Market Risk

April 2015: Its Seismology Not Roulette
Publisher: Risk Magazine
The Swiss franc surge on January 15, when the central bank abandoned its peg to the euro, revealed continuing confusion about the role, the value and the limitations of models. I argue that too many analysts still carry around a misleading analogy that hampers their understanding such events.

August 2015: Extended Shortfalls Redeeming Impact
Publisher: Other Publisher
This whitepaper discusses the technical requirements for the Basel III Expected Shortfall calculation and the optimal system architecture to support the requirements. It argues that an appropriate system would pay big dividends beyond just assuring regulatory compliance.

October 2015: Expected Shortfalls Silver Lining
Publisher: Risk Magazine
Despite continuing to insist that replacing value-at-risk with expected shortfall in the Basel capital rules is wrongheaded and potentially dangerous, I argue that the shift may have an important silver lining.

January 2014: An Impractical White Elephant
Publisher: Risk Magazine
The Basel Committee’s Fundamental review of the trading book raises some serious issues but I argue its central proposed revision to the market risk capital regime is little more than a costly distraction that should be abandoned.

June 2013: Value at Risk - A Valuable Tool That Was Greatly Oversold
Publisher: Other Publisher
This bried essay is to a summary of some issues raised in the full Risk Management Beyond VaR paper. It appeared in the Atlanta Fed Notes from the Vault series.

September 2013: Risk Management Beyond VaR - Misys Whitepaper Version
Publisher: Other Publisher
This is a slightly expanded version of my April paper at the Atlanta Fed Conference with some more detailed references.

November 2012: The False Promise of Expected Shortfall
Publisher: Risk Magazine
The Basel Committee on Banking Supervision has proposed using expected shortfall instead of value-at-risk as the central metric for regulatory market risk capital. I argue that this will be both ineffective and dangerous.

January 2011: Why Institutions Failed to Manage Their Risk
Publisher: Other Publisher
This brief essay appeared in The Euromoney Risk Management Handbook 2011. It emphasizes the fundamental difference between risk and uncertainty and the need for firms to evaluate uncertainty using methods quite different from those developed over the past 25 years for analyzing risk. (The complete Handbook can be found at: http://digital.turn-page.com/issue/21869 )

February 2010: Hammers and Nails
Publisher: Risk Magazine
Excess regard for the techniques we know can lead to these methods being misapplied. Risk managers too often fall into this trap.

May 2010: Don't Distort the Message
Publisher: Risk Magazine
Looking back on the development of financial risk management over the past 25 years, this paper notes how easily risk assessments can be misinterpreted by nonspecialists and the necessity for risk managers to guard against this as best we can.

June 2010: Taking Flight
Publisher: Risk Magazine
In the second of a four-part series on the development of risk management, I consider the phenomenon of high-impact events, or Black Swans.

March 2009: To VaR or Not to VaR?
Publisher: Other Publisher
From Insurance Risk & Capital - Value-at-Risk (VaR) is appropriate and effective for its proper purpose - but it addresses only one of the two key challenges of financial risk management.

March 2007: The Stress Testing Trident
Publisher: Risk Magazine
While stress testing is a much discussed topic, an accepted definition of best practice remains elusive. A three-pronged approach may be a start.

March 2007: The Stress Testing Trident (in Chinese)
Publisher: Risk Magazine
While stress testing is a much discussed topic, an accepted definition of best practice remains elusive. A three-pronged approach may be a start.

November 2007: Cutting the Gordian Knot
Publisher: Risk Magazine
Basel II remains wedded to incremental extensions to the market risk rules. It is time for a bolder approach in this area.

January 2006: Building Pessimised Scenarios
Publisher: Risk Magazine
Isolating events that could produce significant losses has long been a part of risk assessment. Pressure is building, however, to make such insights a standard component of regular risk analysis and reporting.

December 2006: From VaR to Stress Testing
Publisher: Risk Magazine
Implementation of enterprise-wide VAR models in the 1990s was an important risk management advance, but it’s time to rethink some fundamental aspects of how they were designed.

September 2005: The New Market Risk Challenge
Publisher: Risk Magazine
Since the late 1990s, the issue of market risk assessment has been viewed as largely settled. A recent statement from the Basel Committee, however, is likely to change this comfortable presumption.

October 2005: The Future of Market Risk Management
Publisher: Other Publisher
A SunGard-Adaptiv Whitepaper - The message of this paper went sadly unheeded. Three years later the world reaped the consequences. "All the above pressures for change point in a consistent direction: the need and the capacity to supplement aggregate macro-estimates of potential losses with far more micro-oriented information about the nature and magnitude of specific vulnerabilities ... Technology can provide more nuanced insight into the composition and magnitude of market risk. Doing so requires understanding, will and discipline. Lacking these, market risk information will continue to fall short of its potential and this shortfall will doubtless have severe consequences for some institutions."

October 2005: Whither Stress Testing?
Publisher: Risk Magazine
In light of the Basel Committee’s renewed emphasis on stress testing, an industry dialogue is overdue on how this oft-cited technique should be applied. Herewith are some preliminary thoughts on the issue.

January 2004: Mutual Self-Awareness and Fat Tails
Publisher: Risk Magazine
Mutual self-awareness among market participants is an important distinction between physical and social systems. This is a fundamental cause of the well documented characteristic of fat tails in the distribution of changes in market data, and should be a key focus of all market risk managers.

April 2002: Hedge Fund Risk and VaR Uncertainty
Publisher: Risk Magazine
External transparency of the risk of hedge funds continues to be a difficult issue. Even internally, traditional risk measures can fail to portray the full implication of highly leveraged positions. The parameter sensitivity of value-at-risk estimates can help.

May 2000: VaR Over More Than One Day
Publisher: Risk Magazine
The simplest option - scaling by the square root of time - is the best, Dynamic simulation with portfolio rebalancing is a dangerous diversion.

August 2000: VaR Is Not Everything
Publisher: Risk Magazine
Why I disagree with those who assert the benefits of multi-step Monte Carlo simulation versus scaling one-day VAR in estimating market risk over a longer period.

November 1999: When Price Changes are Not Normal
Publisher: Risk Magazine
If investor decisions are statistically independent, price changes tend to be normally distributed.. But on some days this independence flies out the window. What can you do at times like these?

December 1999: Risk and Uncertainty
Publisher: Risk Magazine
Some risk managers' confidence in science leads them to ignore the uncertainty of markets. In times of crisis. Forewarned is forearmed.

January 1983: ROWE 2012
Publisher: Other Publisher


Stress Testing

March 2015: Greece: a new drachma unfolds
Publisher: Risk Magazine
The electoral triumph of Syriza in Greece has awakened the sleeping ogre of the eurozone crisis. I argue that no plausible outcome of the confrontation between Greece and its creditors will ultimately resolve the inconsistency of a monetary union unsupported by political union. Nevertheless, a temporary fudge might work for awhile, leading the unwary into complacency.

June 2015: Geeks at the Gates
Publisher: Risk Magazine
Hampered by increasingly complex regulations, as well as the cost and inertia of inefficient legacy systems, banks are facing growing competition from innovative non-bank organisations. Unless they start to confront the mission-critical importance of transforming their technology, they could face death by a thousand cuts.

June 2014: Optimal Currency Areas and the Euro
Publisher: Risk Magazine
A classic paper on the economics of currency areas illuminates the dilemma facing the eurozone. The recent calm in financial markets does not alter the fundamental problem.

July 2014: Europes Leaders are Playing with Fire
Publisher: Risk Magazine
After the proposed European Constitution was rejected by French and Dutch voters in 2005, I wrote that Europe’s leaders needed to rethink the pace of integration. After the latest European parliamentary election, I argue that such a change of direction is even more urgent - but still far from certain.

September 2014: Risk Management Beyond VaR and Emerging Technologies
Publisher: Other Publisher
I argue that emerging technologies we see every day on your smart phones and other personal devices can revolutionize risk management systems, but it will take time and persistence to make the transition.

April 2013: Risk Management Beyond VaR
Publisher: Other Publisher
This paper was presented to the Federal Reserve Bank of Atlanta's 2013 Financial Markets Conference in Stone Mountain Georgia on April 10, 2013.

June 2013: Value at Risk - A Valuable Tool That Was Greatly Oversold
Publisher: Other Publisher
This bried essay is to a summary of some issues raised in the full Risk Management Beyond VaR paper. It appeared in the Atlanta Fed Notes from the Vault series.

June 2013: Tipping Point?
Publisher: Risk Magazine
Electoral advances by anti-European parties and vocal criticism by influential voices represent the most serious challenge to the European project in a generation. While a rapid restructuring of the eurozone, or of the union itself, may seem unlikely, I argue that risk managers ignore the possibility at their peril.

September 2013: Risk Management Beyond VaR - Misys Whitepaper Version
Publisher: Other Publisher
This is a slightly expanded version of my April paper at the Atlanta Fed Conference with some more detailed references.

January 2012: 2012: Another Year of Living Dangerously
Publisher: Risk Magazine
It is always possible to envisage threats to economic and political stability, but I argue that 2012 presents an especially abundant source of potentially unhappy surprises.

February 2012: Foundations of Sand
Publisher: Risk Magazine
Despite the remarkable advances made over the past 25 years, I argue the existing financial risk models are not fit for purpose when it comes to stress testing and analysis of tail risk.

March 2012: Not All Hedges Are Created Equal
Publisher: Risk Magazine
The Global Financial Crisis has taught many hard lessons. One lesson risk managers should take especially seriously is that not all hedges are created equal. Furthermore, a hedge that is effective for one type of risk may be ineffective or even counterproductive for another.

June 2011: Stress Testing Culture
Publisher: Risk Magazine
Many financial institutions are putting greater focus on stress testing, but I argue that most will require a cultural adjustment for it to become an effective part of the risk management process.

