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Archegos: Difference between revisions
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===Formal versus [[informal systems]]=== | ===Formal versus [[informal systems]]=== | ||
And here we see the behavioural crux: we tell ourselves that what matters in risk management are the formal boundaries we draw; the official channels; the technical superstructure of the relationship; the architecture of the parties’ rights and obligations versus each other. But this isn’t true. In practice the relationship is governed by soft, morphing, invisible, ''informal'' boundaries. | And here we see the behavioural crux: we tell ourselves that what matters in risk management are the formal boundaries we draw; the official channels; the technical superstructure of the relationship; the architecture of the parties’ rights and obligations versus each other. But this isn’t true. In practice the relationship is governed by soft, morphing, invisible, ''informal'' boundaries. Interpersonal relationships. Understandings. Past practices. Precedents. Expectations. Trust. The [[commercial imperative]].<ref>This isn’t the place for it, but note: these fundamental qualities of commercial life are utterly [[Legible|illegible]] to [[neural networks]], [[Policy|policies]] and [[algorithm]]s.</ref> | ||
Not only that, but there is a fundamental asymmetry in that softness ''between'' the parties: the relationship, after all is one of service provider and customer. The custome sees the edges of its rights and obligations as, for the most part, hard-edged economic options, to be exercised without fear or favour, regardless of the impact of their exercise on “the house”: if you run a roulette wheel with odds favouring the customer, expect your customers to exploit it mercilessly until you correct your algorithms. Thus, Archegos was entitled to withdraw its excess variation margin, and its broker had little option but to comply ''''without blowing up the relationship''. On the other hand, the recalibration of [[initial margin]], whilst framed as a contractual right, on three days’ notice, was understood to be nothing of the kind, ''unless the conditions justifying exercise were so unbearably dire as to give the broker no plausible alternative''. | Not only that, but there is a fundamental asymmetry in that softness ''between'' the parties: the relationship, after all is one of service provider and customer. The custome sees the edges of its rights and obligations as, for the most part, hard-edged economic options, to be exercised without fear or favour, regardless of the impact of their exercise on “the house”: if you run a roulette wheel with odds favouring the customer, expect your customers to exploit it mercilessly until you correct your algorithms. Thus, Archegos was entitled to withdraw its excess variation margin, and its broker had little option but to comply ''''without blowing up the relationship''. On the other hand, the recalibration of [[initial margin]], whilst framed as a contractual right, on three days’ notice, was understood to be nothing of the kind, ''unless the conditions justifying exercise were so unbearably dire as to give the broker no plausible alternative''. | ||
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{{sa}} | {{sa}} | ||
''{{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|Report on Archegos Capital Management}}'' | ''{{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|Report on Archegos Capital Management}}'' | ||
*[[Informal systems]] | |||
{{ref}} | |||