Young Professionals Journal – Volume III, 2014

November 2014 Issue – Reduced Resolution Version

 

       Market seems to be teeming with good news of a protracted recovery, at least by measure of stock performance.  Wary but growing confidence in businesses seems to be the order of the day.  Monetary policies and continued accommodation through monetary easing and market stimulus have propelled stock and asset prices to past highs, and even surpassing historical highs.  While this may seem like good news, there are reasons for us as risk professionals to step back and examine if there is a real case for congratulating each other for so successfully defeating the potential disastrous effects of the 2008 crisis with minimal overall pain across global economies.

The effects of persistent market interventions and continued regulations are certain to exact structural distortions to reward and incentive structures that would be otherwise adjusted through “free-market” mechanisms.  This interplay of market forces in the face of constant interventions and the shifting effects will need to be understood so we could better know where things are headed, and whether we need to start bracing for yet another major shake-up.

One critical way of understanding markets is a careful examination of history.  History accords many great lessons for examining the risks of tomorrow and dealing with situations we face today.  But even this is fraught with much difficulties, as we have a great tendency to view history with preconceived ideas and use history to justify our views than learn objectively from the past.  When we are able to do so, history can be a powerful tool, as King Solomon has wisely said, “There is nothing new under the sun.”

So here in this issue, we present one interesting article by Alex Pollock on “The American Banking System Might Not Last Until Monday” – a compelling read for how often we fail to look back in dealing with today’s issues and tomorrow’s challenges.  As we brace for challenges of tomorrow, it might also be useful to read David Rowe’s article on “Risk Management Beyond VaR and Emerging Technologies” and Sumit Mathur’s article on “Capital Management – Dawn of a New Era” for some perspectives on evolving technologies and solutions for the future in risk management.  Mayra Rodriguez has also shared an interesting article “Can Banks’ Volcker Metrics Be Trusted”, which is part of a series of articles by Mayra on Volcker Rule implementation.  We have also included three interesting articles: Peter Wallison’s “Underwriting the Next Housing Crisis”, Prof. Cliff Rossi’s “Making Sense of Affordable Housing and GSE Reforms” and Prof. Moorad Choudhry’s “Derivatives Funding Value Adjustment (FVA) and Bank’s Internal Funding Policy”, as well as Werner Hahn’s quick highlight of the recent September “Gearing for the Future in Risk Management” event.

You may access the full copy in reduced resolution (smaller file size) by clicking on the thumbnail cover page above.  For those who would like to access the full resolution copy, please click on the thumbnail below.  In addition, we have provided thumbnails for individual articles below.  You may click the respective thumbnails to access the articles directly.

We hope you will enjoy the compilation of articles in this issue.  Do send us your comments and suggestions via email to info@finrisk.org.  We encourage you to learn more about other FinRisk initiatives and activities at our website: www.finrisk.org.

Steven P. Lee
Chair, FinRisk Founding Committee

 

 

November 2014 Issue – Full Resolution Version