September 2011: Quo vadis, CVA?
Publisher: Risk Magazine
I argue that hedges of derivatives counterparty credit exposure based on credit default swap spreads are unreliable and may lull banks into ignoring tail risks.

November 2011: The Democracy Deficit
Publisher: Risk Magazine
The Eurozone is grappling with a fiscal crisis but I argue that its ability to cope is being hampered by a more fundamental problem, namely a democracy deficit.

July 2010: Beyond Distributional Analysis
Publisher: Risk Magazine
Risk management must move beyond distributional analysis to weigh more qualitative considerations.

October 2010: Analysing Correlations Under Stress
Publisher: Risk Magazine
A structural assessment of co-variability during periods of stress can improve crisis management and contribute to better strategic planning.

December 2010: Regulators Double Down
Publisher: Risk Magazine
I have reluctantly concluded that trying to formulate a reliable quantitative estimate of extreme, low-probability tail risk for banks is futile. If true, this raises serious questions about the wisdom of developing a more complex Basel III capital framework.

March 2009: To VaR or Not to VaR?
Publisher: Other Publisher
From Insurance Risk & Capital - Value-at-Risk (VaR) is appropriate and effective for its proper purpose - but it addresses only one of the two key challenges of financial risk management.

October 2009: Beyond Comparative Statics
Publisher: Risk Magazine
It is time to extend stress testing to include more than just analyzing the immediate impact of selected extreme events.

March 2007: The Stress Testing Trident
Publisher: Risk Magazine
While stress testing is a much discussed topic, an accepted definition of best practice remains elusive. A three-pronged approach may be a start.

May 2007: A Dangerous Idea
Publisher: Risk Magazine
Encouraging and supporting sound internal risk management has become an important aspect of effective financial regulation. Imposing a regulatory capital charge for stress-test losses would undermine this important objective.

January 2006: Building Pessimised Scenarios
Publisher: Risk Magazine
Isolating events that could produce significant losses has long been a part of risk assessment. Pressure is building, however, to make such insights a standard component of regular risk analysis and reporting.

December 2006: From VaR to Stress Testing
Publisher: Risk Magazine
Implementation of enterprise-wide VAR models in the 1990s was an important risk management advance, but it’s time to rethink some fundamental aspects of how they were designed.

September 2005: The New Market Risk Challenge
Publisher: Risk Magazine
Since the late 1990s, the issue of market risk assessment has been viewed as largely settled. A recent statement from the Basel Committee, however, is likely to change this comfortable presumption.

October 2005: Whither Stress Testing?
Publisher: Risk Magazine
In light of the Basel Committee’s renewed emphasis on stress testing, an industry dialogue is overdue on how this oft-cited technique should be applied. Herewith are some preliminary thoughts on the issue.

January 2004: Mutual Self-Awareness and Fat Tails
Publisher: Risk Magazine
Mutual self-awareness among market participants is an important distinction between physical and social systems. This is a fundamental cause of the well documented characteristic of fat tails in the distribution of changes in market data, and should be a key focus of all market risk managers.

September 2004: Operational Risk and Black Swans
Publisher: Risk Magazine
Scarce data is a well recognized problem for the assessment of operational risk. In such circumstances, it is necessary to blend professional judgment with the available data. In doing so, however, it is crucial to counter some well documented psychological biases in our subjective estimates of probability – and a healthy dose of humility is also advisable.

September 1982: The Role of Models in Economic Prediction
Publisher: Other Publisher
A Paper presented at the 1982 Annual Meeting of the National Association of Business Economists - Written more than a quarter century ago, this brief paper considers the balance between science and judgment in economic prediction. While it contains several references to circumstances specific to the time, the central message remains as valid today as it was then.

General Credit Risk

May 2012: A Crisis of Identity, part two
Publisher: Risk Magazine
It has taken a long time to build broad international support for a system of legal entity identifiers. Now that progress is being made, I argue it is important to achieve a responsive system that will last.

July 2012: Credit Markets: Retrospect and Prospect
Publisher: Other Publisher
This article appears in the 2nd annual Global Credit Review published by the Risk Management Institute of the National University of Singapore. It surveys the development of analytical techniques applied to credit risk analysis from the early 1960s to today. It then considers the likely future changes necessitated, in large part, from harsh lessons learned from the Global Financial Crisis.

July 2011: Mission Impossible for Ratings
Publisher: Risk Magazine
The U.S. Securities and Exchange Commission is soliciting views on how to reform the credit rating process to minimise conflicts of interest and assure higher quality ratings. I argue that this exercise is based on an erroneous view of the possible.

August 2011: Europe in Wonderland
Publisher: Risk Magazine
European politicians are still blaming rating agencies for the continent’s debt crisis. I argue that this is obscuring some of the real problems posed by ratings.

July 2008: Competitive Implications of Holistic Balance Sheet Management
Publisher: RMA Journal
Compared to their larger brethren, the smaller banks have reaped greater benefits from the new tools for improving credit portfolio diversification.

February 2007: A Gathering Storm
Publisher: Risk Magazine
U.S. default rates for high-yield bonds have remained surprisingly low over the past three years. Some argue this indicates that the world has changed, but we have heard this story before.

October 2007: Credit Risk Management
Publisher: RMA Journal
The banking industry has undergone a remarkable transformation in the past 25 years.That transformation has included entry into areas once forbidden to banks by the restrictions of the Glass-Steagall Act. Equally dramatic, however, has been the revolution in how banks fulfill their traditional credit management role. This article will outline the history behind and future of this continuing revolution.

November 2007: Credit Modeling Innovations (with Thomas Day)
Publisher: RMA Journal
A number of conceptual innovations have been central to the transformation of credit risk theory and practice over the past 25 years. The most significant of these contributions are reviewed in this article.

January 2003: The Role of Correlation
Publisher: Risk Magazine
A review of recent research on the role of correlation between probability of default and recovery rates, as well as among default probabilities.

November 2003: When is Best Practice Good Enough
Publisher: Risk Magazine
The most dramatic change in banking regulation in decades has been the move from highly prescriptive procedures towards demanding "best practice" risk management methods. Differences over how quickly the new approach can be applied to credit risk management is at the heart of the controversy over revising the Basel capital Accord.

December 2003: Credit Risk Catches Up
Publisher: Risk Magazine
When Basel II was first proposed in 1999, credit risk models lagged way behind market risk models. But that’s changed, which means we need less prescriptive rules for determining credit risk capital.

September 2002: Correlation and Credit Risk
Publisher: Risk Magazine
Active development of full credit portfolio modeling continues apace, even though it is not recognized in the proposed Basel II framework. An important issue is the relationship between probability of default and loss-given default. Caution is needed in interpreting apparent correlation between the two.

June 2001: Strength Through Diversity
Publisher: Risk Magazine
Recognition of the impact of diversification effects is imperative for good portfolio management. Regulatory capital rules should pay greater attention to this aspect of credit risk measurement.

April 2000: Consistency and Credit Risk Models
Publisher: Risk Magazine
If banking supervisors are to allow use of credit risk models to calculate regulatory capital requirements, how can they be sure the figures they are receiving are accurate?

Counterparty Credit Risk

March 2014: Unwilling or Unable?
Publisher: Risk Magazine
Regulators recently published the findings of a study of counterparty risk data at the world’s largest banks. I note that it makes for depressing reading but also is symptomatic of deeper problems hampering the practice of enterprise risk management.

May 2012: A Crisis of Identity, part two
Publisher: Risk Magazine
It has taken a long time to build broad international support for a system of legal entity identifiers. Now that progress is being made, I argue it is important to achieve a responsive system that will last.

December 2011: CDSs: Lubricant or Landmine?
Publisher: Risk Magazine
Credit default swaps have allowed banks and investors to improve the management of their credit risk, but I argue that they may represent a lurking source of contagion in a crisis.

March 2010: Efficient Calculation of Counterparty Exposure Conditional on Default (with Philip Koop and Daniel T
Publisher: Risk Books
(2010, Counterparty Credit Risk, Eduardo Canabarro, ed.) This chapter describes a computationally efficient method of estimating counterparty credit exposure conditional on default. It can support derivation of the incremental impact of a new transaction on the Credit Valuation Adjustment (CVA) with sufficient speed to influence the price quoted by a trader.

September 2008: Towards T+0 Reconciliation
Publisher: Risk Magazine
The Counterparty Risk Management Policy Group’s third major policy statement appeared in early August – and it presents surprisingly radical demands.

September 2007: Lagging Risk Management
Publisher: Risk Magazine
The rate of growth in the complexity of new derivatives products is causing a worrisome lag in risk management’s ability to keep pace. As credit derivatives markets endure a period of stress, this lag could have serious consequences.

October 2007: No Silver Bullet
Publisher: Risk Magazine
The emergence of contingent credit default swaps has presented banks with a new way to manage their counterparty credit exposures, but they have important limitations.

December 2007: CCDS Unchained
Publisher: Risk Magazine
An earlier column argued that contingent credit default swaps offered only limited potential for active counterparty credit risk management. The convergence of several factors could change that.

April 2006: An Echo from the Past
Publisher: Risk Magazine
Derivatives offer excellent potential for spreading insurance risks across a wide base of investors. Legal uncertainty, however, represents a potential obstacle to traditional insurance companies’ efforts to realize these benefits.

July 2006: Dangerous Perfection
Publisher: Risk Magazine
An obsessive insistence on academic perfection could limit the benefits of allowing simulation-based counterparty credit exposure methods in Basel II.

November 2006: Validating EPE
Publisher: Risk Magazine
Empirical validation of trading credit exposure simulation models is clearly essential. The process must differ significantly, however, from traditional back-tests of VaR models.

May 2005: The Future of Credit Risk Management - (with Mat Newman)
Publisher: Other Publisher
A SunGard-Adaptiv White Paper - Historical innovations in credit risk management and their implied technology requirements.

