Felix Salmon

The unwilling risk-takers

Comment of the day comes from Chris:

The person most willing to take on risk is the one unaware he is doing so. He charges no risk premium…

Money market funds, risk, and cash

Eleanor Laise has the encouraging news this morning that Deutsche Bank is planning to launch a money-market fund whose shares fluctuate in value, rather than being artificially pegged at $1.

How has VaR changed over time?

Whenever I write about banks’ rising Value-at-Risk, a bunch of commenters tells me that duh of course VaR is rising, because VaR is a function of volatility, and volatility has gone up. So here’s my question: can someone come up with a baseline VaR chart, for a hypothetical bank which had, say, a fixed $1 million investment in the S&P 500. What would its quarterly Value-at-Risk have looked like over the past couple of years?

Goldman goes off-message

Goldman Sachs bankers are generally smooth, urbane, and on-message. But these days they’re clearly flustered. Why else would Goldman president Gary Cohn say something as arrogant and tone-deaf as this to the NYT’s Jenny Anderson?

Modelling model risk

Paul Wilmott has words of wisdom for anybody in the financial-services industry who’s putting a model together:

How much do chief risk officers talk to each other?

Algonaut asks whether the Financial Services Oversight Council will have a direct line to banks’ chief risk officers; I’m sure the answer is yes. But I also think that won’t be enough. What I’d love to see — and this could be put in place directly by the major banks, without the need for any legislation at all — would be a regular formal meeting of all the big banks’ chief risk officers, where they can talk about all the systemic risks they’re worried about which require coordinated response. Does anything like that exist? Is there some way in which the FSOC or the Fed could use its moral suasion to make it happen?

The sukuk shakeout arrives

The first sukuk (Islamic bond) defaults have arrived, and no one has a clue how they’re going to shake out. Which might actually be a feature rather than a bug, going forwards.

How we super-seniored the entire financial system

Gillian Tett was just in the office to talk about her new book; I interviewed her for Reuters TV, and the results should be up soon. But we got to chatting afterwards, and she made a great point which we didn’t cover in the more formal interview and which she says she would have liked to have put in her book. But since it’s not there, I can at least put it on YouTube. She talks about the Bistro deal (see Jesse for background on that), and how it can be seen as a metaphor for the financial system more generally:

The risks of consolidation

I had a short chat with Nassim Taleb this morning about his new paper with Charles Tapiero, entitled “Too Big to Fail, Hidden Risks, and the Fallacy of Large Institutions”.