A challenge to the conventional wisdom surrounding financial risk, providing insight into why easy solutions to control the financial system are doomed to fail.
Finance plays a key role in the prosperity of the modern world—but it also brings grave dangers. We seek to manage those threats with a vast array of sophisticated mathematical tools and techniques of financial risk management. Too often, though, we fail to address the greatest risk—the peril posed by our own behaviour.
Jon Danielsson argues that critical risk is generated from within, through the interactions of individuals and perpetuated by their beliefs, objectives, abilities, and prejudices. He asserts that the widespread belief that risk originates outside the financial system frustrates our ability to measure and manage it, and the likely consequences of new regulations will help alleviate small-scale risks but, perversely, encourage excessive risk taking. Danielsson uses lessons from past and recent crises to show that diversity is the best way to safeguard our financial system.
Read Jon's latest blog post on What Silicon Valley Bank and Credit Suisse tell us about financial regulations
Dr Jon Danielsson is a Director of the ESRC funded Systemic Risk Centre at the London School of Economics. He has a PhD in the economics of financial markets and his research interests include financial stability, systemic risk, extreme market movements, market liquidity and financial crisis. He has published his research extensively in both academic journals and the mainstream media, and has presented his work in a number of universities and institutions.
Find Jon's newest book, The Illusion of Control, on amazon.
Tuesday, 04 April 2023
10:00 - 10:45 BST
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