The number that killed us : a story of modern banking, flawed mathematics, and a big financial crisis

"A critical look at the risk measurement tool that has repeatedly, and severely, hurt the financial world. The credit crisis that erupted in 2007 is by no means the only shock to have shaken the financial markets throughout the years. But these market tribulations seem to wreak more havoc than ever before. Author Pablo Triana, as well as other experts in the financial field, think that a specific number is to blame. As it turns out, the very number financial institutions and regulators use to measure risk (Vale at Risk/VaR) has masked it, allowing firms to leverage up their speculative bets to unimaginable levels. VaR sanctioned and allowed the monstrously geared toxic punts that sank Wall Street, and the world, during the latest crisis. We can confidently say that VaR was the culprit. In 'The Number That Killed Us', derivatives expert Pablo Triana takes you through the development of VaR and shows how its inevitable structural flaws allowed banks to take on even greater risks to their never-ending delight. The precise role of VaR in igniting the credit crisis is thoroughly covered, including in-depth analysis of how and why regulators, by falling in love with the tool, condemned us to chaos. Uncritically embraced worldwide for way too long, VaR is, in the face of such destruction, just starting to be examined as problematic, and in this book Triana (long an open critic of the tool's role in encouraging malaise) uncovers exactly why it makes our financial world a more dangerous place. If we care for our safety, we should let VaR go. Contains controversial analysis of the hotly debated risk metric Value at Risk (VaR) and its central role in the credit crisis. Denounces the role of regulators and academics in forcing the presence of the inevitably malfunctioning in financeland. Describes how bonus-hungry traders can use VaR as an alibi to take on the most reckless of bets. Reveals how the most recent financial crisis will simply repeat itself if the problems behind VaR are not unmasked. Pablo Triana is also the author of 'Lecturing Birds on Flying.' The very risk measurement tool that was intended to contain risk allowed financial firms to blindly take on more. The Number That Killed Us reveals how this has happened and what needs to be done to correct the situation"-- � Read more... Abstract: A critical look at the risk measurement tool that has repeatedly, and severely, hurt the financial world The credit crisis that erupted in 2007 is by no means the only shock to have shaken the financial markets throughout the years. But these market tribulations seem to wreak more havoc than ever before. � Read more... A Critical Look At The Risk Measurement Tool That Has Repeatedly, And Severely, Hurt The Financial Worldthe Credit Crisis That Erupted In 2007 Is By No Means The Only Shock To Have Shaken The Financial Markets Throughout The Years. But These Market Tribulations Seem To Wreak More Havoc Than Ever Before. Author Pablo Triana, As Well As Other Experts In The Financial Field, Think That A Specific Number Is To Blame. As It Turns Out, The Very Number Financial Institutions And Regulators Use To Measure Risk (vale At Risk/var) Has Masked It, Allowing Firms To Leverage Up Their Speculative Bets To Unimaginable Levels. Var Sanctioned And Allowed The Monstrously Geared Toxic Punts That Sank Wall Street, And The World, During The Latest Crisis. We Can Confidently Say That Var Was The Culprit.in The Number That Killed Us, Derivatives Expert Pablo Triana Takes You Through The Development Of Var And Shows How Its Inevitable Structural Flaws Allowed Banks To Take On Even Greater Risks To Their Never-ending Delight. The Precise Role Of Var In Igniting The Credit Crisis Is Thoroughly Covered, Including In-depth Analysis Of How And Why Regulators, By Falling In Love With The Tool, Condemned Us To Chaos. Uncritically Embraced Worldwide For Way Too Long, Var Is, In The Face Of Such Destruction, Just Starting To Be Examined As Problematic, And In This Book Triana (long An Open Critic Of The Tool's Role In Encouraging Malaise) Uncovers Exactly Why It Makes Our Financial World A More Dangerous Place. If We Care For Our Safety, We Should Let Var Go. Contains Controversial Analysis Of The Hotly Debated Risk Metric Value At Risk (var) And Its Central Role In The Credit Crisis Denounces The Role Of Regulators And Academics In Forcing The Presence Of The Inevitably Malfunctioning In Financeland Describes How Bonus-hungry Traders Can Use Var As An Alibi To Take On The Most Reckless Of Bets Reveals How The Most Recent Financial Crisis Will Simply Repeat Itself If The Problems Behind Var Are Not Unmasked Pablo Triana Is Also The Author Of Lecturing Birds On Flying The Very Risk Measurement Tool That Was Intended To Contain Risk Allowed Financial Firms To Blindly Take On More. The Number That Killed Us Reveals How This Has Happened And What Needs To Be Done To Correct The Situation-- Introduction : April 28, 2004 -- When A Tie Is More Than Just A Tie -- Steve Benardete Gets His Wish ; The World Suffers -- The Greatest Story Never Told -- Origins -- They Tried To Save Us -- Regulatory Embracement -- Abetting The Cdo Party -- Var Goes To Washington -- The Common Sense That Should Rule The World -- The Perils Of Making The Simple Too Complex -- Guest Contributions : Why Was Var Embraced? -- A Q&a With Nassim Taleh -- A Pioneer Wall Street Rocket Scientist's View -- An Essay By Aaron Brown. Pablo Triana. Includes Bibliographical References (p. 245-250) And Index.

