J.P. Morgan has added at least five new employees over the past month to the risk department in its Chief Investment Office, the unit responsible for trading losses that may have climbed to $9 billion, according to people familiar with the matter. The bank is expanding the risk unit as it responds to the trading debacle and rebuilds the CIO, said one person familiar with the bank’s thinking. [FINS]

The three directors who oversee risk at JPMorgan Chase include a museum head who sat on American International Group Inc.’s governance committee in 2008, the grandson of a billionaire and the chief executive officer of a company that makes flight controls and work boots. What the risk committee of the biggest U.S. lender lacks, and what the five next largest competitors have, are directors who worked at a bank or as financial risk managers. The only member with any Wall Street experience, James Crown, hasn’t been employed in the industry for more than 25 years…The committee, which met seven times last year and hasn’t changed its composition since 2008, approves the bank’s risk- appetite policy and oversees the chief risk officer, according to the company’s April 4 proxy statement. [Bloomberg]

Earlier today, it was announced that Matt Zames had been named JPMorgan’s new Chief Investment Officer, to replace Ina Drew, the woman who supervised the trader responsible for the firm’s whale of a loss and was dismissed over the weekend. Previously, Zames served as the firm’s head of fixed income and while he may be happy to be seen by senior management as a guy capable of putting out a fire, based on his experience, is probably at least a little bit underwhelmed by the task. Read more »

  • 07 May 2012 at 5:47 PM
  • Banks

Markets Are Telling Us That Too Big To Fail Is All Better

Oh am I a sucker for this sort of thing:

This paper proposes a theoretically sound and easy-to-implement way to measure the systemic risk of financial institutions using publicly available accounting and stock market data. The measure models credit risk of banks as a put option on bank assets, a tradition that originated with Merton (1974). We extend his contribution by expressing the value of banking-sector losses from systemic default risk as the value of a put option written on a portfolio of aggregate bank assets whose exercise price equals the face value of aggregate bank debt. We conceive of an individual bank’s systemic risk as its contribution to the value of this potential sector-wide put on the financial safety net. To track the interaction of private and governmental sources of systemic risk during and in advance of successive business-cycle contractions, we apply our model to quarterly data over the period 1974-2010. Results indicate that systemic risk reached unprecedented highs during the years 2008-2010, and that bank size, leverage, and asset risk are key drivers of systemic risk.

A “theoretically sound and easy-to-implement way to measure the systemic risk of financial institutions” sounds pretty good! Is it easy to implement? Well let’s implement it to find out. [Pounds head against Google Spreadsheets.] Umm. Okay, I guess it was easy? I don’t know, I can’t fully replicate their numbers; tell me where I’m wrong in the comments. Or don’t. Read more »

  • 14 Jul 2011 at 3:21 PM

Nassim Taleb To Unload Infinite Wisdom On G-20

Though his schedule is extremely packed, Nassim Taleb, who knows everything there is to know about risk while Ben Bernanke knows nothing, has agreed to co-author a paper with the IMF’s Monetary and Capital Markets department “for the G-20 to develop ways to apply his method for identifying tail risks, or the chances of low probability, high-impact event.” Topics discussed will presumably include but not be limited to destroying the Nobel prize before it can destroy us.

  • 12 Nov 2010 at 10:49 AM

Nassim Taleb: Ben Bernanke Doesn’t Understand Risk

“Did Ben Bernanke see the crisis?” Nassim Taleb asked on Bloomberg TV today. “No,” Taleb answered himself, “He was flying the plane and he crashed the plane…[Bernanke] reminds me of the LTCM people. They had brilliant people with great academic records and they blew up the fund and almost blew up Wall Street…Bernanke is someone who talks about returns without talking about risk. It’s identical to a pilot who is talking about speed — not talking about safety. The measures he is using, this quantitative easing, may work but should it fail the risks are humongous.” Read more »

The scene: You’re at your desk buying, selling, sending asinine IMs to your colleagues and just generally kicking ass and taking names when you get an itch. A stirring, down in your plums. You need to stick your tongue in something sweet or there’s a good chance you might die. You need a cupcake, ASAP.

The internal conflict: Cupcakes are for chicks and pusses. You’re a fucking MAN. How would it look if you were seen eating that little slice of heaven? You’d sooner take estrogen pills, slip into some panties and heels and tell people to call you Stupid Girl and that’s something you’d never do unless asked nicely twice or maybe just once or maybe even voluntarily. But, oh god, you need that sugar so bad you’re gonna burst! BUT HOW?? you ask yourself, nearly on the verge of tears. Cupcakes are inherently a woman thing due to their size so would it be better to just eat an entire red velvet cake in the break room, literally just plow right through it letting the creamy white frosting goodness cascade down your hands and face? Would that man things up a bit? A little but 1) you love how big cupcakes make your hand look 2) you’re watching your weight (it’s beach season and all). There’s also the problem of most cupcake makers using lots of girly colors like pink and skimping on the non-manly ingredients like semen and sweat and gah it’s just too hard! WHAT’S A BOY TO DO?? Read more »