Discover and read the best of Twitter Threads about #GFC

Most recents (24)

Risk Management is not just about producing tons of reports that nobody wants to read in the office.
I am very angry to note that most of the #ERM/Risk Desks just produce day-end reports, which end up in the dustbin.
Risk Dept. should not be a tick the box function.
what is the point of preparing #VaR Reports, when the fund manager does not understand basic probability?
Rubbish!!
There is no point in hiring a world-class hard science PhD to do risk management work at financial institutions or elsewhere, if the board members have zero numeracy and data science skillsets, the staff in front and back offices have poor technical and academic backgrounds, etc
Read 8 tweets
A select case of #Evolution and #Leftist Progression in the History of Economic Thought ->
From #Marxism to #Keynesian Economics to #MMT
#Complexity
Negative events will lead to negative outcomes :
#Bolshevik Revolution => #Intenational #Proletarianism & #Leninism
#Great #Depression -> #Keynesian Economics
#Chinese Cultural Revolution -> Gang of Four
#GFC -> Modern Monetary Theory #MMT
That is how to interpret history.
Anticipating #tippingpoint is the most essential thing a gifted leader has to his credit.
All non-linear events should be studied carefully by applying #physics in social sciences, such as #Chaos #Theory and Law of #Thermodynamics.
Yes, and #Murphy's #First Law might also help.
Read 6 tweets
Many academic institutions are kinda confused when it comes to launching new degrees such as #FinTechs, Data Sciences, Business #Analytics, Machine Learning, Ai, etc.
There does not seem to be a standardized curriculum for such programs as we see in other academic disciplines.
Just combining courses from Maths, Statistics and Computer Sciences Faculty will not give you a Data Science Degree Program.
That is the mistake that universities're making at the moment.
Highly Amateurish.
The same mistake was made when business schools Physics,& Engineering Departments came together to launch applied Mathematical Degrees such as FE- Financial Engineering, etc.
#Quant #Finance was probably the most sought-after degree before the #GFC and later the lies got exposed
Read 5 tweets
Did the #Irish Central Bank provide sovereign guarantees to buyers of Irish Bank Bonds and other contractual debt liabilities classified as fixed income securities, before the #GFC struck?
I asked this question after watching Professor Kelly on YouTube.
He was describing how the #Irish Central Bank allowed banks to import capital in large sums, and later lend it out to housing finance borrowers.
That created a severe #ALM Mismatch, as homes are not liquid assets.
Only after the #GFC, did the Irish and other banks realize that a run on the #deposits could lead to financial #insolvency.
#Ruin #Risk by definition is the gap between Unexpected #Loss and Expected Loss.
As the gap increases, the chances of financial ruin and #default rises too!
Read 7 tweets
The Psychology of Human Misjudgement - Charlie Munger Full Speech via @YouTube
well, if one can get around the accounting and auditing systems, you can commit fraud on a massive scale.
That is what rogue traders do!
But, financial institutions have invested big time in hiring quants who can write codes and Greek symbols which board members don't comprehend
It's brilliant if your standard fraud risk assessor aka auditor and the quantitative risk manager can use the #Benford #Law to identify, proactively measure and control fraud risk-related predicate financial crimes.
But, first, do the basic work, before leapfrogging.
Read 22 tweets
Basel I, II, III: evolution of global banking regulation via @YouTube
It was interesting to watch this discussion.
Even the participants agreed to the fact that Basel Accords are a complete exercise in futility.
What might happen tomorrow is not known even to the best minds working in the area of financial bank risk management.
Being a risk management professional, I can very well understand how rogue traders can wreak havoc! the concept of having a Middle Office came into existence after the Baring fallout. Middle Office is supposed to check and re-check all transactions in real-time and at the close
Read 5 tweets
After three years of reading commentaries, definitions, philosophies, books, articles, analysts’ whingings, and witnessing a general muddle regarding #geoeconomics, it’s time for a summary - and quite possibly, a departure. 1/
This thread has personal and motivational aspects, so I’ll beg forgiveness rather than permission for the personal pronouns. 2/
My initial interest in geoeconomics started during master’s studies between 2011-2012 when reviewing the topic of economic warfare and sanctions as they relate to Organski and Kindleberger’s “power transition theory”. That naturally led me to the ’91 @ELuttwak article 3/
Read 54 tweets
Buy Vs. Sell-Side Risk Information: Time to Differentiate between “Your Risk” and “My Risk” Reports
@CFAinstitute @GARP_Risk
Report Sample of Asset Allocation Analytics
Well, we all are accustomed to reading “Buy” and “Sell-Side” Investment Evaluation Reports prepared by Financial Research Analysts at various FIs such as Investment Companies operating in the Financial Markets.
Read 50 tweets
Somebody on this forum needs to do a thread on quotes, spreads, risk-neutral probabilities, real-world probabilities, order books, market execution, limit ordering strategies, order cueing, and bid-ask spreads, etc.
Market #Microstructures are key to analyzing liquidity risks.
The first thing we need to include within our risk pedagogy masterclass is how liquidity risks vary across financial markets, order books, volatility term structures, asset classes, premarket, auctions, intra-day, and private placement transactions.
Most of the students in a standard risk management program are asked to do statistics, mathematical modelling, and computer programming straight away!
All good.
But, it's important to learn the process, and product features, that leads to financial product development.
Read 4 tweets
Net thread Inshallah ->
What is the difference between the value at risk (VaR) and the conditional value at risk (CVaR)?
Value - at - Risk is the purported worst-case loss under normal circumstances/market conditions developed using a computational technique and further specific modelling assumptions tailored as per the risk reporting requirements of a Trading / Investment Desk.
But I tend to disagree with the term WCL - (the Worst Case Loss), as mostly used by some authors in the field of FRM - Financial Risk Management.
Read 36 tweets
When we talk of IR #Interest #Rate #Risks we must understand the markets in which this product operates, and the fundamental pricing, trading, and hedging dynamics of this financial #derivative asset class.
Banks normally use IR Derivatives and Structured Products for on and/or off-balance-sheet ALM Asset Liability Management and Immunization, Bond Risk Hedging, NII Risk Hedging, Arbitrage Opportunity Exploration using the treasury based fixed income desks, Rate Speculation, etc.
Of course, we have other financial market participants such as Pension Funds, Hedge Funds, Insurance Companies, and several other specialized asset management firms, that have strategies and asset allocation models, which use IR derivative for both Macro and Micro-hedging.
Read 26 tweets
useful lecture for those who are interested in applying statistical knowledge to problem-solving in risk management, insurance, financial engineering, banking, and actuarial mathematics and modelling.
The biggest problem faced by the statisticians is that they over-rely on the computational characteristics of the Bell-shaped Normal Distribution Model.
Read 4 tweets
I am into risk management.
Most of the risk managers are now required to have an advance background in operating technological applications such online trading and price data terminals (Bloomberg/Reuters, etc),
FINTECH, Crypto Assets, Digital Marketing based vendor systems, DLT(Distributional Ledger Technologies) - Blockchain, AI / ALGO based trading in financial markets, Derivatives and Risk Pricing Engines and other Software Computational Programs,
Risk MIS/ERP Project Management Tasks, 4GL Fourth Generation Languages, Data Warehousing, BI, MI, SQL, NoSQL, and so on etc.
Read 6 tweets
Did the Asian Financial Crisis (1997) had any influence in the 2008 crisis?
@GARP_Risk
No, Not really!

