Posts Tagged ‘Credit-Default Swap’

When all you have is a hammer; Why financial managers are so bad at measuring risk

Monday, May 20th, 2013

By Robin (Mac) Stark

When a carpenter sets to work, tools in hand, he is prepared. The house he goes to work on, he is all too familiar with, and, thanks to physics and engineering, he can replicate, time after time, the same solid and reliable structure. Alas – this is not so for the contemporary Financial manager. Yet, there is a belief that a risk analyst can go to her trade, tools in hand, with the same accuracy and reliability of the carpenter. But this is her first mistake, a hammer is a reliable tool derived from the predictability of physics – the carpenter can make use of a simple and reliable hammer because with certainty, the force of the last strike of the hammer will be the same as the next. However, for the risk manager, such an assumption can prove costly, because the game is not the same – finance is not physics, a hammer just won’t do.

(more…)


Privacy | Copyright matters | Accessibility
Contact us | Feedback | Disclaimer
Opinions expressed in this blog are those of the individual contributors only.
QUT Home | Blog Home