June 2005: At long last
Publisher: Risk Magazine
After more than a decade of active deployment at major institutions, simulation-based estimation of counterparty credit exposure is on track to become part of the Basel II regulatory capital regime. Its impact on regulatory capital is not the most important benefit of this change.

February 2003: The Evolution of Counterparty Credit Risk Management
Publisher: Risk Books
(2003, Modern Risk Management: A History, Peter Field, ed.) This paper traces the roots of counterparty credit risk management in discussions around the Basel I accord in the 1980s and then describes the progress of increasingly sophisticated methods for measuring and monitoring this type of risk. It concludes with some speculations about the future.

September 2003: Reason for Hope
Publisher: Risk Magazine
One disappointing aspect of the Basel II deliberations has been the lack of any proposed change in the treatment of counterparty credit exposures. Recent dialogue between the Basel Committee and industry representatives offers hope for an important improvement in this area.

March 2002: Tracking Wrong-Way Exposure SunGard web only
Publisher: Risk Magazine


April 2001: Frozen in Time
Publisher: Risk Magazine
The Basel Committee of the Bank for International Settlements appears stuck in the distant past with regard to counterparty credit risk analysis.

September 2001: The Age of Collateral
Publisher: Risk Magazine
Even collateralised trading relationships can give rise to potential unsecured credit exposure. Portfolio aging is an important and often neglected source of such exposure.

October 2000: Down With Add-ons
Publisher: Risk Magazine
There are historical and cultural reasons why many banks miscalculate counterparty credit risk exposures. What’s needed is consistency across counterparties and over time.

November 2000: Counterparty Credit Risk - Let's Get Serious
Publisher: Risk Magazine
A call for the introduction of simulation-based methods to quantify counterparty credit exposure.

October 1999: How to Right Wrong-way Exposure
Publisher: Risk Magazine
How can banks track derivative exposures that tend to increase as the counterparty's credit status weakens? In the first of a new series, David Rowe offers a simple approach to the thorny issue of wrong-way exposure.

Operational Risk

May 2012: A Crisis of Identity, part two
Publisher: Risk Magazine
It has taken a long time to build broad international support for a system of legal entity identifiers. Now that progress is being made, I argue it is important to achieve a responsive system that will last.

September 2010: BP: Lessons Learned
Publisher: Risk Magazine
The BP oil disaster in the Gulf of Mexico offers some hard lessons for risk managers. It also shows the essential importance of the rule of law and how easily it can be threatened by the court of public opinion.

October 2008: Time for Action
Publisher: Risk Magazine
Back-office processing has long been the neglected stepchild of the derivatives business. Improved technology and growing systemic risk mean the time is ripe for supervisors to demand T+0 reconciliation.

May 2004: Commensurable vs Appropriate Risk Measures
Publisher: Risk Magazine
Integrated measurement has become something of a mantra in the risk management field. Unfortunately, this means different things to different people. It does not mean that a uniform measure is suitable for detailed monitoring of risk at all levels of an organization.

June 2004: A Difference in Kind
Publisher: Risk Magazine
Tracking key risk indicators is emerging as a central aspect of best practice for operational risk management. Defining these indicators and establishing benchmarks for them is a complex task. There is an industry initiative that can help.

September 2004: Operational Risk and Black Swans
Publisher: Risk Magazine
Scarce data is a well recognized problem for the assessment of operational risk. In such circumstances, it is necessary to blend professional judgment with the available data. In doing so, however, it is crucial to counter some well documented psychological biases in our subjective estimates of probability – and a healthy dose of humility is also advisable.

July 2003: The Point of Operational Risk Management
Publisher: Risk Magazine
The inclusion of an explicit operational risk component in the proposed Basel II Capital Accord has caused widespread controversy. Much of this has surrounded the feasibility of accurately measuring, or even defining, such risk. A more important goal should be to improve the consistency of banks’ internal process execution.

August 2003: The Operational Risk Pyramid
Publisher: Risk Magazine
The extremely heterogeneous character of operational risk often makes discussion of it appear fragmented and unstructured. This column proposes a possible paradigm for organizing our thinking on various aspects of this increasingly important topic.

October 2003: Statistical Process Control
Publisher: Risk Magazine
Too often, finance professionals manifest a smug sense of superiority towards their peers in manufacturing. When it comes to operational risk management, the manufacturing sector has much to teach financial institutions. Statistical process control is a good case in point.

July 2002: A Crisis of Identity
Publisher: Risk Magazine
Disputes over identification of the specific reference entities in certain credit derivatives contracts is troubling. It reflects a more pervasive lack of discipline among financial institutions. Improved quality control of legal information is vital for the success of integrated credit risk management.

May 2001: Could Do Better
Publisher: Risk Magazine
The Basel Committee can provide better incentives for improved operational risk management than those implicit in the draft revision to the capital accord.

December 2001: A Major Improvement
Publisher: Risk Magazine
The Operational Risk working paper the Basel Committee published in late September outlines a major and valuable improvement in the proposal.

February 2000: Operational Risk - Keep It Simple
Publisher: Risk Magazine
Many seek perfection in a system for calculating risk exposures. This is understandable, but we shouldn’t forget that sometimes the most workable solutions lie in the simple things.

Organizational Issues

April 2012: Beware of Data Leverage
Publisher: Risk Magazine
The inadequacy of available data resources for effective decision-making is a widely recognized problem. I argue that some rough and ready means of quantifying this shortcoming is important to keeping it under control.

October 2012: Personal Criminal Liability Works, like it or not
Publisher: Risk Magazine
If the banking industry is to be cleaned up, rules alone will not cut it. I argue that bankers should face personal criminal liability as well.

May 2011: Systemic Risk Lessons for an Age of Uncertainty
Publisher: Other Publisher
This is a PowerPoint presentation to the Spring Meeting of the International Association of Credit Portfolio Managers in London, May 13, 2011.

October 2011: Organizational Balance
Publisher: Other Publisher
Organizational balance is an essential requirement for successful risk management. The prospective requirement in the United States for independent Board-level Risk Committees may support improvement in this area at the very top of financial organizations.

January 2010: Revenge of the Economists
Publisher: Risk Magazine
Business economists are poised for a resurgence if they will apply their skills to the problem of diagnosing structural stresses and dark risk.

August 2010: Organizational Aspects of Risk Management
Publisher: Risk Magazine
In this last of a four-part series, I consider organizational issues and argue that the chief executive and board must accept responsibility for strategic risk management decisions.

September 2010: BP: Lessons Learned
Publisher: Risk Magazine
The BP oil disaster in the Gulf of Mexico offers some hard lessons for risk managers. It also shows the essential importance of the rule of law and how easily it can be threatened by the court of public opinion.

February 2009: The Danger of Two Cultures
Publisher: Risk Magazine
A 50-year-old essay on the failure of communication between scientists and literary intellectuals might offer lessons for the future of modern finance.

January 2008: Where the Buck Stops
Publisher: Risk Magazine
Risk management units alone cannot avoid the damage from periodic bouts of irrational exuberance. Ultimately that responsibility lies with the chief executive and the board.

July 2008: Required Reading
Publisher: Risk Magazine
Over the past year, we have witnessed a unique experiment in what makes ¬ financial risk management effective. A succinct supervisory summary of what we have learned should be required reading for all interested parties.

August 2008: Truth and Responsibility
Publisher: Risk Magazine
The meltdown in subprime collateralized debt obligations will affect financial markets for years. One likely result will be a renewed market willingness to reward sound credit underwriting – and therein lies a valuable business opportunity.

October 2006: Arrogance of Hindsight
Publisher: Risk Magazine
Some governments are reportedly becoming more active in using derivatives to manage their debt and funding costs. While arguably quite sensible, public distrust and sensationalist journalism present special dangers.

February 2005: Dynamic Benchmarks
Publisher: Risk Magazine
One of the biggest challenges in effective risk reporting is avoiding the trap of mind-numbing routine. Dynamic benchmarks and exception highlighting are ways of keeping such reports relevant and useful, thereby maintaining management’s attention.

March 2005: Is Risk Management Dangerous?
Publisher: Risk Magazine
Risk management has experienced such a remarkable rise in the past 15 years that some have begun to decry its influence. Often these are just the complaints of those who bristle under its constraints. A recent more thoughtful critique, however, raises issues that should be taken seriously.

May 2005: The Risk of Inertia...and of Change
Publisher: Risk Magazine
"Embrace change or die," we are told. Clearly slavish resistance to change will end badly. Nevertheless, embracing change for its own sake can be equally disastrous.

August 2005: Beware Creative Destruction
Publisher: Risk Magazine
A previous column discussed the importance of resisting unnecessary change. This month's column cautions against the tendency to avoid confronting fundamental threats to an organization’s established position.

November 2004: Risk Management: Overhead or Value Added
Publisher: Risk Magazine
Many argue that risk management professionals must break out of the role of being the ‘risk police’ and become value-added contributors. This idea is commendable but it still is important to distinguish the nature of a risk manager’s role from that of traditional line managers.

June 2002: Integrated Credit Risk Management - Are You Ready?
Publisher: Risk Magazine
Consolidating data across fragmented systems is crucial for integrated credit risk management - but it's not the whole story. Organizational readiness is a more amorphous, but equally important, requirement.

October 2001: Organizational Balance
Publisher: Risk Magazine
Excessive risk can destroy a company - but a company that takes no risk will fail. Balancing risk and return is the key to long-term success.

Technology Management

January 2015: The Era of Computational Abundance - and its risks
Publisher: Risk Magazine
The advent of the internet of things and the explosion of computational power it portends will transform banking information systems. Unfortunately, many institutions will fail to capitalize on this because they are constrained by a reluctance to surrender decades-old assumptions.

