In the past two years, the world has experienced how unsound economic practices can disrupt global economic and social order. Today’s volatile global financial situation highlights the importance of managing risk and the consequences of poor decision making.
The Doom Loop in the Financial Sector reveals an underlying paradox of risk management: the better we become at assessing risks, the more we feel comfortable taking them. Using the current financial crisis as a case study, renowned risk expert William Leiss engages with the new concept of “black hole risk” — risk so great that estimating the potential downsides is impossible. His risk-centred analysis of the lead-up to the crisis reveals the practices that brought it about and how it became common practice to use limited risk assessments as a justification to gamble huge sums of money on unsound economic policies.
In order to limit future catastrophes, Leiss recommends international cooperation to manage black hole risks. He believes that, failing this, humanity could be susceptible to a dangerous nexus of global disasters that would threaten human civilization as we know it.
Authors
- Bibliography, etc. Note
- Includes bibliographical references (p. 148-157) and index
- Control Number Identifier
- CaOOCEL
- Dewey Decimal Classification Number
- 332.1068
- Dewey Decimal Edition Number
- 22
- General Note
- Issued as part of the desLibris books collection
- ISBN
- 9780776619286 9780776607382
- LCCN
- HG173
- LCCN Item number
- L44 2010eb
- Modifying agency
- CaBNVSL
- Original cataloging agency
- CaOONL
- Physical Description | Extent
- 1 electronic text (xix, 169 p.)
- Publisher or Distributor Number
- CaOOCEL
- Rights
- Access restricted to authorized users and institutions
- System Control Number
- (CaBNVSL)slc00226090 (OCoLC)752543148 (CaOOCEL)435811
- System Details Note
- Mode of access: World Wide Web
- Transcribing agency
- CaOONL
Table of Contents
- Contents 6
- Preface 8
- Acknowledgements 15
- Chapter 1 Black Holes of Risk 19
- Systemic Risk 20
- Super-Systemic Risk 22
- Testing the First Atomic Bomb 25
- A Coronal Mass Ejection 28
- A Smaller Asteroid 32
- The Convoluted Tale of the Particle Colliders 33
- A Reasonable Selection of Plausible Black-Hole Risks 37
- Chapter 2 Systemic and Super-Systemic Risk in the Financial Sector 39
- Introduction 39
- Systemic and Super-Systemic Risk in the Global Financial Sector 46
- A Brief Primer on Financial Derivatives 54
- Prelude to Global Financial Crisis 56
- Types of Financial Risks 62
- The Regulatory Response to Systemic Financial Risk 64
- A Vapid Risk Management Paradigm 72
- The “Standard Model” for Risk Management 76
- Dispersal of Risk 79
- Correlation 89
- Contagion 93
- Complexity 98
- Tight Coupling 102
- Heterogeneity and Modularity 104
- The “Value at Risk” Model 108
- Solutions 111
- General Conclusions 117
- Chapter 3 Controlling the Downside Risk 126
- Three Simple Steps for Good Risk Management 126
- Applying Precaution to Black-Hole Risks 137
- Black-Hole Risk in the Global Financial Sector 142
- Risk of a Coronal Mass Ejection 145
- Risk from a Smaller Asteroid 146
- Risk of Cyber-Warfare 147
- Risk of Nuclear Proliferation 148
- Risk of Climate Change 150
- Conclusion: The Ugly Reality of Non-Linearities 153
- Appendix 1 Fragility in Complex Systems and the “Tipping Point” Problem 155
- Appendix 2 A Basic Integrated Risk Management Frameworks 163
- Table 2-1, Dimensions of Risk Management 164
- Works Cited 166
- Index 176
