There certainly was a ‘lively debate’ at the LSE on Monday evening. The house was packed, with guests including our friends at the Treasury, the PRA, and a number of analysts. Kevin will be writing some more about this, meanwhile here are the slides. Note that we covered them in a slightly different order. I discussed slides 16-19 (and mostly slide 16) on the ‘upper bound principle’ after Kevin’s main presentation.
The upper bound continues to be misunderstood, as I commented in our reply to the Institute yesterday. It does not depend in any way on arbitrage arguments, complete markets, geometric Brownian motion or any of that stuff.
Simply, jam today worth more than jam tomorrow, and should be valued as such by accountants such as KPMG. Yes?