JonDanielsson You can't manage what you can't measure. #SystemicRisk https://t.co/8ZeJNFxVHV https://t.co/VyJVcBbpO4
  • Mon Apr 24
    Shows how badly systemic risk is measured. We need better approaches. https://t.co/N47gnjE75a
  • Mon Apr 24
    Policy objective: more resilient financial system, fewer bad crises and more benefits for the economy and society. https://t.co/iDGOp0xTto
  • Sun Apr 23
    We rely too much on risk measurements for important decisions. https://t.co/pGLSAJN7ys
  • Sat Apr 22
    On the folly of trusting the Riskometer https://t.co/2oOmF3VENR
  • Fri Apr 21
    De-industrialisation and not globalisation is what matters. A good piece on @voxeu https://t.co/KSYEBmEgyG
  • Fri Apr 21
    RT @LSE_SRC: #SystemicRisk What Research Tells Us and What We Need to Find Out https://t.co/yVHueiaBNd #finance #regulation #economics
  • Fri Apr 21
    A depressing take on what this country has become. https://t.co/HQ6AViY6eO
  • Thu Apr 20
    Madness in the method: Basel grapples with G-Sib riskometer. https://t.co/2oOmF3VENR?
  •  

    Is Julia ready for prime time?

    I really want to like Julia. She promises to solve all the frustrations with other numerical languages.

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    With capital controls gone, Iceland must prioritise investing abroad

    The Icelandic government announced today it it lifting its capital controls. Private investors, pension funds and the government need to prioritise investing abroad to lower the chance of another crash.

    The Icelandic authorities in November 2008 imposed capital controls because they were in a panic over how to react to the crisis. The IMF was an enthusiastic supporter, its representative at the time arguing that it was one half of a belts and suspenders policy, the other being interest rates of 21%.

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    Competing Brexit visions

    I have been struggling to make sense of the Brexit debate. Perfectly reasonable, well informed and highly intelligent people reach diametrically opposite conclusions, all impeccably argued. In order to make sense of the debate, I did what any quant might do and made a graph of the competing Brexit visions.

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    Systemic consequences of Brexit

    I got to present on the systemic risk consequences of Brexit in a SUERF conference. The slides can be downloaded here. The main conclusions are:

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    Interview on þjóðbraut on Hringbraut

    I was interviewed on the new programme þjóðbraut on the Icelandic TV station Hringbraut. Only if you speak Icelandic.

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    The McNamara fallacy in financial policymaking

    One of the puzzling things about post-crisis financial policymaking is the dual understanding that we missed the excessive build-up of risk before 2007 in spite of having all the numbers right in front of us and at the same time founding the new world order on numbers and measurements. Have the policymakers fallen for the McNamara fallacy?

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    Farewell CoCos

    One can only welcome ECB’s rethinking on CoCos. They make banks’ capital structures unnecessarily complicated and create hidden risks.

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    Will Brexit give us the 1950s or Hong Kong?

    At the risk of overgeneralising, Brexiteers have two, rather different world views — 1950s Britain or the hip, modern, perhaps like Hong Kong. One certainly is more likely.

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    Of Brexit and regulations

    One often hears from Brexit supporters that too many regulations come from Brussels, that it would be much better if we could regulate ourselves. At least when it comes to finance, that argument just does not hold water.

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    Is MacroPru Procyclical?

    I know it is heretical to even suggest it, but is it possible, just possible that MacroPru could be procyclical?

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    IMF and Iceland

    I just spotted an interview with the IMF representatives to Iceland about their policy prescriptions, and it did make for an interesting reading.

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    Stability in Iceland

    I got to address the annual meeting of Business Iceland today on the topic of “On fiscal and monetary policy in Iceland”. The main theme was about what to do about the high economic volatility.

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    Of tail risk

    Suppose one cares about tail risk, what is the best way to estimate it? There are two, not mutually exclusive, ways; statistical and structural. Which is right?

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    What are risk models good for?

    One can endlessly criticize risk models, but that is just too nihilistic. So, what are the good for? There are three camps, the model believers, the rejectionists and the healthy skeptics. I’m going to make the case for the last below.

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    Perceived and actual risk

    Risk can be classified into what is predicted by models — perceived risk — and the the fundamental — underlying risk, actual risk.

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    Models and regulations and the political leadership

    Why do the regulatory authorities seemingly fall into the category of model believers, if not quite to the view that there must be one true model? Well, it is sort of inevitable the way the regulatory process works.

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    Why do we rely so much on models when we know they can't be trusted?

    There a lot of evidence that models are less than perfectly reliable. Why then do we rely so much on models in decision-making, and especially financial regulations? Because there are three types of people: Believers in true model, skeptics who accept model risk and nihilistic rejectionists.

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    Does a true model exist and does it matter?

    When designing models, the underlying assumption is often that the model captures the true data generating process. Does a true model exist? To me, the question is completely irrelevant.

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    The point of central banks

    Much of the analysis of the recent market turmoil is amusing. Take the Wall Street Journal, Why the Fed Is the Root of Much Market Turmoil: Fed is a key reason markets have plunged and risk of recession rising . Here is a quote:

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    Impact of the recent market turmoil on risk measures

    Last January I looked at how the Swiss FX shock affected the most popular risk measures. Events of the past week give us another interesting test. My daily risk forecast shows the various risk measures for a number of assets, but focus on the SP-500, and the following picture taken from the site today:

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    Objective functions of macro-prudential regulations

    I have been in a conference for the past few days, and have seen a few presentations on macro-pru type regulations. I was bothered by this work.

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    Risky business: Finding the balance between financial stability and risk

    Our LSE blog It is important that we understand and do something about systemic risk. The problem is that we desire two incompatible things simultaneously: we wish the financial system to be safe; but we also want to finance risky economic activity.

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    Regulators could be responsible for next financial crash

    LSE report warns that forcing financial institutions to forecast risk in the same way could mean they will all end up being caught unawares.
    A writeup in the Telegraph about our Magazine.

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    How Iceland is falling behind. On Sprengisandur

    I got to be on the radio show Sprengisandur, if you understand Icelandic. After discussing Greece, got asked about Iceland. The Icelandic authorities could have made some of the same mistakes as the Greek government did in its crisis, but overall, the three governments since then, have done a decent job. All, in their own way, paving the way for prosperity.

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    Greece on Sprengisandur

    I got to talk about Greece on the radio show Sprengisandur, if you understand Icelandic.

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    Market moves that are supposed to happen every half-decade keep happening

    May 14, 2015
    Bloomberg today had an interesting piece, called Market Moves That Are Supposed to Happen Every Half-Decade Keep Happening. Here is their self-described “terribly simplistic list”

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    Capital controls

    May 12, 2015
    I got to participate in a discussion on capital controls, sponsored by Samtök Atvinnulífsins which could be translated as the Icelandic Chamber of Commerce. The event was held in the lovely Harpa. If you read Icelandic, the writeup is here with my slides.

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    What do ES and VaR say about the tails

    So, does ES capture tail risk, but VaR not? Therefore the Basel committee is correct, and we all should use ES. Is that true?

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    The Danish FX event

    Denmark had a small FX event on March 20, in the context of the Swiss FX shock, it is not much a of an event, but it does reinforce stereotypes.

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    On the Swiss FX shock

    Just looked again at the what I did on the Swiss FX shock, looking at how the various risk measures performed in the days after the event, and also looking at the risk of the inverse FX.

    The original analysis just looked at the risk of the Franc appreciating, but why not look at the risk of the euro appreciating.

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    My bloggs on VoxEU