Comments on Rick Bookstaber: The Risks of Financial Modeling: VaR and the Econo...

I think the discussion between you, Mr Bookstaber,...

2009-09-18T09:48:00.573-04:00

I think the discussion between you, Mr Bookstaber, Mr Taleb and the Subcommittee was very very good.

http://science.edgeboss.net/wmedia/science/scitech09/091009.wvx

I am not sure about the impact of the discussion. The issue is that politics want clear-cut statements of the "yes-no" type.

I think i going to burn the video on dvd, watch it several times, and try to draw some conclusions about operationalisation. It's worth!

I am appreciative of the interesting viewpoint wit...

2009-09-14T19:56:50.251-04:00

I am appreciative of the interesting viewpoint with a sound basis behind it but would like to add another dimension (or several) to the discussion, if I may.

I hear the use of concepts, such as complex, yet that we need to get the message out about how this impacts us is not there.

Too much manifest destiny on this side of the pond?

http://fed-aerated.blogspot.com/2009/09/engineering-economics.html

If I recall correctly, you recommend greater liabi...

2009-09-13T01:40:51.855-04:00

If I recall correctly, you recommend greater liability for risk managers who previously were inclined to side with the traders they are supposed to oversee, yet whose compensation is only a fraction of the later.

It would seem that your recommendation increases the asymmetry between traders' and RM's rewards, in favor of the former. Who is going to want to accept a job where if the desk blows up he/she becomes the scapegoat, and everyone else walks free?

A policy that empowers RM's to stand up to traders (Remember Paul Moore vs Sir James Crosby?) would be more effective. Here's an idea: traders' liability is increased (malus), not that of RM's. It's then up to traders to motivate/compensate RM's to do their job to best avoid a crisis. Let the trader come to the RM, not the other way around.