Preface to “A New Theory of Risk and Rating” by Giulio Sapelli. The Elegance of Frugality and Risk. From a theoretical standpoint, risk is confronted in the very same way in which human interests and activities deploy and manifest themselves at given levels of self-organization. In fact, there cannot exist an objectivistic and deterministic theory…
The World’s stock markets form a complex highly interdependent and dynamic network which embraces the entire global economy. This system of systems, comprising over 45000 interacting corporations, provides an instantaneous reflection of the world’s economy and its state of health. As of the end of November, the total value of equities in the 58 major…
It its may 12-th, 2014 final Peer Review Report (download) the Financial Stability Board speaks of “reducing Reliance on CRA Ratings”. According to the FSB: “The key challenge lies in developing alternative standards of creditworthiness and processes so that CRA ratings are not the sole input to credit risk assessment.” As we have repeatedly pointed…
Much has been written about the global economic crisis, its causes and its consequences. We could say that to a large extent we actually understand what has happened and why. The point, however, is to look to the future and to learn from past mistakes. In particular, we would all like to understand how to…
In a turbulent and globalized economy, the focus is no longer on growth but on stability. The stability of a business is of paramount importance to investors, shareholders, banks, insurance companies, etc. Banks in particular have great interest in monitoring their customers in order to appreciate their state of health. Complexity allows to establish such…
In circumstances characterized by high turbulence and interdependency: it is impossible to make predictions – in fact, even the current economic crisis (of planetary proportions) has not been forecast only very rough estimates can be attempted there is no such thing as precision it is impossible to isolate “cause-effect” statements as everything is linked optimization…
There is much discussion today about systemic risks. In particular, the notion of “systemic” banks or corporations has become popular, which indicates entities that have the capability of causing considerable damage to the economy in case of default. Such entities are often termed as “Too Big To Fail” and their footprint on the national and…
