The hottest Risk management Substack posts right now

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A Mean Reversion Strategy with 2.11 Sharpe

Quant Trading Rules • 79 implied HN points • 20 May 24
💰 Finance Trading Strategies Investing Risk management
  1. A mean reversion strategy was tested with rules involving computing rolling means and using the IBS indicator, focusing on bouncing back from market drops.
  2. Implementing a market regime filter significantly reduced drawdowns and exposure time, improving the Sharpe ratio and reducing drawdown durations.
  3. By incorporating a long & short strategy, trading QQQ in bull markets and PSQ in bear markets, a good balance of Sharpe ratio, annual returns, and maximum drawdown was achieved.

Ergodic Development

Software Design: Tidy First? • 883 implied HN points • 25 Aug 23
🕹 Technology Software Development Team Collaboration Risk management Innovation
  1. Ergodicity reminds us to treat systems that continue as is differently from those that fail when changed.
  2. Strategies like reducing irreversibility and having skin in the game can help transform failing systems into sustaining ones.
  3. Load redistribution and encouraging collaboration can make development more survivable and sustainable.

What to Buy: Seasoned Coins vs. Fresh Launches

DeFi Education • 799 implied HN points • 16 Apr 23
🔮 Crypto Tokens Markets Investing Blockchain Risk management
  1. There are many coins available, but creating a successful one is tough. It needs to be used and well-liked for it to last.
  2. Older coins often struggle to survive, but some can still thrive years later. You have time to research and pick the right ones now.
  3. Investing in new coins can be risky. You need to be ready to hold on for a while, even if the value drops before it might rise again.
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Digging into the OWASP AI Exchange

Resilient Cyber • 239 implied HN points • 10 Jan 24
🕹 Technology AI Security Cybersecurity Open Source Software Development Risk management
  1. OWASP AI Exchange is a valuable resource for understanding AI security risks and sharing knowledge. It helps organizations learn how to protect themselves against threats in AI systems.
  2. The AI Exchange provides guidelines for managing AI security throughout its development and use. Companies can adopt controls to mitigate risks associated with data leaks, manipulation, and insecure outputs.
  3. Practitioners are advised to incorporate standard security practices from app security into AI systems. Regular monitoring and using tools like threat modeling are essential for maintaining safety in AI usage.

Buffer Funds

Market Sentiment • 393 implied HN points • 30 Jul 23
💰 Finance Investing ETFs Market Strategies Risk management
  1. With derivatives, you can create a portfolio that never loses money and still invest in stocks.
  2. Buffer funds offer a way to protect your capital from losses while capping your potential gains.
  3. These strategies were traditionally expensive and complex, but are now more accessible through ETFs.

On Insurance

Something to Consider • 59 implied HN points • 03 Jun 24
💰 Finance Insurance Risk management Economic Policy Behavioral Economics
  1. Moral hazard happens when people take more risks because they have insurance, like thinking they can be careless if they have fire insurance. This means insurance can't cover every behavior to keep premiums fair.
  2. A better way to provide insurance is to focus on events that you can't control, like natural disasters, rather than paying out for specific losses. This keeps people motivated to protect their property since their actions impact their safety.
  3. Government assistance can be more effective if it's tied to things outside a person's control, like race or family status, rather than just income. This way, people are still encouraged to work hard because their benefits don’t change based on their work efforts.

There are Complex-Number One-Norm Square-Root of Probability Amplitudes of 0.006 in Which Sam Bankman-Fried Is Happy

Brad DeLong's Grasping Reality • 676 implied HN points • 05 Oct 23
💰 Finance Investing Risk management Probability Psychology Trading
  1. Amplitudes in quantum-mechanical superposition relate to philosophy-of-probability vs. psychology.
  2. Understanding the Kelly Criterion for betting based on win-loss odds and maximizing returns.
  3. Traders use the Kelly Criterion for survival, making positive-value bets, and psychological factors.

