Archive for June, 2008
RMC 2008: Policy Session
June 30th, 2008 atschool
The calibre of speakers greatly surpass the earlier Op Risk Asia conference I attended in June. Almost every speaker told me something I didn’t know about the Sub Prime problem in the Policy Session. Hark:
*The problem of IAS 39: on one hand, the balance sheet requires mark to market valuation for derivatives (which takes into account expected losses), on the other hand, it prohibits the accounting of provisioning of expected loss, provisioning is only allowed for incurred loss. Recall, Basel 2 requires capital allocation of risks undertaken, this means that the correct picture is only seen in the B/S and not the P/L.
*Fair Value Accounting is the best of the worst system: in an illiquid market, the FV accounting might not be effective in showing the correct valuation of assets, since assets are assumed to be liquid and can be gotten rid off in a hurry if required.
*Better disclosure but not more disclosure; heavy handed regulation may not be the way to deal with in a crisis (a la Bernanke).
*S&P should not be blamed because S&P assessed only the credit risk of a company and its cash flow not the products and cannot be relied upon without independent review
*Models should show expected exposure size but model selection might be difficult because each model has its own flaws. The key to a good estimate of exposure size could be stress testing and scenario analysis.
*Sub prime financial crisis could possibly be a problem of information asymmetry as a result of the outsourcing of risk (instead of the underwriting of risks) banks, traditionally experienced with independent assessment, is taking on risk and outsourcing the risk via CDOs and CDO^2 products. The investors purchasing these products are not well versed with the assessment, undertakes the risk without knowing what they have undertaken.
*Sovereign Wealth Funds (SWFs), due to their possible geopolitical influence, will require careful policy making to ensure that investments are made with the purpose of long term gains and with minimum intrusion in the recipient’s country policies.
*SWFs should not be uber cash vehicles – reserves held should be sufficient to support 3-4 mths of imports; excess reserves should be invested. (SWFs with excess reserves are mainly from commodity producing countries.) High reserves and investments in local economy pushes up inflation and if inflation increases in the climate of low USD, it is stressful to maintain the value of their reserves, which is typically held in USD.
*Engle’s address is a variation of the speech made for the FT.com video – same key themes addressed, with a reference made to Spline-Garch model as a method to assess the volatility of a country. Engle found that key macroeconomic variables (size of country, high inflation, recession, volatility of ST i/r, volatility of output growth and volatility of inflation) serve to explain the volatility experienced by the country. However, Engle noted that the volatility experienced now is not as high as 2002 and volatility can be addressed by fixing macroeconomic variables.
*Engle also talked about the sub-prime crisis and his take was not that no one understood the risk but that, there was no data – the CDO is a new product, and that the correlation of the different assets in a tranch of CDO was not understood.
*The fact on wall street is that products are not made to reduce the fiction in transaction costs and to distribute risk but to take advantage of loopholes inherent in existing regulations. Products are packaged and structured in whichever way is acceptable to clients.
*VAR is not a solution. Sometimes VAR may create illiquidity in the market especially during stressed market conditions due to a product dumping by all investors to cut losses.
*Wary eyes should be kept on option-like income where the downside exposure is enormous. A hard stand should be made on sustainable business models.
*Concentration risk: consider nominal limits instead of expected loss limits.
*It’s okay to use the word ‘orgy’ at a presentation on sub-prime crisis.
The Curious Incident of A Dog In The Nighttime
June 29th, 2008 books
I tested my new voice recorder, reading a few pages from The Curious Incident of A Dog In The Nighttime and found the book to be lyrical and almost too easy to read.
It reminded me of an episode of House (’Lines in the Sand‘) about Wilson’s observation that House wanted to be autistic. I think it’s not just House – everyone secretly wants to be autistic, to have the amazing mental faculties, the ability to shut out everyone else, to live with just the basic food, shelter and hygiene, and to be absolutely honest and forgiven because of autism.
Reflecting on unsuccessful dates
June 29th, 2008 Uncategorized
On the bus to the workplace organised prawning competition*, I had a chat with a colleague from the next department – an interesting, articulate girl J., who is fresh out of university. I love speaking with people who had fun learning at uni because they are dying to share this life changing experience. The conversation glanced on a few ice breaking topics (holiday, etc), gender studies and her project on deviants. Sometime in our conversation, she mentioned that she has a few friends who are butch.
E: When I didn’t know better, I always wondered why didn’t they put on a dress or go to a better hairdresser. (My favourite story because it made people laugh when I said I almost said it to a colleague some years ago.)
J: We were at JC when a group of us saw two girls. It was Saturday evening, quite late, after ECC. From far away we saw a class with the fan on. Eh, what’s that? So the group of us went to check it out. We tried the door but it was locked. So a guy friend climbed up the windows. Shocked, he came down and said to us, “Don’t see, don’t see.” Of course we had to see, and that was when we saw two girls at it.
EC: Gosh!
The conversation that began about gender issues became mostly a gossipy prattle later. It was quite interesting, especially, the bits on sexual deviants where she told me about transvestites in Changi Village who charge $30 an hour and while waiting for the prawn to make their way from the other end to my line, I began to wonder why being interesting is such a death knell for my dating life. A fellow and I would be chatting nicely to each other and then the damnable word would escape from his lips and that would be the end of it. Of course, at first that I didn’t understand that it wasn’t meant as compliment because it was uttered in a smiley manner, with the light in the eyes that said, what an admirable girl this is, so how on earth could it be not a compliment, when the truth came in a crashing silence of the telephones. Rinse, lather, etc, it dawn that being interesting seems to be seriously uninteresting. And I thought about my conversation with J. in the bus. It was interesting and I would like to have another conversation with her – perhaps something without the gossipy, more factual. Did I bond with her? I don’t think this would be what my friend V., would classify as good interpersonal chemistry. Bonding seems to require a sharing of feelings, a display of social support. To do that all within 20 min, seem impossible and shallow yet somehow de reguire in the initial formation of close bonds. And my preference for factual and resistance to shallow bond forming is the essence of the gist in the core of nub. Hence, a transformation of proportions undertaken by Eliza Doolittle is superfluous and could be the nail in the coffin – an overhaul of the internal engine of the mind is completely necessary.
