Minsky

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When Risk Models Create Risk When Risk Models Create Risk
12 min read Keywords:  Daníelsson, endogenous risk, VaR, systemic risk, risk models, monoculture, macroprudential regulation, Taleb, Minsky, financial stability

The last essay said the tail is too hard to measure. Jón Daníelsson goes one step further: in finance, the measurement itself changes the thing measured. When everyone uses the same risk model, the model becomes a synchronization device. The answer is a system designed to survive without everyone trusting the same number.

Why the Calm Is Dangerous Why the Calm Is Dangerous
10 min read Keywords:  critical slowing down, early-warning signals, tipping points, Scheffer, Minsky, stability is destabilizing, variance, autocorrelation

A system heading for a tipping point gives off warning signs in unexpected places. The danger rarely arrives as drama and rising volatility. It hides in the calm. Ecologists learned to read it in lakes and climate, and the same signature shows up before some market crises. This is the measurable cousin of everything in this series.