Author: db

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The independent faculty

Recently published here, the first mention as far as I know of the amount paid to Radu Tunaru’s Centre for Quantitative Finance, namely £56,000 for ‘key research into determining appropriate methods for determining ERM cashflows and their value’.

As Kevin pointed out, we have already done that, as have the PRA.

Of course it is always a good thing to have more than one pair of eyes on the problem, and worth every penny, no doubt, but it does raise the question of independence. I have repeatedly been told by those connected with the Institute that the working party is just another working party, that any paper it produces is the working party’s paper, nothing to do with the Institute etc.

But that clearly isn’t true. Money has changed hands, and it appears – if the announcement by Kent University is correct – that it is not the working party’s money.

Who at the Institute authorised the grant? We should be told.

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Libor flat

I mentioned David Land’s bemused question to the Equity Release working party yesterday. If the working party hasn’t yet fixed the right method of calculating the forward, isn’t that a pretty major source of possible error?

No coherent answer emerged, but Land raised an interesting point. If we can’t lower the value of the no negative equity guarantee by putting in an optimistic growth forecast, perhaps we can tweak the funding rate instead? He drops a hint when he suggests that there’s a large range of possible funding rates that you could think about, and that ‘The PRA thinks that you could possibly fund a house at Libor flat, which seems remarkably difficult’.

Nice try, but there is a problem with that idea too.

Continue reading “Libor flat”

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Sold out

The presentation of the totally independent review committee on ERM valuation is sold out. The final research report (by Kent University) will be uploaded about a week beforehand (i.e. around Thursday 21 Febuary), so watch that space.

The launch event will bring together a multidisciplinary group of professionals to discuss Professor Tunaru’s findings. Due to the high profile nature of this research topic the launch event is expected to attract a high number of attendees and spark a topical debate, so early registration is advised.

By coincidence I noticed the 11 December presentation by the same committee is available on YouTube.

Continue reading “Sold out”

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Doomed to failure

I have got round to preparing my presentation for Friday 8th.  The sacred text is from the co-founder of Wikipedia.

Wales: “The internet interprets any type of centralized planning as a malfunction and routes around it. The command-and-control model is doomed to failure here by the very nature of the network. This is inevitable”.

My question is whether ‘the secretive nature of regulation threatens, rather than supports, the stability of the financial system’.

You see the tension. If the command-and-control model really is doomed to failure, as though by a process of historical materialism, then we can sit around and watch while it eats itself.

But regulation is still with us, more than 20 years after Wales said that (in 1997). So is the command-and-control model really doomed to failure? Doom: from OE dōm ‘statute, judgement’, from a Germanic base meaning ‘to put in place’, figuratively speaking fate or destiny etc.

Find out. There will be quotations from Marx and Sartre, no less (but don’t let that put you off).

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Correction

Thanks to the ‘Cornishman’ who spotted a mistake in the legend of the spreadsheet. (‘Deferment PV’ was wrongly labelled as ‘Loan PV’ and conversely. Now fixed, hopefully, together with some other minor fixes.

Eumaeus will be a little quieter over the next few weeks, as there is stuff going on that we can’t publish, at least for now. But there will be more to come!