16 Pages

Financial Resilience Engineering

Toward Automatic Action Formulas against Risk and Reckless Endangerment
WithBill McKelvey, Rossitsa Yalamova

This chapter provides a number of resilience interventions designed to be applied to individuals and banks. It suggests that resilience interventions should be automatically activated once the tipping point is crossed. Interventions must be made in the markets at the tipping point. In fact resilience interventions that are imposed automatically rather than depending on potential actions by lobby-influenced politicians and government regulators are a critical element of resilient Financial Services systems. In short, financial markets should be free to resiliate freely and without the impact of lobbying. The chapter discusses the idea that noise in balanced efficient market hypothesis (EMH) trading is really random information. In discussing the search for a narrative to explain what he calls the Great Recession, Yergin argues that the normal oscillation between 'fear and greed' characterising stock markets following EMH at the Triple Point was shifted in favour of greed by the historically low cost of risk.