May 2015: Still in Denial
Publisher: Risk Magazine
Despite banks’ ongoing struggle to improve the agility and transparency of their information systems, I argue that they are still ignoring the need for a fundamental change in architecture.

June 2015: Geeks at the Gates
Publisher: Risk Magazine
Hampered by increasingly complex regulations, as well as the cost and inertia of inefficient legacy systems, banks are facing growing competition from innovative non-bank organisations. Unless they start to confront the mission-critical importance of transforming their technology, they could face death by a thousand cuts.

July 2015: Agility versus Transparency
Publisher: Risk Magazine
For the past thirty years, banks have faced a difficult trade-off between agility and transparency. I argue that this trade-off was an unavoidable consequence of 20th century technology that now can be overcome. Unfortunately regulators seem as stuck in the 20th century as the banks are.

February 2014: Beyond Relational Databases
Publisher: Risk Magazine
Data and analytical fragmentation have been obstacles to effective risk management for decades. I argue that the intractability of this problem is rooted in dependence on relational databases and that moving beyond this framework holds the key to success.

May 2014: Underestimating the Risk Data Challenge
Publisher: Risk Magazine
The Basel Committee on Banking Supervision is pressing banks to clean up their act when it comes to risk data. This is a commendable and long overdue initiative but supervisors may well be underestimating the full magnitude of the task

September 2014: Risk Management Beyond VaR and Emerging Technologies
Publisher: Other Publisher
I argue that emerging technologies we see every day on your smart phones and other personal devices can revolutionize risk management systems, but it will take time and persistence to make the transition.

September 2014: Cyber Fears - Go Modular
Publisher: Risk Magazine
Cyber security has become an increasingly important concern over the past year. I argue that embracing radically modular computer architecture is essential if we are to make real progress in meeting the challenge.

March 2013: The Case for Dynamic Efficiency
Publisher: Risk Magazine
The shift from vacuum tubes to transistors revolutionized the optimum approach to software design. Banks’ risk technology strategy should be formulated with this lesson in mind.

September 2013: Focus on Fundamentals
Publisher: Risk Magazine
For too long, regulators have issued complex rules while remaining seemingly oblivious to the fact that banks will struggle to comply. A new Basel initiative around effective risk data aggregation and reporting represents an overdue focus on the fundamentals.

April 2011: Jeopardy and the Future of Risk Management
Publisher: Risk Magazine
Computers may triumph playing Jeopardy, but that represents mastery of only one dimension of what we call human intelligence. Nevertheless, the computational advances in natural language processing and information filtering have implications for the practice of risk management.

March 2010: Crossing the Chasm
Publisher: Risk Magazine
Existing risk management information systems proved too fragmented and cumbersome to meet decision-makers’ requirements in the crisis. A major reappraisal is required.

September 2008: Towards T+0 Reconciliation
Publisher: Risk Magazine
The Counterparty Risk Management Policy Group’s third major policy statement appeared in early August – and it presents surprisingly radical demands.

October 2008: Time for Action
Publisher: Risk Magazine
Back-office processing has long been the neglected stepchild of the derivatives business. Improved technology and growing systemic risk mean the time is ripe for supervisors to demand T+0 reconciliation.

September 2007: Lagging Risk Management
Publisher: Risk Magazine
The rate of growth in the complexity of new derivatives products is causing a worrisome lag in risk management’s ability to keep pace. As credit derivatives markets endure a period of stress, this lag could have serious consequences.

March 2006: Meeting the Challenge of Economic Capital Implementation (with Dean Jovic)
Publisher: RMA Journal
Data fragmentation and model implementation are major technical obstacles to the success of economic capital. Both must be addressed if capital calculations are to be more than a costly but necessary exercise in regulatory compliance. In discussing approaches to meeting these challenges. Flexibility and transparency are key to success.

May 2006: Protect and Survive
Publisher: Risk Magazine
Internet banking has soared in popularity over the past few years, but the banking industry must improve security or risk a major loss of public confidence.

December 2006: From VaR to Stress Testing
Publisher: Risk Magazine
Implementation of enterprise-wide VAR models in the 1990s was an important risk management advance, but it’s time to rethink some fundamental aspects of how they were designed.

January 2004: The Data Challenge of Basel II (with Dean Jovic)
Publisher: Other Publisher
From The Journal of Securities Operations - The historical obstacles to data consolidation and techniques for overcoming them.

December 2004: Risk Information - Balancing Priorities
Publisher: Risk Magazine
Reliable generation and timely distribution of relevant information is essential for effective risk management. A senior executive with working knowledge of all aspects of the problem and authority to make the necessary compromises among competing priorities is essential for success.

May 2002: The Connectivity Revolution
Publisher: RMA Journal
In the aftermath of the dot-com implosion, it is tempting to relax and say, "Thank heavens, that’s over." It is precisely in times like this that such complacency is most dangerous.

August 2002: From Strategy to Tactics
Publisher: Risk Magazine
Effective tactical use of risk management information has long been an aspiration of many organizations, but multiple technical obstacles have stood in the way. Advances in technology and analytics mean this reality may finally be within reach.

January 2000: XML and the Future of Risk Management
Publisher: Risk Magazine
Risk managers need to know the potential value of eXtensible Mark-up Language (XML). Without it, they will be stuck in an era of rigidly inflexible data formats.

Risk Management Methodology

February 2014: Beyond Relational Databases
Publisher: Risk Magazine
Data and analytical fragmentation have been obstacles to effective risk management for decades. I argue that the intractability of this problem is rooted in dependence on relational databases and that moving beyond this framework holds the key to success.

September 2014: Risk Management Beyond VaR and Emerging Technologies
Publisher: Other Publisher
I argue that emerging technologies we see every day on your smart phones and other personal devices can revolutionize risk management systems, but it will take time and persistence to make the transition.

April 2013: Risk Management Beyond VaR
Publisher: Other Publisher
This paper was presented to the Federal Reserve Bank of Atlanta's 2013 Financial Markets Conference in Stone Mountain Georgia on April 10, 2013.

June 2013: Value at Risk - A Valuable Tool That Was Greatly Oversold
Publisher: Other Publisher
This bried essay is to a summary of some issues raised in the full Risk Management Beyond VaR paper. It appeared in the Atlanta Fed Notes from the Vault series.

September 2013: Risk Management Beyond VaR - Misys Whitepaper Version
Publisher: Other Publisher
This is a slightly expanded version of my April paper at the Atlanta Fed Conference with some more detailed references.

November 2013: Beyond the Comfort Zone
Publisher: Risk Magazine
Institutional inertia is one of the abiding forces in human experience, especially in governmental institutions. Sadly, such inertia is likely to hinder much-needed revisions in the practice of financial risk management.

October 2011: Dangerous Adaptation: the evolution of risk
Publisher: Risk Magazine
Adaptation is a powerful force that helps ensure the survival of species. Nevertheless, I argue it also has a dark side that risk managers should keep in mind.

February 2010: Hammers and Nails
Publisher: Risk Magazine
Excess regard for the techniques we know can lead to these methods being misapplied. Risk managers too often fall into this trap.

March 2010: Efficient Calculation of Counterparty Exposure Conditional on Default (with Philip Koop and Daniel T
Publisher: Risk Books
(2010, Counterparty Credit Risk, Eduardo Canabarro, ed.) This chapter describes a computationally efficient method of estimating counterparty credit exposure conditional on default. It can support derivation of the incremental impact of a new transaction on the Credit Valuation Adjustment (CVA) with sufficient speed to influence the price quoted by a trader.

May 2010: Don't Distort the Message
Publisher: Risk Magazine
Looking back on the development of financial risk management over the past 25 years, this paper notes how easily risk assessments can be misinterpreted by nonspecialists and the necessity for risk managers to guard against this as best we can.

March 2009: To VaR or Not to VaR?
Publisher: Other Publisher
From Insurance Risk & Capital - Value-at-Risk (VaR) is appropriate and effective for its proper purpose - but it addresses only one of the two key challenges of financial risk management.

July 2008: An Interview with Sean Lyons
Publisher: Other Publisher
From Corporate Defense Insights: Dispatches from the Front Line Risk Management and Its Role in Corporate Defense - Thoughts on risk management and its future formulated before the worst of the financial crisis broke in September 2008.

July 2008: Competitive Implications of Holistic Balance Sheet Management
Publisher: RMA Journal
Compared to their larger brethren, the smaller banks have reaped greater benefits from the new tools for improving credit portfolio diversification.

March 2006: Meeting the Challenge of Economic Capital Implementation (with Dean Jovic)
Publisher: RMA Journal
Data fragmentation and model implementation are major technical obstacles to the success of economic capital. Both must be addressed if capital calculations are to be more than a costly but necessary exercise in regulatory compliance. In discussing approaches to meeting these challenges. Flexibility and transparency are key to success.

May 2004: Commensurable vs Appropriate Risk Measures
Publisher: Risk Magazine
Integrated measurement has become something of a mantra in the risk management field. Unfortunately, this means different things to different people. It does not mean that a uniform measure is suitable for detailed monitoring of risk at all levels of an organization.

August 2001: Cracking the covariation code
Publisher: Risk Magazine
A relative rank-based representation of covariance is more useful than one based on actual values.

January 2000: XML and the Future of Risk Management
Publisher: Risk Magazine
Risk managers need to know the potential value of eXtensible Mark-up Language (XML). Without it, they will be stuck in an era of rigidly inflexible data formats.

February 2000: Operational Risk - Keep It Simple
Publisher: Risk Magazine
Many seek perfection in a system for calculating risk exposures. This is understandable, but we shouldn’t forget that sometimes the most workable solutions lie in the simple things.

May 2000: VaR Over More Than One Day
Publisher: Risk Magazine
The simplest option - scaling by the square root of time - is the best, Dynamic simulation with portfolio rebalancing is a dangerous diversion.

June 2000: The New Encryption
Publisher: Risk Magazine
Public key encryption is a vital enabling technology for Internet commerce that risk managers should understand.