#SOX Compliance came after ENRON and WORLD COM Frauds and Financial Reporting Failures.

You cannot mix the two events.
Asian Financial Crisis came about as a result of Unsound Macroeconomic Policies, disrespect for stabilization, excessive price competition among trading nations, lack of Asset Liability Risk Management done at the Central Banks, monopolistic market structures,
Read 33 tweets
Many #investors will be focusing on the #PresidentialDebates, which begin tonight, but while there are quite meaningful #policy differences between the parties, ongoing structural #deficits are likely to exist regardless of who wins in November.
Further, to the extent that these #deficits are #monetized by the @federalreserve, then significant increases in #money supply could drive nominal #GDP growth for a time, even in the absence of new fiscal initiatives.
Also, we’re skeptical of the arguments that fret over a #FiscalCliff, since the @USCBO estimates that even with no further #stimulus measures, the U.S. will have a #deficit of 8.5% of #GDP for fiscal 2021.
Read 5 tweets
The World economy went from excess demand before #GFC(Global financial crisil) to excess supply after it. #China's #trade #surpluses have therefore had an increasing depressing effect on global demand and world GDP growth since ~2006.
2/ch Sustaining China GDP gr(based on 47% investment rt & 37% Consumption rt) requires, (1) Large surpluses of exportable manuf goods, (2) technology theft & forced technology transfers to ensure rate of return on investment remains +ve. Stop these & gr will decelerate sharply
3/ch Analysts accepting China data alleging 1-3% GDP gr in 2020, must show much is inventory accumulation? Besides its usual fudging of deflators, in 2020, #CCP11 has accumulated unsold inventory, to show(fake) +ve gr & hidden the resulting loses with credit from State banks🧐🤔
Read 3 tweets
...though basically unchanged in 3 1/2 years

#Housing
And, those good ole #FederalReserve policies again mean the monthly cost of an average #NewHome (approximated here) is back where it was 15 years ago...

#housing #QE
...while, as a proportion of the average weekly wage )as per #NFP), well - you can see for yourself:-

As we always say, there'll always be a scarcity of something real as long as there are few such constraints on #money & #credit creation.