*I caught 5 that ambled around where I was pondering.
Immortality vs Vulgar Success
June 23rd, 2008 books
Clickable cloud here
Looking at Library Thing’s Author Cloud, Stephen King, Terry Pratchett and JK Rowling is the biggest name – beating all the immortal Dead White Males. But I won’t worry about the DWMs – afterall they can’t feel hurt.
Reading VaR and other articles for RMC2008
June 22nd, 2008 atschool
The amount of time on blogging and the reading that I have to do has a direct relationship which can be expressed:
y = bx / c
where,
y = time spent on blogging (write/read)
c = time left for reading
b = degrees of difficulty of reading*
x = pages of reading
*measured by multiplying greek letters utilised where the letters are numbered by their position in the greek alphabet as a power of itself for instance alpha = 1^1, beta = 2^2 so alpha beta would be (1^1)x(2^2)
BooksIRead vs Library Thing vs GoodReads
June 22nd, 2008 books
After discovering BooksIRead on Facebook to be rather untidy re its book catalogue, I did a quick search and found LibraryThing (LT) and GoodReads (GR) and signed up for both. While LT is cumbersome, needing too many keystrokes to add a book, but it has a handy mobile application which lets me check my list before buying a book I already have. I also like the other stuff like author-cloud and the various listie styles. GR is much easier to use and allows me to prioritise my to-read list. So I will be adding stuff into GR and exporting into Library Thing and am trying to rid myself off BooksIRead because it’s too confusing to have three catalogue programs. (My Listie on LibraryThing and my to-read list on GoodReads.)
I’ve been adding books off the top of my head and it seems I have only 202 books I remember reading, which is an average of 16 new books per year and I am perturb because 16 books a year isn’t a lot of reading. I could be watching too much television.
The Hoax
June 22nd, 2008 screen
I become stuck at home watching The Hoax on the Star World and despite Richard Gere disappointing portrayal – he had so much! – I was completely enthralled by the movie and Clifford Irving. What fabulous trickery!
A minor point I wish to point out on the pyschology of a trickster like Irving. If Irving truely desires fame, then he would not admit the hoax because he was a cornered rat, but that he desired to be found.
Old Classmates
June 19th, 2008 atschool
I’m quite chuffed to have found some a group of my Sec4 classmates and defunct primary school Lee Kuo Chuan but I don’t recognise everyone! In those days, everyone has a Pin Yin name but now everyone has an English name. I hold quite a lot of affection for Lee Kuo Chuan Primary, in particular. My father, all my aunts, my younger brother C and I were educated there. My paternal grandmother passed away in one of the upper primary classrooms when it became an old folks home.
There is particular scene that stood out from the blur of childhood. I was eight, standing in the shade of the enormous trees that line the roads looking down at the longkang where my the bright yellow tupperware cover had fallen. I don’t know how long I had been looking at it, trying to come up with a cunning plan to get at the cover without dirtying my skirt, shoes and socks, or falling down the longkang and not knowing how to come up, when a boy – the really fierce kind who fights at school and will poke your eye out if you look at him wrong – shouted in Mandarin, yours? I don’t remember nodding or making any sound – I was quite frightened of his reputation – but I must have because in two hops, he picked up the cover handed it to me and was on his way into the school. I don’t think I thanked him.
The other memory I have is of a slim, tall, fair, soft-spoken and graceful prefect who was primary 5 when I was primary 1. She did not shout, nor perspire, or have unruly hair. She was smilely and nice to all and sundry and spoke in perfect English and Mandarin. I was in awe of her although I never spoke a word to her – nor do I know her name. I think she called me by my name once. I was surprised she bothered with the lower classes (because none of the upper classes bothered about us kids), my esteem of her, which was already high, now floated like a helium balloon amongst sky scrapers. I would always save a seat for her on the school bus and would be very slightly anxious if I do not see her. Nearing the last day of school in Primary 2, I was a bit mopey knowing it was her graduating year. I must have looked quite forlorn because she said bye-bye that last day. For years after, she stayed in my mind, a perfect example of a lady I want to be when I grow up.
Digital Recorder:Ten Reasons
June 18th, 2008 atschool
Thinking that I won’t be able to sufficiently understand all the points discussed at the RMC 2008, I have been toying with the idea of getting a voice recorder:
1. Insurance, in case I should fall over into deep sleep.
2. Listen Again feature, in case the accents are too thick.
3. Share with folks I like.
Okay, I can’t make up 10 useful reasons for the conference. I remembered doing it for a few undergrad classes and I stopped because I wasn’t using the listen again feature at all since 1 and 2 didn’t happen. Mainly, I feel really self conscious about taping talks and lectures – it does not look cool at all. Coolness is like Capote in an interview – listen, think and write later.
I can think of other fun things I can use with it:
4. Record everyone’s Hainanese with it, especially grandma
5. Record children’s tantrums (v useful for disciplining)
6. Record interesting ideas or passages in my readings
7. Record personal errands
8. Record my expenditure for the month for better budgeting review.
9. Possible travel diary – although I feel silly speaking to myself
10. Record dietary trangressions and experiences prior to transgressions for better control
