The Number That Killed Us
A Story of Modern Banking, Flawed Mathematics, and a Big Financial Crisis
The Number That Killed Us finally tells the "greateststory never told": how a mysterious financial risk measurementmodel has ruled the world for the past two decades and how it hasrepeatedly, and severely, caused market, economic, and socialturmoil. This model was the key factor behind the unleashing of thecataclysmic credit crisis that erupted in 2007 and which theeffects are still being felt around the world. The Number ThatKilled Us is the first and only book to thoroughly explain thishitherto-uncovered phenomenon, making it the key reference fortruly understanding why the malaise took place.
The very number financial institutions and regulators use tomeasure risk (Vale at Risk/VaR) has masked it, allowing firms toleverage up their speculative bets to unimaginable levels. VaRsanctioned and allowed the monstrously geared toxic punts that sankWall Street, and the world, during the latest crisis. We canconfidently say that VaR was the culprit. In The Number ThatKilled Us, derivatives expert Pablo Triana takes you throughthe development of VaR and shows how its inevitable structuralflaws allowed banks to take on even greater risks. The precise roleof VaR in igniting the latest crisis is thoroughly covered,including in-depth analysis of how and why regulators, by fallingin love with the tool, condemned us to chaos. Uncritically embracedworldwide for way too long, VaR is, in the face of suchdestruction, just starting to be examined as problematic, and inthis book Triana (long an open critic of the tool's role inencouraging mayhem) uncovers exactly why it makes our financialworld a more dangerous place. If we care for our safety, we shouldlet VaR go.
- Contains controversial analysis of the hotly debated riskmetric Value at Risk (VaR) and its central role in the creditcrisis
- Denounces the role of regulators and academics in forcing thepresence of the inevitably malfunctioning in financeland
- Describes how bonus-hungry traders can use VaR as an alibi totake on the most reckless of bets
- Reveals how the most recent financial crisis will simply repeatitself if the problems behind VaR are not unmasked
- Pablo Triana is also the author of Lecturing Birds onFlying
The very risk measurement tool that was intended to contain riskallowed financial firms to blindly take on more. The model that wassupposed to save us condemned us to misery. The Number ThatKilled Us reveals how this has happened and what needs to bedone to correct the situation.
304 pages; ISBN 9781118171547
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Title: The Number That Killed Us
Author: Pablo Triana