jaded risk manager

Bank Risk: Will Basel II Finally Discredit VAR?

I'm a quant. Bottom line is idiot management use models to make and justify risks of a business and not challenge them. Challenging assumptions is what models should be used for in risk management.

It's not simply they don't understand the risk - they do. Risk management has become a rubber stamp process at most firms, you don't get paid if you don't. Classic case of agency costs. Can't help it, the call-option bonus is how people are paid on the street.

P/E Ratio & Estimated Earnings Growth for S&P Sectors

wondering how all sector earnings significantly below the total S&P500 earnings? should the S&P500 earnings be close to the weighted sector earnings?

The Need For Risk Management and Its Implementation

I think risk management systems are all too often used as investor panacea/snake oil or as the scape goat when things go awry. It's easy to blame a machine or geek.

It's not really about whether you have a Risk management system or not.. If the captain wants to sail through the storm, rocks or ice, in a bid to get home in a hurry, it won't matter how good your radar or sonar is, or whether you're sailing the Titanic..

Same can be said about risk management. It's really up to whoever runs the firm and their pay and 'skin in the game'. Unfortunately those executives are too easily tainted by the structure of their pay (i.e. % of the upside, little downside). In the case of Freddie and Fannie, those executives can pay off politicians too. Cronyism pays off in the US even if you lose.

People will bet the farm because they have incentive to do so. They hire quants to get the 'rubber stamp' and to assuage the investors. Believe me, if Stan Oneal had every single cent in Merrill but food and dinner he wouldn't need a risk manager. You don't need a risk manager to tell you not to put all your eggs in one basket.