July 2000: The Flaw of Averages
Publisher: Risk Magazine
Statistical intuition is an essential skill for risk managers but don’t assume that other business professionals share such intuition ... and beware of overconfidence in your own.

August 2000: VaR Is Not Everything
Publisher: Risk Magazine
Why I disagree with those who assert the benefits of multi-step Monte Carlo simulation versus scaling one-day VAR in estimating market risk over a longer period.

October 2000: Down With Add-ons
Publisher: Risk Magazine
There are historical and cultural reasons why many banks miscalculate counterparty credit risk exposures. What’s needed is consistency across counterparties and over time.

November 2000: Counterparty Credit Risk - Let's Get Serious
Publisher: Risk Magazine
A call for the introduction of simulation-based methods to quantify counterparty credit exposure.

September 1982: The Role of Models in Economic Prediction
Publisher: Other Publisher
A Paper presented at the 1982 Annual Meeting of the National Association of Business Economists - Written more than a quarter century ago, this brief paper considers the balance between science and judgment in economic prediction. While it contains several references to circumstances specific to the time, the central message remains as valid today as it was then.

The Role of Complexity

December 2014: The Complexity Conundrum
Publisher: Risk Magazine
Complexity is an inherent aspect of almost all human progress, but it also can be a source of danger. In light of the global financial crisis, countering this danger understandably remains high on the policy agenda. Important as this is, I continue to argue that regulating new derivatives like new drugs would be a step too far.

January 2013: Forgotten Pillars
Publisher: Risk Magazine
As well as doubling down on complexity, I argue that Basel III represents the triumph of elaborate Pillar I capital rules and the total neglect of Pillars II and III.

February 2013: Regulators' High-Wire Act
Publisher: Risk Magazine
The recent easing of the Basel III liquidity coverage ratio is welcome, but it highlights the difficult – perhaps impossible – regulatory challenge of striking the right balance in a world of too-big-to-fail banks.

March 2011: Market-driven Transparency
Publisher: Risk Magazine
Much of the legislation written in response to the financial crisis is intended to force greater disclosure and increase transparency for both market participants and regulators. I think we should consider whether there may be a better way to achieve this badly needed objective.

November 2010: Whither the Office of Financial Research?
Publisher: Risk Magazine
The new US Office of Financial Research can make a real contribution to financial stability, but only if it develops goals that are both ambitious and realistic.

June 2009: Markets Are Not Magic
Publisher: Risk Magazine
Despite their pervasive contributions to economic growth and efficiency, it is important to remember that markets are not magic when transparency fails.

August 2008: Truth and Responsibility
Publisher: Risk Magazine
The meltdown in subprime collateralized debt obligations will affect financial markets for years. One likely result will be a renewed market willingness to reward sound credit underwriting – and therein lies a valuable business opportunity.

April 2005: The Dangers of Complexity
Publisher: Risk Magazine
The dramatic financial market changes of the past twenty years have introduced daunting complexity into the system. Much of this complexity is the necessary consequence of valuable innovations but complexity for its own sake is dangerous.

September 2000: In Defense of Exotics
Publisher: Risk Magazine
Exotics options remain a mistrusted and misunderstood entity, but a sensible approach to exotics can provide unique protection benefits for end-users.

Analytics and Judgment

August 2015: Extended Shortfalls Redeeming Impact
Publisher: Other Publisher
This whitepaper discusses the technical requirements for the Basel III Expected Shortfall calculation and the optimal system architecture to support the requirements. It argues that an appropriate system would pay big dividends beyond just assuring regulatory compliance.

August 2015: Let the Dice Fly
Publisher: Risk Magazine
A painfully negotiated agreement may have staved off the immediate threat of Grexit, but I argue that the structural inconsistencies of the eurozone will be a source of uncertainty for years or even decades to come.

April 2013: Risk Management Beyond VaR
Publisher: Other Publisher
This paper was presented to the Federal Reserve Bank of Atlanta's 2013 Financial Markets Conference in Stone Mountain Georgia on April 10, 2013.

January 2010: Revenge of the Economists
Publisher: Risk Magazine
Business economists are poised for a resurgence if they will apply their skills to the problem of diagnosing structural stresses and dark risk.

January 2004: Mutual Self-Awareness and Fat Tails
Publisher: Risk Magazine
Mutual self-awareness among market participants is an important distinction between physical and social systems. This is a fundamental cause of the well documented characteristic of fat tails in the distribution of changes in market data, and should be a key focus of all market risk managers.

May 2004: Commensurable vs Appropriate Risk Measures
Publisher: Risk Magazine
Integrated measurement has become something of a mantra in the risk management field. Unfortunately, this means different things to different people. It does not mean that a uniform measure is suitable for detailed monitoring of risk at all levels of an organization.

December 2000: Science and Sentience
Publisher: Risk Magazine
A caution for those tempted to follow a purely scientific approach to risk estimation.

November 1999: When Price Changes are Not Normal
Publisher: Risk Magazine
If investor decisions are statistically independent, price changes tend to be normally distributed.. But on some days this independence flies out the window. What can you do at times like these?

December 1999: Risk and Uncertainty
Publisher: Risk Magazine
Some risk managers' confidence in science leads them to ignore the uncertainty of markets. In times of crisis. Forewarned is forearmed.

September 1982: The Role of Models in Economic Prediction
Publisher: Other Publisher
A Paper presented at the 1982 Annual Meeting of the National Association of Business Economists - Written more than a quarter century ago, this brief paper considers the balance between science and judgment in economic prediction. While it contains several references to circumstances specific to the time, the central message remains as valid today as it was then.

Historical Perspective

February 2015: An Idea Whose Time Has Come?
Publisher: Risk Magazine
The merits of breaking up JP Morgan were widely discussed in early January, marking the topic’s shift to the mainstream of public discourse. It is an open question whether the global mega-banks can resist an idea whose time may have come.

August 2015: Let the Dice Fly
Publisher: Risk Magazine
A painfully negotiated agreement may have staved off the immediate threat of Grexit, but I argue that the structural inconsistencies of the eurozone will be a source of uncertainty for years or even decades to come.

November 2015: And so farewell
Publisher: Risk Magazine
After more than 16 years, I have decided to stop down from my role as the monthly Risk Analysis columnist at Risk magazine. My final column takes a personal look back at the issues and events that have shaped risk management during this period.

February 2014: Beyond Relational Databases
Publisher: Risk Magazine
Data and analytical fragmentation have been obstacles to effective risk management for decades. I argue that the intractability of this problem is rooted in dependence on relational databases and that moving beyond this framework holds the key to success.

October 2014: The Limits of Ambiguity
Publisher: Risk Magazine
The UK has a remarkably successful record of living with ambiguity but it may have reached the limits of its ability to do so. Whether it can resolve regional differences in an equitable way poses a source of fundamental uncertainty.

April 2013: Risk Management Beyond VaR
Publisher: Other Publisher
This paper was presented to the Federal Reserve Bank of Atlanta's 2013 Financial Markets Conference in Stone Mountain Georgia on April 10, 2013.

April 2013: China's Challenge
Publisher: Risk Magazine
If China is to continue its remarkable economic success of the past 30 years, it needs to tolerate and even encourage disruptive figures such as Steve Jobs. I argue that it is unclear whether the existing power structure is prepared to do so.

May 2013: From Greek Tragedy to Cypriot Farce
Publisher: Risk Magazine
The crisis in Cyprus may come to be seen as a turning point towards reduced moral hazard and a viable future for the euro but I argue that many pitfalls remain.

July 2013: Wishing Won't Make It So
Publisher: Risk Magazine
François Hollande’s claim that “the crisis in the eurozone is over” says more about the wishful thinking of many European leaders than it does about economic and social reality.

August 2013: Consent and Chaos
Publisher: Risk Magazine
In many different guises, an ancient question still haunts human society: “What is the source of government legitimacy?” While this is a largely settled issue in the Western industrial countries, it is likely to disrupt parts of the Islamic world for generations.

December 2013: Yellen Faces a Logistical Nightmare
Publisher: Risk Magazine
The impending transition from Ben Bernanke to Janet Yellen at the US Federal Reserve is taking place at a particularly sensitive time. I argue that the new chair faces a logistical nightmare in unwinding a massive increase in the central bank’s balance sheet.

July 2012: The Eurozone Crisis is a Buyers' Strike
Publisher: Risk Magazine
Commentators portray the markets as aggressively attacking European government bonds. I argue that what is really happening is a buyers’ strike motivated by fear. Failure to recognize this can lead to bad policy.

August 2012: How to Mend the Libor Process
Publisher: Risk Magazine
Barclays’ settlement of Libor-rigging claims has sparked a full-scale financial scandal and exposed the conflicts inherent in the rate-setting process. I argue there is a better way to organise it.

September 2012: Debt Mutualization: Lessons from the U.S.
Publisher: Risk Magazine
Some argue that debt mutualization across the Eurozone is the answer to the current crisis, pointing to an almost 200 year old experience in the U.S. for support. I argue that this represents a very selective reading of history.

January 2011: The Power of Defunct Economists
Publisher: Risk Magazine
Economists’ concepts have informed much of the debate around fiscal policy, but the crisis in the eurozone goes well beyond basic text book theories.

February 2011: Withholding Versus Withdrawing
Publisher: Risk Magazine
The political difficulty of withdrawing privileges, especially those long expected by the public, will create fundamental uncertainty for years to come.

May 2011: Darkest Before the Dawn?
Publisher: Risk Magazine
Tragic upheavals sometimes shock a society out of patterns of behavior that have endured for decades or even centuries. In my Risk Analysis column for May I ask whether the triple disaster that has befallen Japan may be a case in point?

March 2008: Whither Originate & Distribute?
Publisher: Risk Magazine
Some argue that the crisis in structured credit markets signals the demise of the originate-and-distribute model of banking, but this fails to take into account the pattern of all revolutions.

