Met a CFA today who lost so much money, and only a few days back had the privilege of meeting a top broker in my country, who made millions on the same day!
Investment is not just about education.
Market whims matter when you trade-in & out of positions.
Research versus timing
Especially, Retail Banks, that have Capital Market and Investment Banking Desks, lose so much money on bad days.
Banks should cap their equity market exposures using some haircuts such as capital, etc.
It's not their forte.
As an #ERM Consultant, I normally don't advise conservative commercial banks to venture into financial derivatives and structured products.
It's high risk because firstly, they don't have the trained manpower, secondly, they lack the intelligence, and, lastly, the risk appetite.
Retail banks normally in most jurisdictions have to adhere to an ADR Advance to Deposit Ratio Limit set by the supervisory authority.
The rule of thumb is 75%, after which the residuum 25% is left for the treasury and capital markets
ST Placements & Risk-free bonds were the norms
Of course, Treasury and Capital Market Desks are NOT your run of the mill Banking
That is where Commercial/Retail banks lose money!
The same holds true for Insurance firms that underwrite unusual risks, which is contrary to their business model
Mutual Funds when they imitate HFs

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More from @SAH16928046

May 8
What are recent topics for #PhD research in management?
@firstphdchat @ThePhDPlace @PhD_Genie @phd_positionsdk @PhDVoice
The latest topics of interest are =>
1. Behavioural models of Marketing using experimental economics

2. Role of Data Sciences in modelling time-motion studies to measure human efficiency and output on the shop floor.
3. Reliability Management Process Improvement Controls used in the Value Added Industries(Industrial/engineering management).

4.Supply Chain Risk Management Models.
Read 6 tweets
Apr 22
Studying Industrial Economics, without learning cost accounting, quality mgmt, or operations management, is a waste of time.
Nobody cares who Lagrange, Hotelling, Cornett, and Nash were if you cannot explain basic outlay to the board of directors.
Universities are just pathetic.
Similarly, many financial economists have no understanding of financial accounting concepts.
Economics Education needs a complete revamp at unis.
If economists cannot understand basic accounting entries, then how will they manage risks at Fis?
Doing International Economics, but, not being taught International Marketing, and Relationship Management?
These are just some examples of why many econs students cannot find work.
They cannot relate to practical examples and applied for work in industries.
Read 6 tweets
Apr 22
The lawyer's approach to assessing materiality
Proof Reading documents inside out more as an academic writer than a lawyer, highlighting headers aka rubrics & footnotes, meticulously checking punctuations, referencing with case law and statutes, using a legal dictionary, etc
Of course, in risk management, we do refer contracts and other legal manuscripts to lawyers who offer their fully qualified opinion on legality, materiality, and liability fixing.

But, quantifying legal risk is a big challenge for banks and other financial institutions.
Especially, at Commerical / Retail Banks, the nature and variety of lending are such that multiple legal risks arise at the transaction initiation stages, and later during post-authorization phases.
CROs usually don't come from a legal background.
Hence, that is an Ops risk!
Read 4 tweets
Apr 20
Stochastic and Deterministic LGD Loss Given Default Models are different.
Many bankers are unable to understand the different mathematical assumptions that can make the computations.
That is a big risk per se!
@BIS_org
#model #Risk #Validation #Creditrisk #FRM
#MachineLearning
What is a hazard rate assumption?
How can credit risk be modelled using hazard rates?
This is beyond an average #banker.
Most primal bankers only understood the 5 or later the 7Cs of credit.
Accounting, cashflows, creating a charge on assets, foreclosure, special asset mgmt, etc
Actually, Quantitative Risk Management has not helped at all, in my opinion.
Blindly applying maths and statistics has made decision-making worst.
Banking was about relationship mgmt, business model analysis, accounting trickeries, branch operations, etc
Now it's like a lab work
Read 4 tweets
Apr 17
(December 2017) Paul Klemperer "Auction Design in the Financial Crisis" via @YouTube
Monetary Economics is a well-established field.
Central banking practices may differ from what is taught to Monetary Economists.
Because CB is not just an executioner of the monetary policy but is also a banker to the government and the apex bank of the country per se.
Hence, CB Balance sheet expansion and contraction have consequences for the broader economy.
Read 9 tweets
Apr 12
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

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