when the r/WSB guys realize their quarry is not high-short-interest hedge funds after all, but option writers and importantly their brokers, does that make them less or more enthusiastic about their games? 1/
so much of financial intermediation depends upon modeled distributions of asset price moves. what r/WSB did was basically to take direct control of some assets and make their prices move in ways to which the models would have given infinitesimal probability. 2/
if intermediaries update their models for much thicker tails, margin requirements become huge, and products like options become much more expensive. that would be disruptive. 3/
so instead of updating their models of asset price distributions, intermediaries are considering this a kind of “state of exception”, and collaborating to encourage the upset assets to hew more closely (after a “blip”) to the originally modeled price distributions after all. 4/
the market cap of the underlying is not usually incorporated in standard option price models, except indirectly via observed volatility. 5/
going forward, i suspect options brokers will require much higher margins for low-market-cap underlyings, because low-market-cap introduces what we might call r/WSB model risk. /fin
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@chulsookim2@morganmz@ngpsu22 oh, you are absolutely right that falling housing prices would be extraordinarily disruptive, would break a lot of families’ (and investors’ and banks’) finances. that we’ve allowed this to emerge is precisely the problem. 1/
@chulsookim2@morganmz@ngpsu22 to become richer as a society, we want the price of housing, including high quality, desirable amenity housing, to fall. 2/
@chulsookim2@morganmz@ngpsu22 but we’ve created institutional arrangements under which increasing overall wealth in that very important way is financially and so politically intolerable to the more affluent part of our society, whose wealth is largely concentrated in homes. 3/
@ZeeshanAleem@ggreenwald@HeerJeet@ryangrim@sunraysunray There is often a strong tension between quality standards for individual pieces and quality of conversation. Imposing high quality standards at an individual piece level restricts participation, both between and within writers. 1/
@ZeeshanAleem@ggreenwald@HeerJeet@ryangrim@sunraysunray Within a writer, more good might come from publishing weak pieces with "half-baked" ideas that others can elaborate upon than imposing a high bar on her own writing's quality. 2/
@ZeeshanAleem@ggreenwald@HeerJeet@ryangrim@sunraysunray Between writers, if the standard for participation in a conversation is the beautiful craftsmanship that good editing can help to deliver, those who aren't institutionally placed to have such editing will be excluded, along with the contributions they might furnish. 3/
1. Control of the Senate, and thereby the full legislative branch of the United States government, for now.
2. The capacity to reform a judiciary "Constitutionally hardballed" with tremendous hypocrisy into a decades-long supermajority of Republican appointees at its highest level.
i am very torn about this stuff, but the issue i don't think @ggreenwald addresses is that leaks themselves constitute a form of selective editing, and an "in the public interest standard" has to consider that, even regarding authentic material. 1/ greenwald.substack.com/p/article-on-j…
if (not saying this is the case here and now, but if) one political faction is much more capable of unearthing competitors' private materials than others, when is it in the public interest to cover even the authentic material released? 2/
records of private, "candid" conversations will include things that would be discreditable in a public context, even when actions ultimately taken may be innocent. 3/
people think of nationalization as more radical, more dangerous, than regulation, but for deeply regulated industries that may be misguided. 1/
like nationalization, regulation usurps control. but often clumsily. pervasive regulation blurs lines of accountability, public actors point fingers at private "owners", and vice versa. 2/
obviously it depends on the nature and pervasiveness of the regulation. for industries in which private actors are numerous and diverse in how they behave, where regulation imposes just shared limits and requirements, this is argument doesn't hold. think restaurants. 3/
@csissoko points out the obvious-once-you-think-about-it fact that in a world where institutional money is collateralized, borrowed liquidity (i.e. repo), a change in interest rates amounts to a sharp change in the quantitative money supply… 2/
and immediate in that it does not depend on a reequilibration of investment decisions, which would unfold over time, that is implicit in imagined "hurdle rate" channels. (Interest rate rises, equivalently bond price drops, mechanically destroy collateral value.) 3/