Book reviews
Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
Detlev S. Schlichter, Wiley Business & Finance Publishing, 2011
The recent financial crisis has exposed the instability of our financial system. While there is plenty of talk of reform, few commentators are yet willing to consider that the root cause could be the transition from commodity money to limitless paper money, although the track record of paper money systems is uniformly discouraging: Throughout human history, all paper money systems have either collapsed in chaos, or society has returned to commodity money (usually based on gold) before a total currency disaster occurred. Drawing upon ground-breaking new research, Paper Money Collapse conclusively demonstrates why paper money systems – those based on an elastic and constantly expanding supply of money, as opposed to a system of commodity money of essentially fixed supply – are inherently unstable and why they must, by their very nature, lead to economic disorder. In an engaging style based on extensive study and analysis, this compelling new book exposes the fallacies of mainstream macroeconomics and debunks erroneous conventional wisdom. Paper Money Collapse shows in the starkest terms that the recent crisis is far from over and that the solutions presented by the advocates of paper money around the world are misguided and inherently flawed, in particular the current policy of accelerated paper money production to ‘stimulate’ the economy. If these policies are continued, a complete currency catastrophe will be inevitable according to Schlichter.
DETLEV S. SCHLICHTER is an author and Austrian School Economist. He has appeared as a commentator on television and radio (Sky News, Reuters TV), and his editorials have been published by The Wall Street Journal, TheStreet.com and mises.org. He is a senior fellow at the Cobden Centre, London, a free-market think tank devoted to issues of money and banking. Detlev Schlichter had a 19-year career in investment management. He worked at J.P. Morgan & Co. (1990-1998), Merrill Lynch Investment Managers (1998-2001) and Western Asset Management Co. (2001-2009). During his career, he has overseen billions in assets under management for institutional clients from around the world.
Understanding and Managing Model Risk: A Practical Guide for Quants, trades and Validators
Massimo Morini, Wiley Business & Finance Publishing, 2011
The proliferation of increasingly complex pricing models has vastly expanded the operational capabilities of financial institutions within financial markets. However, it has also increased the industry’s reliance on quantitative instruments, and created massive model risk. Consequently, model validation and model risk management are crucial tools for success in the market. Understanding and Managing Model Risk brings together a wide range of detailed real-world examples, quantitative analysis, and regulatory issues. It investigates the interaction between mathematics and the reality of markets, including the explanation of model errors and misunderstandings, providing readers with the operative indications and practical insight to help mitigate the likelihood of model losses. In addition to examining the risks arising from the use of models in calibration, pricing, hedging, correlation modelling, extrapolation and statistical arbitrage, the book explores in detail examples from interest rate, credit and hybrid markets, covering also equity and cross-currency risks, as well as analysing and comparing a range of models. This book offers an in-depth understanding of the financial implications of mathematical assumptions, and provides the right tools to identify, quantify and manage the risks inherent in the use of quantitative models.
MASSIMO MORINI is Head of Credit Models and Coordinator of Model Research at IMI Bank of Intesa San Paolo. He has spent the last 10 years inventing new models, implementing them, and helping practitioners in using them for buying, selling, and hedging derivatives. This has exposed him to the most practical side of model risk, and has led him to investigate model uncertainty, model robustness, and the management of the risk of model losses. Massimo is also Professor of Fixed Income at Bocconi University. He regularly delivers advanced training on model risk management, credit modelling, interest rate models and correlation modelling. He has published papers in journals including Risk Magazine, Mathematical Finance, and the Journal of Derivatives.
Basel III Credit Rating Systems: An Applied Guide to Quantitative and Qualitative Models
Luisa Izzi, Gianluca Oricchio and Laura Vitale, Palgrave Macmillan Finance and Capital Markets Series, 2011
The market turmoil and the new Basel III capital requirements are re-shaping the financial competitive landscape. More than ever, banking competition is based on the ability to assess, to price and to manage the cost of credit risk. Bankers are increasingly called to manage a process of analysis of the customer in a more structured way. This book is a comprehensive guide to quantitative and qualitative credit rating models and covers all loan portfolios (Corporate, Retail, Banks, Sovereign and Specialized Lending). The credit rating models are illustrated in great detail and are based on the best practices currently in use in large international banking groups. The book, published in the Palgrave Macmillan Finance and Capital Markets Series, also contains pricing tools for liquid and non-liquid markets and is one of the first books on credit risk management published since the crisis.
LUISA IZZI is Head of Model Validation, BNL-BNP Paribas Group, Italy. She has worked in different areas of Risk Management in international banking groups, supporting the group-wide Basel implementation and validation processes. She is author of a number of scientific publications and revealing articles in Mathematical Finance and Economics. GIANLUCA ORICCHIO is Professor of Finance and Capital Markets, CBM University, Italy. He has held senior capital and risk management positions at several global financial institutions. He has been Head of ACPM in Capitalia Banking Group and Head of Group Credit Treasury at Unicredit Group. Gianluca Oricchio has written several books on financial markets, corporate finance and risk management. LAURA VITALE is Head of Internal Rating Agency, BNL-BNP Paribas Group, Italy. In the past she has worked for major Italian banks in ECM, Advisory & M&A, IPO/OPV. Whilst at the BNL-BNP Paribas Group she has been Head of Origination in the Public Administration Sector and is now Head of the Judgmental Rating Department. She has also authored a large number of journal articles.
Ethics in Investment Banking
John N. Reynolds with Edmund Newell, Palgrave Macmillan, 2011
The financial crisis has focused unprecedented attention on ethics and ethical failures in investment banking. Investment banks, as well as politicians and regulators, have accepted the need to revisit ethical standards. Ethics in Investment Banking explores the meaning of ‘ethics’ in investment banking and the capital markets and develops a framework for assessing and managing investment banking ethics. It provides a guide to the high-profile concerns arising from the financial crisis, as well as discussing day-to-day ethical challenges like balancing rights and duties, and exploring a new code for ethics in investment banking. The book is essential reading for investment bankers, MBA students, regulators, ethicists and those seeking to understand investment banking.
JOHN N. REYNOLDS has had a 20-year career in investment banking, spanning equity research, mergers & acquisitions, financial restructuring and principal investment. Prior to becoming an investment banker, John N. Reynolds studied theology at Cambridge University. From 2006 to 2011 he chaired the Church of England Ethical Investment Advisory Group, which advises the Church‘s major investment bodies on ethical and governance issues. The combination of a successful career in investment banking and the experience of leading an influential ethical investment body gives him a unique perspective on ethical questions facing investment bankers. EDMUND NEWELL studied Economics and Economic History at University College London and at Nuffield College in the University of Oxford, where he was both a Prize Research Fellow and British Academy Postdoctoral Fellow. Now a priest in the Church of England, he is Sub-Dean of Christ Church, Oxford, having previously been Chancellor of St Paul‘s Cathedral, London. He writes and speaks on issues to do with faith, ethics and economic life, and is a founder of the Faith and Work Forum, which provides resources for business people to explore workplace issues from a religious perspective.