Eight steps to a better financial future

A Bit Gamey • 6 implied HN points • 26 Jan 25
💰 Finance Investing Savings Wealth Management Financial planning Risk management
  1. Cutting back on spending can help you save money without sacrificing enjoyment. Making small, easy cuts can really add up.
  2. It's important to have an emergency fund for unexpected situations. Protecting yourself financially can give you peace of mind.
  3. Invest in your future by researching and learning about different investment options. The more you know, the better decisions you can make.

Failing upwards

davidj.substack • 35 implied HN points • 18 Nov 24
💼 Business Risk management Corporate Governance Investment strategy Human Resources Data Analysis
  1. Taking risks is a natural part of business. Employees at all levels face risks, and their roles should help manage those risks effectively.
  2. Data teams need to engage with business risks and help optimize rewards. Building data infrastructure should only be a means to support this goal.
  3. Not everyone is suited for risk-taking roles in the private sector. Some people may excel at politics but fail to deliver real results, which leads to inefficiencies in recruitment.

I SOLDI IN BANCA

ANDREA CECCHI Newsletter • 176 implied HN points • 09 Feb 24
💰 Finance Banking Financial Crisis Risk management
  1. People have lost their life savings trusting banks - it's not a safe place for all your money.
  2. The 2008 financial crisis led to a wave of bank failures, and in 2023 banks are again under stress.
  3. It's important to understand the three fundamental truths of the modern banking system before depositing money in a bank.

[PQ] PLTK: Playing Bad (Governance) Odds

Nongaap Investing • 5 implied HN points • 21 Jan 25
💰 Finance Investing Market Analysis Corporate Governance Risk management Financial Strategy
  1. Bad governance can sometimes lead to unexpected investment opportunities. It means that when things look risky or poorly managed, there might be a chance for profit.
  2. Investors need to carefully assess the risks before jumping in. Just because something seems like a good deal doesn't mean it won't come with surprises.
  3. Understanding the company's governance and management style is important. Knowing how they operate can help you make better investment decisions.

Security Is A Useless Controls Problem

Security Is • 59 implied HN points • 29 May 24
🕹 Technology Cybersecurity Information Security Compliance Risk management
  1. Many security controls are useless, wasting resources and time. It's crucial to understand why you're implementing a control to avoid just following the crowd.
  2. If you can't explain why a security control is needed in a simple way, it's likely not very useful. Good controls should have clear reasons behind them.
  3. Wasting time on unnecessary controls can harm everyone in the industry. Focus on meaningful security measures to make better use of limited resources.

Resilient Cyber Newsletter #2

Resilient Cyber • 39 implied HN points • 25 Jun 24
🕹 Technology Cybersecurity AI Cloud Security Risk management Vulnerability Management
  1. Companies need to be careful about how much they share regarding their cyber insurance. Revealing this information might make them targets for attackers.
  2. The role of a CISO is changing and becoming more business-focused. Many believe they should focus on leadership rather than just technical tasks.
  3. AI can help improve cybersecurity, but there are also concerns about its use by attackers. It's important to explore how AI can enhance our defenses.

So, you messed up.

DeFi Education • 1019 implied HN points • 01 Dec 22
🔮 Crypto Investing Risk management Market Analysis Financial planning Personal Finance
  1. Everyone makes mistakes, especially in investing. It's important to learn from them and manage risk so you can keep moving forward.
  2. If you're struggling financially, focus on increasing your cash flow, cutting expenses, and working hard. It's important to adapt to the tough times.
  3. Don't assume that past market conditions will come back. Prepare for the future by managing risks and being smart about your investments.

The Dying Banks and the Singularity

The Dollar Endgame • 339 implied HN points • 12 May 23
💰 Finance Banking Investments Market Regulations Risk management
  1. There is a financial crisis brewing with banks collapsing and facing liquidity issues, leading to a rapid withdrawal of funds from the system.
  2. Banks like Silicon Valley Bank have made risky investments with high-end clients, creating vulnerabilities in the financial sector.
  3. The Federal Reserve's policies have inadvertently caused a drain on traditional banks, pushing money into shadow banks and triggering a potential chain of bank failures.

