I seldom focus on Market Risk, often thinking that the
systems and analysts and long (back) tested methodologies will suffice. However, in a month where a major central
bank precipitates a one day 41% move in a major currency, an aggressive trading
group with a name that includes ‘chaos’ dramatically moves copper, a major bank
is (again) fined for behavior in dark pools, and oil and the dollar continue
moves testing our calculations of standard deviation it may well be time to
take a fresh look.
Full disclosure: for
a profession that enthusiastically supports as much volatility as possible (to
create trading opportunities) the market(s) participants can claim victory this
month. I claim ‘foul’ without specific detail – just the general feeling that
there are a whole lot of boys and girls in the FICC world who just posted a bad
earnings year and need volatility to assure future bonuses. Call me cynical and naïve, but I believe the
markets as we knew them are (technical term) boluxed.
Even if my proposition is shaky on the issue of rigor, there
is something very different about how global markets are behaving. There has been a foundational structural
change, and I suspect that the way we view market risk will have to change as
well.
No comments:
Post a Comment