Paul Jorion's Blog

Category: Finance

  • Le Monde, October 12th

    Here an account of my column in Le Monde on the concept of a new Bretton Woods. Bretton Woods 2.0 – Paul Jorion on The Financial Crisis Paul Jorion wrote a column in Le Monde a few days ago concerning the prospects of a new Bretton Woods (never mind that the original died at Richard…

  • Friday Market Monitor (AM 580 CFRA), on October 17 at 2 PM (EST)

    I was Walter Traversy’s guest on CFRA a news only radio station in Toronto, between 2 and 2:30 PM. The podcast is here. I’m talking in the second part of the program … just after the weather report. But hear Walter introduce me in the nicest way at the very beginning. I’m a bit blasé…

  • What have anthropologists to tell about the subprime crisis that no one else has said before?

    Finance is in shambles. It has remained until now under the close supervision of economic and financial theory. In recent years, due to the overbearing dominance of views developed under the umbrella of the “Chicago School” of economics, finance has been regarded as explainable through the combination of a very simplified version of psychology: that…

  • The willing catalyst

    On September 5th, I wrote on my French blog : “D’ici à la fin du mois il semble donc bien que les conditions d’un krach soient réunies”, meaning in proper English: It seems therefore that from now until the end of the month the conditions for a crash are being met. The risk of my…

  • Where this blog stands

    Various commitments on papers commissioned in French have kept me away from this blog. Reward is another factor: with an average of around 30 daily hits on the English blog and 2500 on the French one, vanity has been a powerful drive for concentrating on the French one. Dialogue is another one. If you’ve had…

  • Foresight and Despair

    A review of my just published book L’implosion. La finance contre l’économie: ce que révèle et annonce “la crise des subprimes” by Adrien de Tricornot in Le Monde, dated June 16th (translation by Jiro Tanaka – many thanks Jiro!) Foresight and Despair (“Oracle, ô désespoir !”, pun on a famous line from Corneille’s play “Le…

  • The cunning of Reason

    The very justification of a Human Complex System’s approach to the operation of human societies, implying a continuous explanatory spectrum from the individual (particle) to the cultural or societal levels (field), is offered by Hegel when he writes in Reason in History (*) that … human actions in history produce additional results, beyond their immediate…

  • A population dynamics approach to the subprime crisis

    One way of looking at the subprime crisis – and by this I mean only the properly real estate–based part of the unfolding drama – is in terms of population dynamics, in terms of three populations of borrowers who first entered the market and then left it in reverse order as the last to come…

  • The Implosion, Finance vs. the Economy

    My new book called “The Implosion, Finance vs. the Economy – What the subprime crisis reveals and foretells” (L’Implosion, La finance contre l’économie – Ce que révèle et annonce la crise des subprimes) will be published on May 4th. The publisher is Arthème Fayard, one of the top French publishers who will realize here a…

  • The end of trust in the subprime crisis and how to model it

    The subprime crisis is often explained in terms of trust: one day trust between financial counterparties vanished and here was a crisis. Explanations in terms of “market confidence” refer in fact to two distinct phenomena, one being indeed trust and the other one being more plainly straightforward profitability. Let me start with profitability. Subprime loans…

  • The subprime crisis at UCLA

    I’m happy with the way things worked out yesterday, March 8th, at the UCLA Complexity Science Conference with my paper: The Subprime Crisis: A Human Complex Systems Phenomenon. Of course, trying to squeeze the whole crisis into an hour (1 ¼ with John Bragin’s express permission), it turned out I had much too much material.…

  • Pricing models: why the good ones are useless and the true ones, priceless

    I’ve mentioned already in Agents using financial models and the “human cognitive cocktail” a number of pitfalls linked to the task of modeling the subprime crisis in a Human Complex Systems perspective, especially those related to agents’ partial understanding of the models they’re using or in errors they’re making when using them. I’ve also hinted…

  • Agents using financial models and the “human cognitive cocktail”

    I’m working on the paper to be given at the Human Complex Systems’ one-day conference on March 8th. I don’t want to divulge prematurely any scoop but at the same time I’d like to share some of my puzzlement as I go, and as if thinking aloud. To recap: I’m toying with the concept of…

  • The subprime crisis: a human complex system phenomenon

    I’ll be speaking at UCLA on Saturday March 8th, 2008 at the Human Complex Systems – UCLA Four Campus Complexity Conference, UCLA Haines Hall 352. The conference starts at 9 AM, my own talk is at 2:30 PM. If it looks like proposing an entirely new paradigm for financial studies, that’s because that’s precisely what…

  • 2008’s new fad: “rating cliffs” and “credit cliffs”

    Do you know what will be all the rage in 2008 in the wake of the subprime crisis? “Rating cliffs” and “credit cliffs” when firms that have seen a slow erosion of their credit will all of a sudden drop like a stone. As I devoted a whole chapter to the subject back in 2003…

  • Stock prices and the shape of randomness

    I remember an illustration in an article by Heinz von Foerster in the 1960s. In the first picture, a set of tiny cubes were represented, piled up in a random manner. The reader was told that these were steel cubes magnetized on one of their sides. The second picture showed what had happened after the…

  • The subprime crisis and the future of securitization

    Echanges is a financial journal published monthly by DFCG, the French association of financial officers and auditors. I was asked by Jean-François Casanova who will be the editor of a special issue devoted to securitization to contribute a piece on securitization in the light of the subprime crisis. Here it is, in an English translation.…

  • The ABS and Uncle Sam

    Mr. Paul Schulten is asking me the following: “It is true that delinquencies and losses in residential mortgage backed securities (RMBS) are strongly correlated with home price appreciation (HPA) or in the current environment home price depreciation (HPD). As we enter a period of possible decline in home prices these losses accumulate first to the…

  • The credit crunch’s cogwheels

    Collective human phenomena are as a rule tricky to analyze and consequently tough understanding and explaining. The reason is learning. Even if at its core a process remains simple, people learn: they observe how things work and they adapt. Adaptation in its turn modifies the process and initiates an endless dynamics of change. Such feedback…

  • The un-American solution to the subprime mess

    Among the remedies mentioned for the subprime crisis, I haven’t seen listed the system I went through when getting a mortgage in England back in those days. Here is how it worked: the first step would be for you to open an account with a building society; then you would start saving, sending a check…