tag:blogger.com,1999:blog-706772597530050449.post970483445686976626..comments2024-02-19T12:04:56.080-05:00Comments on Reading the Markets: Ray, Extreme Risk ManagementBrenda Jubinhttp://www.blogger.com/profile/02587551531260863509noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-706772597530050449.post-77886524288110909442010-10-13T10:25:36.751-04:002010-10-13T10:25:36.751-04:00I found an overview of Ms. Ray's book here. Th...<a href="http://www.dsbox.com/index.php/blog/comments/extreme_risk_management_part_1/" rel="nofollow">I found an overview of Ms. Ray's book here.</a> This has prompted me to start reading it and to solicit ideas from others. The connectivist approach is compelling and I'll "invest" some effort in learning more. As I ramp up, I hope to glean more wisdom from this community.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-706772597530050449.post-8215581061718384422010-07-30T17:25:51.350-04:002010-07-30T17:25:51.350-04:00"Absent randomness segmentation, indeterminat..."Absent randomness segmentation, indeterminate information cannot be processed effectively and efficiently by determinate metrics."<br /><br />Yikes! Written by The Dense Prose Society, me thinks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-706772597530050449.post-14171229177745616812010-07-30T13:36:37.673-04:002010-07-30T13:36:37.673-04:00Moving Beyond Risk Management
But what, she asks,...Moving Beyond Risk Management<br /><br />But what, she asks, if this assumption isn’t true? “What if instead the system evolves to an enduring new state in which risk is substantially higher?” (p. 139)<br /><br />In a world of financial innovation, I argue that it is “uncertainty” and not “risk” that should be the randomness component of focus. Uncertainty is different from, rather than a higher degree of, risk. In brief, “risk” is present when future events occur with measurable probability while “uncertainty is present when the likelihood of future events is indefinite or incalculable.<br /><br />Investments that lack cash flow and are valued on a mark-to-model basis are uncertain. Absent randomness segmentation, indeterminate information cannot be processed effectively and efficiently by determinate metrics. <br /><br />As long as your qualifier is “risk” you are dealing with a deterministic state that more than likely will be governed by one-size-fits-all approach that becomes hostage of a single scale bright line. Sooner or later a critical mass learns how to acquire the current “hot” resource with no money down and begin marching herd-like in the same direction. The Broughton Bridge effect creates a “Minsky” moment from excess credit (the result of no-money down). <br /><br />This reinforces the troubling trend of larger and more frequent boom-bust cycles. It is why reality oriented regulatory governance requires that policymakers move beyond risk management to randomness governance of both determinate and indeterminate underlying economic conditions.<br /><br />Stephen A. Boyko<br /><br />Author of “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System” and a series of articles on capital market governance.<br /><br />http://www.traderspress.com/detail.php?PKey=671Anonymousnoreply@blogger.com