A critical look at the risk measurement tool that has repeatedly hurt the financial world

The Number That Killed Us finally tells the "greatest story never told": how a mysterious financial risk measurement model has ruled the world for the past two decades and how it has repeatedly, and severely, caused market, economic, and social turmoil. This model was the key factor behind the unleashing of the cataclysmic credit crisis that erupted in 2007 and which the effects are still being felt around the world. The Number That Killed Us is the first and only book to thoroughly explain this hitherto-uncovered phenomenon, making it the key reference for truly understanding why the malaise took place.

The very number financial institutions and regulators use to measure risk (Vale at Risk/VaR) has masked it, allowing firms to leverage up their speculative bets to unimaginable levels. VaR sanctioned and allowed the monstrously geared toxic punts that sank Wall Street, and the world, during the latest crisis. We can confidently say that VaR was the culprit. In The Number That Killed Us, derivatives expert Pablo Triana takes you through the development of VaR and shows how its inevitable structural flaws allowed banks to take on even greater risks. The precise role of VaR in igniting the latest crisis is thoroughly covered, including in-depth analysis of how and why regulators, by falling in love with the tool, condemned us to chaos. Uncritically embraced worldwide for way too long, VaR is, in the face of such destruction, just starting to be examined as problematic, and in this book Triana (long an open critic of the tool's role in encouraging mayhem) uncovers exactly why it makes our financial world a more dangerous place. If we care for our safety, we should let VaR go.

• Contains controversial analysis of the hotly debated risk metric Value at Risk (VaR) and its central role in the credit crisis
• Denounces the role of regulators and academics in forcing the presence of the inevitably malfunctioning in financeland
• Describes how bonus-hungry traders can use VaR as an alibi to take on the most reckless of bets
• Reveals how the most recent financial crisis will simply repeat itself if the problems behind VaR are not unmasked
• Pablo Triana is also the author of Lecturing Birds on Flying

The very risk measurement tool that was intended to contain risk allowed financial firms to blindly take on more. The model that was supposed to save us condemned us to misery. The Number That Killed Us reveals how this has happened and what needs to be done to correct the situation.

