Abstract
Despite its history of triggering major mistakes, so much dubious financial risk management remains taken for granted and promoted by markets and regulators. As evermore sophisticated financial processes of operationalising and commodifying an indeterminate future subscribe to a false dichotomy between (quantitative) risk and (qualitative) uncertainty, this chapter problematises how this approach aggravates the asymmetric relationship between private, techno-scientific epistocracy and public democracy. Conventional risk management is analysed through the categories of market/systematic, operational/business and credit risk to reveal their distortions and mistakes. Notwithstanding its repetitious failures, the performativity of risk management/discourse creates and legitimises the conditions and subjectivities that validate its continued utility and normative authority. Immunising market entities from serious public contestation and reform, this depoliticises the constitution of authoritative knowledge.
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Notes
- 1.
Typically, ri sk is considered as a tangible, empirical phenomenon with probabilistic coordinates. Uncertainty, conversely, eludes quantitative capture and demands more subjective estimations and contingent information. Both are modes of framing the future as a problem of government.
- 2.
Developed by anthropologist Gregory Bateson to define a self-amplifying process of divergence and conflict.
- 3.
Beta is a measure of the volatility (systematic risk) of a security or portfolio relative to that of the market.
- 4.
‘Beating the market’ is nearly impossible over time.
- 5.
As of January 2017.
- 6.
As of January 2017.
- 7.
Exchange-traded funds (ETFs) can also be actively managed, margined or sold short.
- 8.
The contention is that the past reproduces itself at regular intervals.
- 9.
According to a March 2016 Ope rational Riskdata Exchange (ORX) benchmark exercise with a sample of 54 banks from Australia , Canada , Europe, South Africa and USA .
- 10.
An options pricing formula that calculates theoretical pricing of put and call options.
- 11.
In reference to physics, it explores stochastic processes in continuous time.
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Paudyn, B. (2018). The ‘Get Out of Jail Card’: The Immunity Risk Provides Financial Markets and Regulators from the Consequences of Their Mistakes. In: Kruck, A., Oppermann, K., Spencer, A. (eds) Political Mistakes and Policy Failures in International Relations. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-68173-3_7
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