Ali’s blog

Mostly quant stuff with occasional digressions

The British PM holds forth

Posted by alifinmath on January 25, 2008

In the Guardian today:

Brown said the current crisis had been caused by an underpricing of risk in financial markets which was only now being corrected. “There has also been too much off-balance sheet activity.”

This is true, but as people are beginning to discover, there’s no exact way of determining risk, particularly for what are deemed to be unlikely events, and hence no way of being exact with pricing.

Share prices have gyrated wildly this week amid growing fears for the ailing American economy. On Monday, markets throughout Europe and Asia suffered huge losses as George Bush’s stimulus package for the world’s biggest economy was judged to be too little, too late.

My exact words in a post on this blog on January 18.

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