Prof. Jayanth R. Varma's Financial Markets Blog: Recent Episodes
Prof. Jayanth R. Varma
A recent judgement of the Australian Federal Court shows that financial sector regulators are by and large unprepared for the challenge of regulating a financial world that is increasingly run on algorithms.
The Reserve Bank of India (RBI) has engaged in a series of flip-flops on whether floating rate loans should be pricied using internal or external benchmarks. Illiquid term money markets and inadequate competition in banking are to blame.
Prof. Sebastian Morris and I propose a mechanism to resolve the stress in infrastructure and real estate by using financial markets for price discovery with the sovereign covering the left tail risk.
Emily Strauss' paper on how during the Global Financial Crisis, judges in the US interpreted a boilerplate contractual clause to reach a result clearly at odds with its plain language demonstrates that the law is elastic as argued by Katherina Pistor.
Many proposals for fixing modern finance ignore the ability to replicate one instrument with another set of instruments.
I argue that Steven L. Schwarcz' paper on abstraction bias as a cause of excessive risk-taking is an instance of what Gigerenzer called the bias bias - the tendency to spot biases even when there are none.