The Business of Venture Capital

Insight Axis • 296 implied HN points • 05 Nov 23
💼 Business Venture Capital Investment Startups Entrepreneurship Risk management
  1. Venture capital began from the dot-com bubble era, where tech entrepreneurs set up investment firms to fund new, high-growth technology companies.
  2. VCs specifically invest in early stage companies with potential for rapid growth and huge profits, aiming to 10x their investment in 5 years.
  3. Venture capital faces challenges like misaligned incentives, high-risk investments, and the need to balance finding unicorns without funding too many duds.

Unknown and Unknowable

Lewis Enterprises • 334 implied HN points • 08 Oct 23
💰 Finance Investing Artificial Intelligence Risk management
  1. Richard Zeckhauser's essay emphasizes recognizing a lack of edge rather than just analytical skill in investing.
  2. Asset prices can heavily discount ambiguity in situations where future states are unknown.
  3. Artificial Intelligence could be applied in investing UU situations based on Zeckhauser's maxims for investing in the unknown and unknowable.

Is Avoiding Extinction from AI Really an Urgent Priority?

AI Snake Oil • 910 implied HN points • 31 May 23
🕹 Technology AI Ethics Risk management Future studies
  1. Global priorities should focus on important and urgent problems humanity faces.
  2. Risks from AI should consider potential harm caused by people using the technology, not just autonomous rogue agents.
  3. Instead of alarming the public about future AI risks, focus on addressing current AI dangers and building institutions to manage new risks.

Not a Lehman Moment

Diane Francis • 639 implied HN points • 20 Mar 23
💰 Finance Banking Regulation Market Trends Economic Policy Risk management
  1. The collapse of Silicon Valley Bank (SVB) wasn't as dramatic as Lehman Brothers in 2008, but it did show flaws in the banking system. Unlike Lehman, SVB's issues came from poor management rather than widespread systemic problems.
  2. Government reactions were swift this time, which helped contain the fallout. They extended deposit insurance to all SVB depositors to prevent panic, but this crisis highlighted the need for stricter banking regulations.
  3. The financial market is in turmoil again, and more banks might struggle due to rising interest rates. While this isn't a repeat of 2008, it serves as a reminder that there need to be safeguards in place to protect the economy.

#24: Insurance for AI: Easier Said than Done

Loeber on Substack • 40 implied HN points • 04 Nov 24
💼 Business Insurance AI Risk management Technology Entrepreneurship
  1. Insurance for AI risks is a complex topic due to the unpredictable nature of AI outputs, making it hard to find solid coverage options. Businesses want protection from costly mistakes by AI, but actual insurance products may be limited.
  2. The market for existing software error insurance is quite small, which raises questions about how large the market for AI error insurance could be. With many companies not even aware of current insurance options, it's a niche field.
  3. Insurers face challenges in accurately assessing AI risks due to information gaps and the rapid evolution of AI technology. This could lead to difficulties in creating effective insurance policies for AI applications.

Overview of Portfolio Construction and Risk Management, Part 2

DeFi Education • 699 implied HN points • 03 Mar 23
💰 Finance Investing Risk management Behavioral Finance Market Trends
  1. Human emotions like greed and fear can affect investing decisions. People often buy high when they're greedy and ignore good opportunities when they're scared.
  2. Even experienced money managers can make mistakes by following trends instead of sticking to their strategies. They sometimes buy at the peak instead of the bottom.
  3. Understanding these emotional swings can help in better portfolio management. It's important to recognize how emotions can lead to poor financial choices.

The Dark Art of Short Selling (+ how to find shorts)

DeFi Education • 619 implied HN points • 22 Mar 23
💰 Finance Investing Short selling Risk management Market Strategies
  1. Short selling lets you profit from a decrease in asset prices, but it comes with high risks. If prices rise instead of fall, you could lose a lot of money.
  2. You can short sell through different platforms and strategies, including centralized exchanges, which might be safer but also have their own risks. It's important to manage your risk and not invest more than you can afford to lose.
  3. Knowing how short selling works can help you make better decisions in the market, even if you don't plan to short yourself. It can guide you in recognizing when to hold or sell your investments.

