The SEC’s Problem With the First Amendment

The SEC’s Problem With the First Amendment

The SEC’s approach to regulating US securities markets relies on controlling speech: they compel “disclosures”, prohibit certain statements, and impose onerous requirements on others. All of this is difficult to reconcile with the First...
Conflict Over Risk Management: A Case Study

Conflict Over Risk Management: A Case Study

Conflict is a recurring problem for financial risk management. At your own firm, are risk managers dismissed as “risk police”? Are risk committee meetings contentious? Do traders hoard information? If you answered “yes” to some of these, you...
What Exactly is an Infinitesimal?

What Exactly is an Infinitesimal?

During the 1800s, mathematicians, and especially Cauchy, finally got around to rigorizing calculus. They got rid of the “infinitesimal” business once and for all, replacing infinitesimals with limits. It is troubling how widespread misunderstanding of calculus is 150 years later. Instead of understanding calculus from Cauchy’s rigorous standpoint, people embrace a hodge-podge of infinitesimals AND limits.

Hedge Funds: Who’ll Take the Toxic Waste?

Hedge Funds: Who’ll Take the Toxic Waste?

Long before Mark Twain stood on Wall Street and saw it was a “street with a river at one end and a graveyard at the other,” there has been financial manipulation and scams. During the Punic Wars against Carthage, businessmen offered to ship supplies to...
More Questions Than Answers

More Questions Than Answers

For the past four years, I have been living with a mystery—a real-life mystery about some things that weren’t supposed to happen but did anyway. Today I will share with you what has been going on, at least to the extent my limited knowledge—and my fear of a...
I’ll Be Gone. You’ll Be Gone.

I’ll Be Gone. You’ll Be Gone.

In his new book The Accidental Investment Banker, Jonathan Knee introduces us to the phrase IBG YBG, which means “I’ll be gone. You’ll be gone.” This might be whispered between investment bankers when an inconvenient fact comes to light during...
The Trend is Your Friend: Value-at-Risk and Amaranth

The Trend is Your Friend: Value-at-Risk and Amaranth

This week, Jeff Skilling received a well-deserved sentence of 24 years for his creativity at Enron. I wouldn’t take the sentence too seriously. Remember that Mike Milken—the Junk Bond King of the 1980s—was sentenced to ten years. After two years, he was...
Inaugural Article

Inaugural Article

Ask a practitioner of the origins of financial risk management, and he might say it emerged in response to financial blow-ups of the early 1990s. Or he might say it emerged out of efforts by the Basel Committee to standardize bank capital requirements globally. Or he...