Taming Global Village Risk

摘要

complex adaptive markets and related sophisticated products. As complex adaptive systems, markets are composed of a great number of decentralized decision makers who are continually digesting information and interacting in unanticipated and nonlinear ways. The fact that markets are complex adaptive systems has critical implications for how we think about and manage investment risk. In risk management, we must focus on the market mechanisms driving capital markets to higher volatility, including the emotions of investors, complexity of adaptive markets, and advances in technology and mathematical modeling. Improving risk management means finding new tools to measure the interconnectedness of markets plus the total amount of systemic risk, leverage, and liquidity in the markets. With improvements in risk management, investors and regulators will be better equipped to mitigate the market volatility that often culminates in financial market instability. Importantly, investors should regard risk management as a guide for quality decision making in the face of uncertainty and not simply view it as being about risk measurement tools or generating an all-inclusive set of risk numbers. Improved risk management requires a broad understanding of the complex financial market system and cannot be reduced to a few numeric metrics. Reasoned voices must partner in the pursuit of healthy, functioning capital markets. This pursuit means investors must try to better understand market volatility and even possibly effect regulations that seek to control market meltdowns and their ensuing contagion. A window of opportunity exists now to influence minds toward mitigating markets which have created so much benefit, before these markets beget equal woe.