Word: tradings
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...computing power, though, financial engineers captured, packaged and sold risk exposure in startlingly new ways. Buying protection against a bad corn harvest or a spike in interest rates was just the beginning. Over time, as instruments became more complex, a huge shift occurred. Risk itself became the thing to trade--and to make money on. In the process, risk was redistributed to the people who could best handle it, making everyone safer...
...safe securities, even as they were leveraged to the hilt. Why? The mathematical models--backward-looking and based on just a few years' data from an asset bubble--said so. "As an industry, we let financial tools be a substitute for human judgment," says Kevin Blakely, CEO of the trade group Risk Management Association. "There's been such an earthquake in the industry, people are saying we have to do it differently...
What is the future of risk? In the short term, an era of risk aversion is sure to continue, as financial outfits, gripped by the fear that something more will go wrong--loans not paid back, a company on the other side of a trade going bust--pull back on everything from the creation of complex securities to credit-card limits...
...appetite for risk returns--and it always does--companies are promising long-lasting change. This time around, they'll handle it differently, they say. Banks are stuffing their boards with risk experts. Trade groups are circulating white papers on the need for risk-adjusted compensation all the way down to rank-and-file employees. In the future, we're told, decisions at firms like Citigroup and UBS about what lines of business to pursue will be made with more of an eye to how much risk comes along with the profit. Merrill Lynch's running into the arms of Bank...
...Harvard Management Company—the group charged with investing the University’s $36.9 billion endowment—is planning to unload $1.5 billion of its riskiest assets, The Wall Street Journal reported yesterday. The Journal’s article followed similar reports from the trade publication Private Equity Week, which said the company would sell $1 billion of its private equity portfolio. A $1.5 billion sale of its private equity holdings—nearly a third of Harvard’s investments in that sector—would mark one of the largest-ever sales...