Saturday, November 01, 2008

My talk on the financial crisis

I was asked by the graduate students in our department to give a talk on the financial crisis. The talk is oriented towards physicists and other scientists, but everyone is welcome. Slides (pdf).

Institute of Theoretical Science, 4 pm Tuesday November 4.

Speaker: Steve Hsu
Title: The Financial Crisis

Abstract: After a brief review of basic financial topics such as valuation, markets and bubbles, I discuss the origins and consequences of the current financial crisis. The discussion focuses on issues such as leverage, securitization, mortgage finance, CDO (collateralized debt obligations) and CDS (credit default swaps). The talk is aimed at non-experts.


daniel beunza said...

Excellent set of slides. All the facts are there. What is lacking is an overarching narrative. (1) do we chuck all existing financial theory (2) was this a perfect storm, so no need to change anything, just go on like before, (3) how do you see the new paradigm coming up?

Steve Hsu said...

Some of the content is lost by just looking at the slides -- you don't get to hear my narration ;-)

But, my goal was only to study the causes and consequences of the crisis. As it is I will barely get through all my slides.

Solutions and policy issues (both short and long term) would take another talk.

Also, I am dubious as to whether one can offer broad solutions with high confidence (see the Intellectual honesty: what do we know? and the Galbraith posts). There are some obvious point solutions such as a central CDS exchange, better regulation, perhaps forcing mortgage originators to hold some fraction of the value, clawbacks, etc. As far as how to best clean up the current mess, that is extremely complicated!

gs said...

1. Some of the content is lost by just looking at the slides -- you don't get to hear my narration ;-)

Have you considered getting made a video of your talk? Even an audio would enrich the slides, especially if there is a lot of audience interaction. If your department doesn't have the capability, maybe some enterprising grad students could do it.

2. I give Greenspan a measure of credit for admitting he was wrong. My impression is that just about everyone else in Washington is claiming that the whole mess is the sole responsibility of their political opponents and the private sector.

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