A critical look at the risk measurement tool that has repeatedly hurt the financial world The Number That Killed Us finally tells the'greatest story never told': how a mysterious financial risk measurement model has ruled the world for the past two decades and how it has repeatedly, and severely, caused market, economic, and social turmoil. This model was the key factor behind the unleashing of the cataclysmic credit crisis that erupted in 2007 and which the effects are still being felt around the world. The Number That Killed Us is the first and only book to thoroughly explain this hitherto-uncovered phenomenon, making it the key reference for truly understanding why the malaise took place. The very number financial institutions and regulators use to measure risk (Vale at Risk/VaR) has masked it, allowing firms to leverage up their speculative bets to unimaginable levels. VaR sanctioned and allowed the monstrously geared toxic punts that sank Wall Street, and the world, during the latest crisis. We can confidently say that VaR was the culprit. In The Number That Killed Us, derivatives expert Pablo Triana takes you through the development of VaR and shows how its inevitable structural flaws allowed banks to take on even greater risks. The precise role of VaR in igniting the latest crisis is thoroughly covered, including in-depth analysis of how and why regulators, by falling in love with the tool, condemned us to chaos. Uncritically embraced worldwide for way too long, VaR is, in the face of such destruction, just starting to be examined as problematic, and in this book Triana (long an open critic of the tool's role in encouraging mayhem) uncovers exactly why it makes our financial world a more dangerous place. If we care for our safety, we should let VaR go. Contains controversial analysis of the hotly debated risk metric Value at Risk (VaR) and its central role in the credit crisis Denounces the role of regulators and academics in forcing the presence of the inevitably malfunctioning in financeland Describes how bonus-hungry traders can use VaR as an alibi to take on the most reckless of bets Reveals how the most recent financial crisis will simply repeat itself if the problems behind VaR are not unmasked Pablo Triana is also the author of Lecturing Birds on Flying The very risk measurement tool that was intended to contain risk allowed financial firms to blindly take on more. The model that was supposed to save us condemned us to misery. The Number That Killed Us reveals how this has happened and what needs to be done to correct the situation. "A critical look at the risk measurement tool that has repeatedly, and severely, hurt the financial world. The credit crisis that erupted in 2007 is by no means the only shock to have shaken the financial markets throughout the years. But these market tribulations seem to wreak more havoc than ever before. Author Pablo Triana, as well as other experts in the financial field, think that a specific number is to blame. As it turns out, the very number financial institutions and regulators use to measure risk (Vale at Risk/VaR) has masked it, allowing firms to leverage up their speculative bets to unimaginable levels. VaR sanctioned and allowed the monstrously geared toxic punts that sank Wall Street, and the world, during the latest crisis. We can confidently say that VaR was the culprit. In 'The Number That Killed Us', derivatives expert Pablo Triana takes you through the development of VaR and shows how its inevitable structural flaws allowed banks to take on even greater risks to their never-ending delight. The precise role of VaR in igniting the credit crisis is thoroughly covered, including in-depth analysis of how and why regulators, by falling in love with the tool, condemned us to chaos. Uncritically embraced worldwide for way too long, VaR is, in the face of such destruction, just starting to be examined as problematic, and in this book Triana (long an open critic of the tool's role in encouraging malaise) uncovers exactly why it makes our financial world a more dangerous place. If we care for our safety, we should let VaR go. Contains controversial analysis of the hotly debated risk metric Value at Risk (VaR) and its central role in the credit crisis. Denounces the role of regulators and academics in forcing the presence of the inevitably malfunctioning in financeland. Describes how bonus-hungry traders can use VaR as an alibi to take on the most reckless of bets. Reveals how the most recent financial crisis will simply repeat itself if the problems behind VaR are not unmasked. Pablo Triana is also the author of 'Lecturing Birds on Flying.' The very risk measurement tool that was intended to contain risk allowed financial firms to blindly take on more. The Number That Killed Us reveals how this has happened and what needs to be done to correct the situation"-- Provided by publisher A critical look at the risk measurement tool that has repeatedly hurt the financial world The Number That Killed Us finally tells the "greatest story never told": how a mysterious financial risk measurement model has ruled the world for the past two decades and how it has repeatedly, and severely, caused market, economic, and social turmoil. This model was the key factor behind the unleashing of the cataclysmic credit crisis that erupted in 2007 and which the effects are still being felt around the world. The Number That Killed Us is the first and only book to thoroughly explain this hitherto-uncovered phenomenon, making it the key reference for truly understanding why the malaise took place. The very number financial institutions and regulators use to measure risk (Vale at Risk/VaR) has masked it, allowing firms to leverage up their speculative bets to unimaginable levels. VaR sanctioned and allowed the monstrously geared toxic punts that sank Wall Street, and the world, during the latest crisis. We can confidently say that VaR was the culprit. In The Number That Killed Us , derivatives expert Pablo Triana takes you through the development of VaR and shows how its inevitable structural flaws allowed banks to take on even greater risks. The precise role of VaR in igniting the latest crisis is thoroughly covered, including in-depth analysis of how and why regulators, by falling in love with the tool, condemned us to chaos. Uncritically embraced worldwide for way too long, VaR is, in the face of such destruction, just starting to be examined as problematic, and in this book Triana (long an open critic of the tool's role in encouraging mayhem) uncovers exactly why it makes our financial world a more dangerous place. If we care for our safety, we should let VaR go. The very risk measurement tool that was intended to contain risk allowed financial firms to blindly take on more. The model that was supposed to save us condemned us to misery. The Number That Killed Us reveals how this has happened and what needs to be done to correct the situation. Content: Introduction When a Tie Is More Than Just a Tie ix April 28, 2004 Steve Benardete Gets His Wish The World Suffers xxvii Chapter 1 The Greatest Story Never Told 1 Chapter 2 Origins 49 Chapter 3 They Tried to Save Us 71 Chapter 4 Regulatory Embracement 89 Chapter 5 Abetting the CDO Party 113 Chapter 6 VaR Goes to Washington 161 Chapter 7 The Common Sense That Should Rule the World 181 Finale The Perils of Making the Simple Too Complex 213 Guest Contributions 223 Why Was VaR Embraced? A Q&A with Nassim Taleb 223 A Pioneer Wall Street Rocket Scientist s View An Essay by Aaron Brown 226 Notes 245 Acknowledgments 251 About the Author 253 Index 255 The Number That Killed Us: A Story of Modern Banking, Flawed Mathematics, and a Big Financial Crisis 5 Contents 9 Introduction: When a Tie Is More Than Just a Tie 11 April 28, 2004: Steve Benardete Gets His Wish; The World Suffers 29 Chapter 1: The Greatest Story Never Told 43 Chapter 2: Origins 91 Chapter 3: They Tried to Save Us 113 Chapter 4: Regulatory Embracement 131 Chapter 5: Abetting the CDO Party 155 Chapter 6: VaR Goes to Washington 203 Chapter 7: The Common Sense That Should Rule the World 223 Finale: The Perils of Making the Simple Too Complex 255 Guest Contributions 265 Why Was VaR Embraced? 265 A Pioneer Wall Street Rocket Scientist's View 268 Notes 287 Acknowledgments 293 About the Author 295 Index 297