#mortgage #RE
Read 5 tweets
At a time the #USCongress is vigorously debating another #fiscal rescue package to support households and businesses into year end, it’s vital to think hard about the intersection between #Fed monetary policy/fiscal support and what it means for #markets: bit.ly/3fkZbfM Image
In fact, the #CovidCrisis forced an evolution in policy coordination, whereby for the first time since WWII, U.S. policymakers married monetary and fiscal policy, with the #Fed and @USTreasury working together to inject cash from the #Fed’s #QE programs into the private sector…
That has been game changing for #liquidity near-term and should continue to help combat the #economic fallout from the #pandemic.
Read 7 tweets
The Fed has taken an extraordinary amount of actions in response to the #COVID19 shock. Their response has been far superior to the #GFC. Since March 9, the Fed has expanded its balance sheet in a staggering 70%. 1/
A big chunk of the #COVID19 intervention came in form of purchases of Treasury securities and MBS. These would be undertaken at the unprecedented rate of up to $125 bn/day during the week of March 23. Since the start of this QE the Fed has acquired around $1.6 tn of treasuries 2/
The Fed also acquired MBS. Since the start of the intervention the Fed has increased its MBS position in $0.5 tn. One difference from previous QE: the Fed is purchasing securities of different maturities, so the effect will not be concentrated on long-term rates. 3/
Read 7 tweets
1/7 Young adults are getting rocked by this recession. If we learned anything from the #GFC, we know the recovery will be slow & costly for them. But doesn’t have to be. We can act now to prevent another “lost” generation. My take: newamerica.org/education-poli… @NewAmericaEd
2/7 Recessions hit young people hard. Recoveries reach them late. Already, youth #unemployment has topped 14%. Many students are rethinking college plans, questioning the wisdom of taking on debt in this economy. Tens of thousands of US teens are MIA from virtual HS classes.
3/7 If young people disconnect at high rates from school and the #workforce, the costs will be enormous—both to them and to our economy. The #CARES Act may provide relief to a subset, but many of our most vulnerable young adults will not benefit.
Read 7 tweets
Proposition: #Banks won't rally because rates -long & short- are too low; #Japan is our marker, banks there falling while US/#EZ rose pre-#GFC, not gaining afterward; Also v-a-v EZ peers, #US bank returns were anomalous, ergo can't be repeated. 1/x
Response: Banks make money by increasing charges in the absence of NIM
NB: When long rates are artificially suppressed & flattened to/thru 0%, opportunity cost vanishes and demand for money -as a savings medium, not a transactional tool - RISES 2/x
It wasn’t low rates per se that held #Japan banks back, post 1989, but scattered failures and an heroic amount of write-offs and restructurings of their toxic, bubble-era legacy - something which helped the country’s eventual, creditable real per capita GDP recovery. 3/x
Read 11 tweets
People trying to draw analogies with the #GreatDepression, wartime, or 70s stagflation are missing the point IMHO 1/x
GD was a ‘sudden-stop’ shock which ended the credit-boom lending to Weimar as the Young Plan looked in jeopardy. Made worse by politics (war debts, etc), #protectionism (Smoot-Hawley), Hoover call to maintain wage-rates, #FX chaos (esp. when Brits left #gold standard) 2/x
The initial slump & ‘secondary (financial vicious cycle) depression’ then perpetuated by #NewDeal boondoggle vote-buying, #FDR capriciousness, & Brain Trust cranks. This was much more a post-#GFC parallel than today’s #ContaminoBay #lockdown 3/x
Read 15 tweets
How to prevent mass corporate bankruptcies?

Here is an overview of national measures to support businesses.

These schemes share the burden of #Covid19 losses with *national* taxpayers. No European backstop in sight, leaving a patchwork and uneven playing field!

A thread. 1/N
What is there already?

1) Basically all countries have extended furlough or short-time work benefits. This supports both workers and firms.

Complementing this, some countries temporarily exempt employers from social security contributions (e.g., Slovak Republic, Spain).

2/N
Europe’s comprehensive job protection & social security systems should protect household incomes and allow firms to retain staff, helping them when the economy unfreezes.

All this should, if well calibrated, allow speedier recovery from the #Covid19 lockdown than, e.g. US.

3/N
Read 16 tweets
Largely because (a) the injections functioned differently last time as it was primarily a financial seizure, not a real one; (c) the real assets which did deflate -RE- are the very ones which have since most risen in price (“inflated”); (d) intl division of labour then undamaged
Somewhat risible to say no fiscal response last time, even if this one is shaping up to dwarf it. That’s just #Keynesian dinosaurs trying to say only their Master’s nostrums can work.
Worry is, we redo the 30s: lacklustre growth as too big a Boondoggle state exploiting its edge.
The state runs only the softest of soft budgets, is the most wasteful, least productive, most monolithic, least innovative of spenders. Backed up by a compliant #centralbank -monetary ‘authority’ is now a joke!- that implies lots of (misdirected) demand for not much extra supply
Read 7 tweets

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