[FoRK] Computational Complexity and Information Asymmetry in Financial Products (Working paper)

Ken Ganshirt @ Yahoo ken_ganshirt at yahoo.ca
Sat Oct 17 17:09:43 PDT 2009


--- On Sat, 10/17/09, Russell Turpin <russell.turpin at gmail.com> wrote:
> 
> My taking such contracts doesn't increase the chance of me keeling
> over dead tomorrow. At least, not from natural cause. But large
> financial firms discounting that risk might, in aggregate, increase
> the risk of such a meltdown. And as this paper points out, domino
> effects are not always easy to evaluate. Which means it may be damn
> hard for future regulatory agencies to tell that risk-assuming
> counterparties are adequately backed.
> _______________________________________________

I know this has been beaten near to death but the problem with the current environment in the US and many European countries is that there really isn't any risk. The belief was that nobody would be allowed to fail and that was pretty much borne out. Going forward, the belief that there's no risk in such behaviour will be even stronger, thus even riskier behaviour should be expected.

If there had been some consequences so that future risk would actually be perceived, regulatory work would be simpler.

         ...ken...


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