just.a.guy

Next Up: Lehman Brothers?

This is probably a pretty accurate way to measure risk for financial firms in particular. After all, the biggest piles of money moving against Lehman on the short side, buying puts, and so on, are going to be those of their Wall Street bretheren -- those most in the know about what's really going on at Lehman... who's trading with them and who's not, etc.

In fact, using public equity share price as a risk indicator is pretty much an admission that investment bank stocks move due to asymmetries of material non-public information -- that is to say, insider trading.