February 2007: A Gathering Storm
Publisher: Risk Magazine
U.S. default rates for high-yield bonds have remained surprisingly low over the past three years. Some argue this indicates that the world has changed, but we have heard this story before.

June 2007: Unthinkably Favorable?
Publisher: Risk Magazine
Imagination in stress testing demands unorthodox thinking, since even seemingly favorable events can have negative consequences. In the case of the oil markets, this means stress testing for a fall, as well as a rise, in oil prices.

July 2007: Risk Milestones
Publisher: Risk Magazine
The 20th anniversary of Risk Magazine was an inevitable inspiration to reminisce. Herewith are several important public milestones and one personal milestone in the development of financial risk management.

February 2006: China - Covering the Angles
Publisher: Risk Magazine
The spectacular growth of the Chinese economy over the past 20–25 years is historically unprecedented in its scope and speed. While there is little sign of this process stalling or even slowing, a note of caution is still advisable.

June 2006: Who Benefits?
Publisher: Risk Magazine
The accounting scandal at Fannie Mae has been an unfolding story for the past two years. Events from the early 1990s should have provided an early warning of future trouble.

September 2006: Awakening Giant?
Publisher: Risk Magazine
Some circumstances endure long enough to become embedded in the unexamined assumptions of a generation. In the case of the Japanese economy, these assumptions could prove costly.

July 2005: History Will Not Be Rushed
Publisher: Risk Magazine
In the aftermath of the ‘double no’ vote on the draft European constitution, much has been written about the crisis in Europe. While much of this is overblown, trying to rush history can be a risky undertaking.

November 2005: The Future of Risk Management in Historical Perspective
Publisher: Other Publisher
From Financial Engineering News - Four lessons from history that financial risk management should heed.

November 2005: The end of an era for the world
Publisher: Risk Magazine
George Bush has made his choice to replace Alan Greenspan. Despite initial praise, Ben Bernanke faces months of close scrutiny and the markets face a period of increased uncertainty. Demonstrating his independence will be key to Bernanke’s success.

July 2004: The Risk of Generational Change
Publisher: Risk Magazine
Most industrial countries are in the midst of a transition away from socially mandated to individually managed retirement planning. This holds potentially huge strategic risks for buy-side firms that fail to meet the highest standards of fiduciary care while offering real opportunities to the most innovative among them.

January 2001: Presidents and Risk Precidents
Publisher: Risk Magazine
The probability of a hung US presidential election now falls into the category of an uninsurable risk.

November 1999: When Price Changes are Not Normal
Publisher: Risk Magazine
If investor decisions are statistically independent, price changes tend to be normally distributed.. But on some days this independence flies out the window. What can you do at times like these?

December 1999: Risk and Uncertainty
Publisher: Risk Magazine
Some risk managers' confidence in science leads them to ignore the uncertainty of markets. In times of crisis. Forewarned is forearmed.

Systemic Risk

September 2015: An Optimistic Note
Publisher: Risk Magazine
Economists in general, and risk specialists in particular, are often viewed as a gloomy lot. Nevertheless, I offer a contrarian and basically upbeat view on two often discussed long-term concerns.

April 2014: Fair-value Accounting's Blind Spot
Publisher: Risk Magazine
In recent years, the preference for market-determined prices as the correct basis for valuation has become deeply ingrained. While agreeing with this view in principle, I argue it is not applicable in all circumstances and can, in fact, magnify the impact of negative feedback loops.

November 2014: Poisoning the Well
Publisher: Risk Magazine
Billions of dollars in fines have recently been imposed on US companies for activities that occurred before the offending business units were acquired, often under government pressure and/or with government support. I argue that the way these fines were imposed not only undermines the rule of law but it will make future crises harder to manage and more severe.

April 2013: Risk Management Beyond VaR
Publisher: Other Publisher
This paper was presented to the Federal Reserve Bank of Atlanta's 2013 Financial Markets Conference in Stone Mountain Georgia on April 10, 2013.

October 2013: Ignorance in Action
Publisher: Risk Magazine
Many of the proposed reforms in derivatives market regulation were driven by politics rather than economics. I argue that this could lead to an additional source of systemic risk and less effective risk management among end-users.

June 2012: Too-Big-to-Fail: The Next Chapter
Publisher: Risk Magazine
The threat to society of institutions that are too big to be allowed to fail should be solved through a predictable legal framework rather than punitive regulation. I commend a group of academics formulating the details of such an approach.

July 2012: The U.S. Residential Finance Market – The Road to Recovery
Publisher: Other Publisher
This six page comment appeared as part of a much larger July 2012 white paper published by the National Association of Insurance Commissioners' Center for Insurance Policy Research. (See: http://www.naic.org/documents/cipr_120812_white_paper_financing_home_ownership.pdf ) In it I review the rise and fall of the securitized residential mortgage market and outline an innovation that I believe can be central to restoring the health of this important source of housing finance.

September 2012: Debt Mutualization: Lessons from the U.S.
Publisher: Risk Magazine
Some argue that debt mutualization across the Eurozone is the answer to the current crisis, pointing to an almost 200 year old experience in the U.S. for support. I argue that this represents a very selective reading of history.

April 2010: The Problem is Severity
Publisher: Risk Magazine
Financial reformers talk endlessly about the too-big-to-fail problem, but they often fail to address the heart of the issue.

January 2009: Corrosive Feedback
Publisher: Risk Magazine
Innovations create their own feedback loops and many of these are dangerous. Risk managers need to pay greater attention to such effects in the future.

March 2009: Systemic Risk Capital
Publisher: Risk Magazine
We have seen what can happen when the size of financial institutions rivals – or even surpasses – that of their home countries. It may be time to limit the size of institutions through imposition of systemic risk capital requirements.

May 2009: Can the Center Hold?
Publisher: Risk Magazine
Despite the inevitability of tighter and more intrusive regulation, this alone will not prevent future financial crises as long as ‘too big to fail’ remains an issue.

June 2009: Markets Are Not Magic
Publisher: Risk Magazine
Despite their pervasive contributions to economic growth and efficiency, it is important to remember that markets are not magic when transparency fails.

July 2009: Fostering Opacity
Publisher: Risk Magazine
"Too-big-to-fail" is not just a moral hazard problem, it positively fosters dangerous opacity.

September 2009: Financial Network Risk
Publisher: Risk Magazine
Both macroeconomics and financial theory have failed to deal adequately with systemic risk. Other disciplines have much to teach us about the stability and fragility of complex dynamic systems.

November 2009: Let Small Fires Burn
Publisher: Risk Magazine
The remarkable stability of the past two decades sowed the seeds of the current crisis. In future, monetary authorities will have to be more aggressive about removing the punch bowl when the party gets interesting.

April 2008: Self-Referential Risk
Publisher: Risk Magazine
Even good models and successful product innovations can cause problems when their very success exposes them to the paradox of self-referential risk. It is important to analyze such feedback effects in our risk assessments.

May 2008: Really Too Big to Fail?
Publisher: Risk Magazine
Are bulge-bracket investment banks really too big to be allowed to fail? Despite the upheavals such a failure would cause, the consequences may have been overblown.

August 2008: Truth and Responsibility
Publisher: Risk Magazine
The meltdown in subprime collateralized debt obligations will affect financial markets for years. One likely result will be a renewed market willingness to reward sound credit underwriting – and therein lies a valuable business opportunity.

November 2008: Macrofinancial Risk
Publisher: Risk Magazine
A valuable synthesis of financial theory and macroeconomics appears to be emerging. This could enrich both areas.

January 2002: Enron and Systemic Risk
Publisher: Risk Magazine
Regulators worry that concentrating derivatives market-making in a few major dealers poses severe systemic risk issues. Could one big player’s failure break the whole system? Enron is an ideal test case, with some encouraging indications.

September 1982: The Role of Models in Economic Prediction
Publisher: Other Publisher
A Paper presented at the 1982 Annual Meeting of the National Association of Business Economists - Written more than a quarter century ago, this brief paper considers the balance between science and judgment in economic prediction. While it contains several references to circumstances specific to the time, the central message remains as valid today as it was then.

Dark Risk Diagnosis

September 2015: An Optimistic Note
Publisher: Risk Magazine
Economists in general, and risk specialists in particular, are often viewed as a gloomy lot. Nevertheless, I offer a contrarian and basically upbeat view on two often discussed long-term concerns.

September 2014: Risk Management Beyond VaR and Emerging Technologies
Publisher: Other Publisher
I argue that emerging technologies we see every day on your smart phones and other personal devices can revolutionize risk management systems, but it will take time and persistence to make the transition.

April 2013: Risk Management Beyond VaR
Publisher: Other Publisher
This paper was presented to the Federal Reserve Bank of Atlanta's 2013 Financial Markets Conference in Stone Mountain Georgia on April 10, 2013.

September 2013: Risk Management Beyond VaR - Misys Whitepaper Version
Publisher: Other Publisher
This is a slightly expanded version of my April paper at the Atlanta Fed Conference with some more detailed references.

September 2012: Debt Mutualization: Lessons from the U.S.
Publisher: Risk Magazine
Some argue that debt mutualization across the Eurozone is the answer to the current crisis, pointing to an almost 200 year old experience in the U.S. for support. I argue that this represents a very selective reading of history.

January 2010: Revenge of the Economists
Publisher: Risk Magazine
Business economists are poised for a resurgence if they will apply their skills to the problem of diagnosing structural stresses and dark risk.

April 2009: Second Order Uncertainty
Publisher: Risk Magazine
The financial crisis has drummed home the dangers of basing analysis on unreliable data. Despite its amorphous character, risk managers must begin to increase their focus on second order uncertainty.

