vague, but exciting

the porous city - commerce - investing



email me



Incentive schemes that reward successful managers with huge bonuses, without penalizing them for losing years, skew behavior towards risky investment strategies: "...appearing to create excess returns but in fact taking on hidden tail risks, which produce a steady positive return most of the time as compensation for a rare, very negative, return."

Dealbreaker's refutation is pretty unconvincing. First, I doubt that most traders have enough equity to counteract the effect described above. Second, banks being "long volatility" just means that they make more money when the market moves. That has nothing to do with the risk inherent in an investment strategy's distribution of payouts. One can have a trading strategy that capitalizes on volatility but still hedges risk effectively (I mean, it's not easy...)

My guess is that in most banks it's senior management whose equity compensation ratio is enough to make them take the long view. Therefore you'll see more blowups at poorly managed banks, or at pure-play investment vehicles.

barcamp, Shopping, Collaboration, Data, Mobile, OS, WRX, Social, Business, Web, Net, Crowdsourcing, Security, Hardware, Wearables, MacOS, s60, Javascript, Storage, Android, a11y, Development, Visual, Product Management, Energy, RSS, Open, PIM, Automobile, Web analytics, Medical, Audio

History, Friday, Transportation, Feminism, Personal care, Minnesota, Politik, Bicycling, Boston, Berlin, Law, Food & Drink, Life hacks, Clothes, Podcasts, Travel, Activism, Toys, Statistics, Geography, Quizzes, San Francisco, L.A., Sports, NYC, Housing, CrowdFlower, Surfing, Games, Agriculture, Video

Booking, House, Business, Labels, Mailing lists, Shopping, Events, Lyrics, Musicians, Mixes, Reviews, Hip-hop, Boston, Mp3s, Making, L.A., History, Streams, Good tracks, Videos

Gossip, Enemies, Exercise, Health, Meditation, Weblogs, ADD, MOTAS, Vocations, Subcultures, Languages, Me, Family, Working with, Life hacks, Heroes, Friends, Stories

Insurance, Investing, Non-profit, Taxes, Web, Personal services, Marketing and CRM, Real Estate, Management consulting, Shopping, Microfinance, IP Law, Personal finance, Macroeconomics, International Development

Rhetoric, iPad bait, Sculpture, Comix, Visual, Outlets, Desktop wallpaper bait, Animation, Events, Literature, Poetry, Movies, Humor, Burning Man, Spoken Word

Algorithmic, Data visualization, Furniture, User experience, Type, Architecture, Process, Web, IA, Tools, Cool, Presentations

Networks, Statistics and Data, Physics, Psychology, Zoology, Environment

Uganda, Kenya, Kingdom of Siam, Vagabond '08

Friends, Moblog, Photos I Wish I'd Taken


One Acre Fund

Internet classic


Subscribe to this site's rss feed