Tweets

  • Sun Jul 23
    RT @djmgaffneyw4: So there is a difference between right & left Brexit. Right want to leave cos EU is agent of regulation, left cos EU agen…
  • Fri Jul 21
    RT @RobDotHutton: If you give it any thought, it's astonishing that it's taken the prime minister a year to sit down with businesses and di…
  • Fri Jul 21
    Policy that increases systemic risk. @FinRegPhilip " Prop traders rebuffed by FCA on capital modelling " https://t.co/uzdiQcWcxK
  • Thu Jul 20
    RT @LSE_SRC: NEW: Executive Masterclass - Modern Sovereign Debt Risk Management: A Systemic Approach https://t.co/d810Rr1NX6 on 2-3 Oct #fi…
  • Thu Jul 20
    If you can’t create a risk model for cyber risk does it mean it doesn’t exist? https://t.co/v9qEbwwNIB
  • Wed Jul 19
    RT @Lutfeys: Lunch after a robust meeting of the board of @LSE_SRC https://t.co/xq7zaluBPl
  • Fri Jul 14
    State-of-the-art stress modelling by the Bank. https://t.co/yN6RXz8Tr5
  • Wed Jul 12
    I fully agree. Students Are Better Off Without a Laptop In the Classroom. https://t.co/aW4dE2U0R5
  • Tue Jul 11
    Now, what does this remind me of? https://t.co/BdqfYwUveP
  • Mon Jul 10
    So Santa Claus does not exist. https://t.co/s0no74On8V
  • Thu Jul 06
    RT @mseltzermayr: He said before buying a haircut from China https://t.co/NZE5Tug4g2
  • Thu Jul 06
    Regulators always seem to be on the banks’ side, either the macropru or the micropru regulators. https://t.co/sbSnND2nDV
  • Wed Jul 05
    RT @LSE_SRC: Today we host Fudan partners on @ESRC & NSFC Chinese debt capital markets project. Delegation includes Chen Xuebin, Sun Lijian…
  • Tue Jul 04
    RT @LSE_SRC: .@voxeu 10 years! A great platform for research-based analysis. Our @JonDanielsson is in top 10 most-viewed authors. https://t…
  • Mon Jul 03
    Spot on by @Peston. The Torys of today seem to stand for precisely nothing of significance. https://t.co/o5XkDGu7pB
  •  

    University of Iceland seminar

    I did a seminar at the University of Iceland. The first half of the presentation was about risk and regulations and the second part is about economic policy in Iceland. The slides can be downloaded from here.

    The announcement is here.

    The slides are in English but the Icelandic title is:

    Stenst uppskriftin í raunverulegum bakstri? Getur þjóðhagsvarúð og peningastefna skilað því sem lofað er - eða aðeins lækka hagvöxt að nauðsynjalausu?

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    Should macroprudential policy target real estate prices?

    Keynote speech at the bank of Lithuania on “Should macroprudential policy target real estate prices?”

    The slides can be downloaded here and the presentation can be seen here.

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    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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