November 2009: Let Small Fires Burn
Publisher: Risk Magazine
The remarkable stability of the past two decades sowed the seeds of the current crisis. In future, monetary authorities will have to be more aggressive about removing the punch bowl when the party gets interesting.

June 2008: A Second Means of Valuation
Publisher: Risk Magazine
In the same way credit risk managers used to question how a loan would be repaid if the primary means of payment were to fail, so banks ought to ask if there is another way to value structured credit investments if market liquidity were to dry up.

July 2008: Required Reading
Publisher: Risk Magazine
Over the past year, we have witnessed a unique experiment in what makes ¬ financial risk management effective. A succinct supervisory summary of what we have learned should be required reading for all interested parties.

November 2008: Macrofinancial Risk
Publisher: Risk Magazine
A valuable synthesis of financial theory and macroeconomics appears to be emerging. This could enrich both areas.

December 2008: Dangerous Momentum
Publisher: Risk Magazine
All too often, we extrapolate tomorrow based on the momentum of today’s trends. We would do well to adopt our primitive fear of physical momentum when assessing the prospects for financial markets.

April 2007: A Yen for Financing
Publisher: Risk Magazine
Yen-denominated mortgages have proven an attractive source of low-cost housing funding over the past 10 years. Are these products an accident waiting to happen?

June 2007: Unthinkably Favorable?
Publisher: Risk Magazine
Imagination in stress testing demands unorthodox thinking, since even seemingly favorable events can have negative consequences. In the case of the oil markets, this means stress testing for a fall, as well as a rise, in oil prices.

October 2004: With a Bang or a Whimper?
Publisher: Risk Magazine
Inconsistent pricing across traditionally segmented markets has been greatly reduced in recent years. Much of this improved market efficiency is due to the efforts of hedge funds, but the very success of these funds may be laying the foundation for a major shake-out, with potentially serious consequences.

January 2001: Presidents and Risk Precidents
Publisher: Risk Magazine
The probability of a hung US presidential election now falls into the category of an uninsurable risk.

December 1999: Risk and Uncertainty
Publisher: Risk Magazine
Some risk managers' confidence in science leads them to ignore the uncertainty of markets. In times of crisis. Forewarned is forearmed.

September 1982: The Role of Models in Economic Prediction
Publisher: Other Publisher
A Paper presented at the 1982 Annual Meeting of the National Association of Business Economists - Written more than a quarter century ago, this brief paper considers the balance between science and judgment in economic prediction. While it contains several references to circumstances specific to the time, the central message remains as valid today as it was then.

General Regulatory Issues

August 2014: Prudent Valuation versus Confidence Accounting
Publisher: Risk Magazine
As the financial crisis demonstrated, markets sometimes do not know what something is worth. I argue that explicit estimates of value uncertainty would be a better way of addressing this than so-called prudent valuation.

January 2013: Forgotten Pillars
Publisher: Risk Magazine
As well as doubling down on complexity, I argue that Basel III represents the triumph of elaborate Pillar I capital rules and the total neglect of Pillars II and III.

May 2012: A Crisis of Identity, part two
Publisher: Risk Magazine
It has taken a long time to build broad international support for a system of legal entity identifiers. Now that progress is being made, I argue it is important to achieve a responsive system that will last.

July 2012: The U.S. Residential Finance Market – The Road to Recovery
Publisher: Other Publisher
This six page comment appeared as part of a much larger July 2012 white paper published by the National Association of Insurance Commissioners' Center for Insurance Policy Research. (See: http://www.naic.org/documents/cipr_120812_white_paper_financing_home_ownership.pdf ) In it I review the rise and fall of the securitized residential mortgage market and outline an innovation that I believe can be central to restoring the health of this important source of housing finance.

November 2012: The Public Use of Private Interest to Revive the U.S. Residential Finance Market
Publisher: Other Publisher
In 1977, Brookings economist Charles Schultze proposed wider application of the Public Use of Private Interest in a book by the same name. In these brief comments I argue that this largely neglected idea is crucial if we are to revive the U.S. residential finance market without open-ended reliance on government guarantees.

December 2012: Basel Faulty
Publisher: Risk Magazine
Having been broadly supportive of the effort to establish global bank capital standards over the past 25 years, I explain why I believe Basel III has gone badly astray.

April 2010: The Problem is Severity
Publisher: Risk Magazine
Financial reformers talk endlessly about the too-big-to-fail problem, but they often fail to address the heart of the issue.

May 2009: Can the Center Hold?
Publisher: Risk Magazine
Despite the inevitability of tighter and more intrusive regulation, this alone will not prevent future financial crises as long as ‘too big to fail’ remains an issue.

June 2009: Markets Are Not Magic
Publisher: Risk Magazine
Despite their pervasive contributions to economic growth and efficiency, it is important to remember that markets are not magic when transparency fails.

July 2009: Fostering Opacity
Publisher: Risk Magazine
"Too-big-to-fail" is not just a moral hazard problem, it positively fosters dangerous opacity.

August 2009: Flying Blind
Publisher: Risk Magazine
Despite including some useful proposals, the Obama administration’s regulatory reform initiative ignores a crucial issue.

November 2009: Let Small Fires Burn
Publisher: Risk Magazine
The remarkable stability of the past two decades sowed the seeds of the current crisis. In future, monetary authorities will have to be more aggressive about removing the punch bowl when the party gets interesting.

December 2009: Twenty-first Century Supervision
Publisher: Risk Magazine
Much of the regulation governing banks was developed in the last century. It is time to stop trying to supervise twenty-first century financial institutions with twentieth century oversight tools.

February 2008: Regulatory Capital, Models, and Holistic Balance Sheet Management (with Thomas Day)
Publisher: RMA Journal
By taking a holistic approach to balance sheet management, you can see beyond the hype of current rules and model-based approaches. This article details the principles of such an approach as well as the steps you can take to effectively manage complex balance sheet risks.

June 2008: Deposit Insurance and the Effective Pricing of Risk
Publisher: RMA Journal
Regulators could mitigate institutions’ excessive risk taking by adopting a risk-sensitive approach to pricing deposit insurance premiums. Those premiums would have to reflect the complex risks associated with trading and off-balance-sheet activities as well as traditional credit quality considerations.

January 2007: Prescription vs Principles
Publisher: Risk Magazine
Over the past decade, the shift of supervisory practice from prescription towards a principles-based approach has been dramatic. This was a valuable and necessary change, but it also has greatly complicated retaining qualified supervisory staff.

July 2007: Risk Milestones
Publisher: Risk Magazine
The 20th anniversary of Risk Magazine was an inevitable inspiration to reminisce. Herewith are several important public milestones and one personal milestone in the development of financial risk management.

August 2006: Home Host Conflict
Publisher: Risk Magazine
Despite structural attempts at supervisory co-ordination, international banking groups need to foster bilateral understanding with their subsidiaries’ host regulators.

July 2001: FSI: Stable and Able
Publisher: Risk Magazine
While the Basel Committee on Banking Supervision remains in the limelight, the quiet efforts of its related entity, the Financial Stability Institute, should not be overlooked.

March 2000: Two Cheers for the Regulators
Publisher: Risk Magazine
Allowing internal models for market risk capital was a big, bold step by the regulators. The downside was a reduction in comparability between internal model and standard model users.

Basel II

January 2013: Forgotten Pillars
Publisher: Risk Magazine
As well as doubling down on complexity, I argue that Basel III represents the triumph of elaborate Pillar I capital rules and the total neglect of Pillars II and III.

February 2008: Regulatory Capital, Models, and Holistic Balance Sheet Management (with Thomas Day)
Publisher: RMA Journal
By taking a holistic approach to balance sheet management, you can see beyond the hype of current rules and model-based approaches. This article details the principles of such an approach as well as the steps you can take to effectively manage complex balance sheet risks.

May 2007: A Dangerous Idea
Publisher: Risk Magazine
Encouraging and supporting sound internal risk management has become an important aspect of effective financial regulation. Imposing a regulatory capital charge for stress-test losses would undermine this important objective.

November 2007: Cutting the Gordian Knot
Publisher: Risk Magazine
Basel II remains wedded to incremental extensions to the market risk rules. It is time for a bolder approach in this area.

March 2006: Regulatory Arbitrage - Back to Basics
Publisher: Risk Magazine
The increasing tradability of credit risk is creating complications for the Basel Capital Accord that were never envisioned when the market risk amendment was first formulated. The problem is a basic inconsistency between Basel’s assumptions regarding the treatment of risk in the banking and trading books.

July 2006: Dangerous Perfection
Publisher: Risk Magazine
An obsessive insistence on academic perfection could limit the benefits of allowing simulation-based counterparty credit exposure methods in Basel II.

August 2006: Home Host Conflict
Publisher: Risk Magazine
Despite structural attempts at supervisory co-ordination, international banking groups need to foster bilateral understanding with their subsidiaries’ host regulators.

November 2006: Validating EPE
Publisher: Risk Magazine
Empirical validation of trading credit exposure simulation models is clearly essential. The process must differ significantly, however, from traditional back-tests of VaR models.

June 2005: At long last
Publisher: Risk Magazine
After more than a decade of active deployment at major institutions, simulation-based estimation of counterparty credit exposure is on track to become part of the Basel II regulatory capital regime. Its impact on regulatory capital is not the most important benefit of this change.

September 2005: The New Market Risk Challenge
Publisher: Risk Magazine
Since the late 1990s, the issue of market risk assessment has been viewed as largely settled. A recent statement from the Basel Committee, however, is likely to change this comfortable presumption.

December 2005: Basel 1.5
Publisher: Risk Magazine
In October, US banking supervisors released an advance notice of proposed rule-making regarding regulatory capital requirements. While it continues to demonstrate an insistence by the US on going its own way, some aspects of Basel 1.5 would be thoughtful improvements to the standardized approach of Basel II.