Value Investors: How To "Buy & Hold" Forever Despite ST Volatility

Value Investing Substack • 294 implied HN points • 25 Jun 23
💰 Finance Investing Portfolio Management Value investing Market volatility Risk management
  1. Value investors can create a low-volatility portfolio by combining Factor Investing with Value Investing
  2. Implementing a diversified portfolio of 20 stocks with >1:3 risk:reward can provide a 15% CAGR while minimizing downside volatility
  3. Staying disciplined, identifying stocks with high risk:reward ratio, and staying in cash until finding suitable opportunities are key strategies for value investors

When to Use Forecasting for Decisions

Abstraction • 19 implied HN points • 13 Dec 24
💼 Business Decision-making Forecasting Risk management Strategic Planning Data Analysis
  1. It's not always worth it to forecast when making decisions. Sometimes it's better to prepare for the worst or trust experts who know what they're doing.
  2. For less important choices, you can follow proven rules or experts. This makes decision-making easier and saves time.
  3. When facing big decisions, like moving cities, it's smart to gather data to guide your choice. Using information about others’ experiences can help you make better decisions.

The LIBOR scandal, part 1: background

The Jolly Contrarian • 79 implied HN points • 08 Apr 24
💰 Finance Interest Rates Derivatives Risk management Banking
  1. Banks have structural interest rate risk, which they manage by borrowing at a low rate and lending at a high one.
  2. The LIBOR rate was created as a benchmark for banks to set their interest rates and trade standardized instruments.
  3. Interest rate swaps changed the game by allowing banks to trade interest rates with counterparties, impacting how they managed their structural interest rate risk.

Enovix (ENVX) - Anatomy of a Lie (PART 1)

ESG Hound • 866 implied HN points • 05 Jul 23
💰 Finance Stock Market Investing Company analysis Financial regulation Risk management
  1. Enovix Management has repeatedly misled customers about their manufacturing capabilities and volumes.
  2. Management at Enovix made significant downgrades to their production capacity without updating investors.
  3. ENVX has exhibited a pattern of dishonesty through inaccurate statements to investors and regulatory agencies.

Overview of Portfolio Construction and Risk Management, Part 2 of 2

DeFi Education • 579 implied HN points • 05 Mar 23
💰 Finance Investment Risk management Portfolio Management Financial planning Market Analysis
  1. Portfolio construction requires understanding different frameworks and methods to organize investments effectively. It's important to choose a strategy that fits your financial goals.
  2. Using leverage can be useful in certain situations, but it also increases risk. It's essential to know when it's appropriate to leverage your investments.
  3. Controlling risk with position sizing is crucial for managing your portfolio. By adjusting the size of your investments, you can better protect yourself against losses.

A 5 Step Process to Improve Your Investment Acumen With Zero Risk

DeFi Education • 919 implied HN points • 07 Sep 22
💰 Finance Investment Trading Market Analysis Risk management Data Analysis
  1. To get better at investing, you need to practice regularly and learn from different situations. The more you engage with investments, the better you'll become.
  2. Gather data from various sources to form a complete understanding of an investment. Don't just look at numbers; think about what they mean and how they relate to the market.
  3. After creating your investment plan, it's key to track how your decisions pan out. Reflect on what you did right or wrong to keep improving your skills over time.

Cannibal Spirits

QTR’s Fringe Finance • 22 implied HN points • 27 Nov 24
💰 Finance Market Trends Investment Strategies Economic Policy Risk management Monetary Policy
  1. Markets can go both up and down, which is a natural part of freedom in trading. It's important to understand that fluctuations are normal.
  2. The term 'animal spirits' is often used to explain market behavior, but many believe it's overused and doesn't accurately describe what's really happening.
  3. There's a perception that the financial system is rigged, relying heavily on inflation and debt, which can create skepticism about the true state of the markets.

Quant Letter: November 2024, Week-2

The Parlour • 25 implied HN points • 13 Nov 24
💰 Finance Investment Algorithms Risk management Quantitative Analysis Machine Learning
  1. A new computational method can measure the shadow rate, which helps in comparing different investment types. This can give investors better insights.
  2. Using multi-agent systems for investment research allows adaptation to changing market conditions, leading to improved performance over traditional models.
  3. Machine learning continues to show promise in finance, with various models effectively predicting market behavior and improving investment strategies.