Maymin on Financial Regulation
One might think that the ideal regulations would be those that find the right numbers for these portfolios, not too small and not too large–the Goldilocks of risk.
Surprisingly enough, it is not possible. It turns out that no algorithm for calculating the required risk capital for given portfolios results in lower systemic risk.
This is from the March Feature Article, “Why Financial Regulation is Doomed to Fail” by Philip Maymin, an Assistant Professor of Finance and Risk Engineering at NYU-Polytechnic Institute and the founding managing editor of Algorithmic Finance.