January 2004: The Data Challenge of Basel II (with Dean Jovic)
Publisher: Other Publisher
From The Journal of Securities Operations - The historical obstacles to data consolidation and techniques for overcoming them.

August 2004: Basel II: The Time for Action
Publisher: Risk Magazine
Despite some lingering issues, the main points of contention around the revised Basel II capital Accord have been resolved, and implementation seems more certain than it has for several years. It is time to stop hoping it will go away and get on with the inevitable effort required to comply.

January 2003: The Role of Correlation
Publisher: Risk Magazine
A review of recent research on the role of correlation between probability of default and recovery rates, as well as among default probabilities.

February 2003: Don't Count on Buffers
Publisher: Risk Magazine
One possible mitigator of the pro-cyclical impact of risk-sensitive capital requirements would be counter-cyclical changes in capital buffers. Empirical evidence on this issue is scarce and a new regulatory capital regime could well induce a behavioral change. Nevertheless, relying on counter-cyclical capital buffers to neutralize the impact of pro-cyclical capital requirements is risky at best.

March 2003: No Cure Through the Cycle
Publisher: Risk Magazine
Some have argued that the antidote for pro-cyclicality in the Basel II capital requirements is the use of ‘through-the-cycle’ estimates of default and recovery rates. While this might mitigate the pro-cyclical impact of the Accord, it would also introduce unacceptable vagueness into the estimates and seriously undermine the basis for back-testing and verification.

May 2003: Is 8% for All Seasons?
Publisher: Risk Magazine
Considering the potential pro-cyclical impact of Basel II and the limited effectiveness of countervailing influences, making the 8% ratio of capital-to-risk-adjusted-assets a discretionary policy variable should be part of the new capital Accord.

September 2003: Reason for Hope
Publisher: Risk Magazine
One disappointing aspect of the Basel II deliberations has been the lack of any proposed change in the treatment of counterparty credit exposures. Recent dialogue between the Basel Committee and industry representatives offers hope for an important improvement in this area.

November 2003: When is Best Practice Good Enough
Publisher: Risk Magazine
The most dramatic change in banking regulation in decades has been the move from highly prescriptive procedures towards demanding "best practice" risk management methods. Differences over how quickly the new approach can be applied to credit risk management is at the heart of the controversy over revising the Basel capital Accord.

December 2003: Credit Risk Catches Up
Publisher: Risk Magazine
When Basel II was first proposed in 1999, credit risk models lagged way behind market risk models. But that’s changed, which means we need less prescriptive rules for determining credit risk capital.

May 2002: The Future of Basel II
Publisher: Risk Magazine
Basel I is the best argument for persevering with Basel II, but any revisions must address regulatory arbitrage problems and take greater account of the full range of credit risk mitigation techniques.

November 2002: Basel II and Procyclicality
Publisher: Risk Magazine
The main argument for making regulatory capital requirements more risk-sensitive is to improve allocational efficiency. Unfortunately this may lead to intensified business cycles if regulators fail to take measures to prevent such an impact. This essay reviews the rationale for risk-sensitive rules and how they could magnify business cycles.

March 2001: Basel's Flawed Paradigm
Publisher: Risk Magazine
The proposed new Basel Capital Accord is a major improvement on the existing framework. Nevertheless, it reflects an obsolete definition of capital adequacy. Here is a proposed alternative paradigm for consideration.

April 2001: Frozen in Time
Publisher: Risk Magazine
The Basel Committee of the Bank for International Settlements appears stuck in the distant past with regard to counterparty credit risk analysis.

May 2001: Could Do Better
Publisher: Risk Magazine
The Basel Committee can provide better incentives for improved operational risk management than those implicit in the draft revision to the capital accord.

June 2001: Strength Through Diversity
Publisher: Risk Magazine
Recognition of the impact of diversification effects is imperative for good portfolio management. Regulatory capital rules should pay greater attention to this aspect of credit risk measurement.

December 2001: A Major Improvement
Publisher: Risk Magazine
The Operational Risk working paper the Basel Committee published in late September outlines a major and valuable improvement in the proposal.

March 2000: Two Cheers for the Regulators
Publisher: Risk Magazine
Allowing internal models for market risk capital was a big, bold step by the regulators. The downside was a reduction in comparability between internal model and standard model users.

April 2000: Consistency and Credit Risk Models
Publisher: Risk Magazine
If banking supervisors are to allow use of credit risk models to calculate regulatory capital requirements, how can they be sure the figures they are receiving are accurate?

Collateralized Debt Obligations (CDOs)

July 2012: The U.S. Residential Finance Market – The Road to Recovery
Publisher: Other Publisher
This six page comment appeared as part of a much larger July 2012 white paper published by the National Association of Insurance Commissioners' Center for Insurance Policy Research. (See: http://www.naic.org/documents/cipr_120812_white_paper_financing_home_ownership.pdf ) In it I review the rise and fall of the securitized residential mortgage market and outline an innovation that I believe can be central to restoring the health of this important source of housing finance.

April 2009: Second Order Uncertainty
Publisher: Risk Magazine
The financial crisis has drummed home the dangers of basing analysis on unreliable data. Despite its amorphous character, risk managers must begin to increase their focus on second order uncertainty.

March 2008: Whither Originate & Distribute?
Publisher: Risk Magazine
Some argue that the crisis in structured credit markets signals the demise of the originate-and-distribute model of banking, but this fails to take into account the pattern of all revolutions.

June 2008: A Second Means of Valuation
Publisher: Risk Magazine
In the same way credit risk managers used to question how a loan would be repaid if the primary means of payment were to fail, so banks ought to ask if there is another way to value structured credit investments if market liquidity were to dry up.

August 2008: CDOs – Risks, Challenges and Market Outlook (with Cyril Deretz)
Publisher: Risk Books
(2008, The Definitive Guide to CDOs, 2008, Gunter Meissner ed.) Sometimes your timing can be just awful. This chapter from a major collection of papers on collateralized debt obligations (CDOs) was finalized in early 2008 and ultimately published in August, just before the intense financial crisis in early September 2008. There certainly are things I would choose to change with 20/20 hindsight. All in all, however, I think most of what was said here has stood the test of time.

Accounting Issues

June 2008: A Second Means of Valuation
Publisher: Risk Magazine
In the same way credit risk managers used to question how a loan would be repaid if the primary means of payment were to fail, so banks ought to ask if there is another way to value structured credit investments if market liquidity were to dry up.

October 2008: Fair-value Accounting - Implications for Liquidity Risk Management
Publisher: RMA Journal
Applying fair-value accounting across the board without careful thought to the impact on volatility of reported earnings and book capital could inadvertently cause instability.

December 2007: Accounting Rules, Risk-based Pricing & Reporting Arbitrage (with Thomas Day)
Publisher: RMA Journal
Within virtually all commercial enterprises, there is a relentless tension between short-term earnings and long-term value creation. Left unchecked, this trade-off can be dangerous, given that investment and asset allocation decisions can easily be driven by short-term earnings targets, to the detriment of long-term value. This article considers some of the consequences and possible alternatives.

February 2004: Accounting for Revenue Uncertainty
Publisher: Risk Magazine
The past 20 years have seen an increasing focus on mark-to-market accounting when determining corporate profits. This has been accompanied by a dramatic growth in contracts where multiple complex contingencies interact to affect valuation. Recent proposal to partition revenue into three components would bring added transparency to financial statements.

March 2004: Net Asset Value and Risk
Publisher: Risk Magazine
In light of the growth of hedge funds and the recent mutual fund market-timing scandal, valuation has become a hot topic. A clear definition of what published valuations represent is essential and such valuations need to be supplemented with consistent risk information.

April 2004: What Are Loan Loss Reserves?
Publisher: Risk Magazine
Few things are more frustrating to businesses than to be subjected to contradictory requirements by multiple authorities. While modest inconsistencies can be glossed over with little or no harm, conflicting definitions of loan loss reserves are creating real problems and need to be resolved.

June 2003: Accounting for Stock Options
Publisher: Risk Magazine
Social problems often grow to uncomfortable proportions before democratic societies can muster the consensus needed to deal with them. Then the steps taken are often sudden and ill-considered. This common pattern is playing itself out relative to accounting for stock options. This column suggests an alternative to the proposed "expensing" approach.

October 2002: Factoring In Stock Options
Publisher: Risk Magazine
In the wake of recent corporate scandals, support has spread rapidly for including the cost of employee stock options as an expense item in corporate income statements. While some reform is appropriate, present trends could end up doing more harm than good.

Other

February 2008: Legal Lethargy
Publisher: Risk Magazine
Constraining buy-side institutions to hold only investment-grade securities uses a nearly century-old metric with limited contemporary relevance. One modest reform proposal would help.

August 2007: Is It Really Alpha?
Publisher: Risk Magazine
Hedge funds often characterize their mission as the pursuit of pure alpha. A growing body of research, however, argues that a significant proportion of observed hedge fund returns are really alternative beta. This column considers the implications for the hedge fund industry and for investors.

January 2006: The Origins of Value - A Review
Publisher: Other Publisher
From The GARP Risk Review - A review of a book of essays exploring the historical roots of modern finance.

April 2003: A Buffetting for Derivatives
Publisher: Risk Magazine
Warren Buffett’s outspoken condemnation of derivatives received wide press coverage in early March. Everyone recognizes Buffett as a shrewd and experienced observer of the business world. Neverhtheless, while his remarks contain some important hard truths, his extreme conclusions reflect the fact that a little knowledge is a dangerous thing.

February 2001: Is Risk Constant?
Publisher: Risk Magazine
An exploration of Gerald Wilde’s idea that risk homeostasis is relevant to risk management.

November 2001: Rethinking International Law
Publisher: Risk Magazine
International terrorism now appears to pose risks of previously unthinkable magnitude. While civilized nations must resist resorting to lawlessness, the accepted rules of engagement, as reflected in international law, need to change.