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{{g}}In which the JC has made up some swap talk, inexpertly cribbing from actual terms used in actual calculus, about which the JC knows 0. | {{g}}In which the JC has made up some swap talk, inexpertly cribbing from actual terms used in actual calculus, about which the JC knows 0. | ||
In risk management, the [[first-order derivative]] of an event “ƒ” is the effect that event would have, were it to actually happen in the practical world. So, for example, | In risk management, the [[first-order derivative]] of an event “ƒ” is the effect that event would have, were it to actually happen in the practical world. | ||
So, for example, the counterparty has failed to make a payment. | |||
The [[second-order derivative]], of function ƒ is a derivative of the [[first-order derivative]] of that function. So, for example, the warning light on a control panel, the [[RAG status]] indicator on a [[Middle management|management]] [[PowerPoint]], or the numerical ''quantity'' of an item (completed ISDA [[negotiation]]s); reviewed legal [[netting opinion]]s) whose ''quality'' one doesn’t have the [[subject matter expert]]ise to assess. | The [[second-order derivative]], of function ƒ is a derivative of the [[first-order derivative]] of that function. So, for example, the warning light on a control panel, the [[RAG status]] indicator on a [[Middle management|management]] [[PowerPoint]], or the numerical ''quantity'' of an item (completed ISDA [[negotiation]]s); reviewed legal [[netting opinion]]s) whose ''quality'' one doesn’t have the [[subject matter expert]]ise to assess. | ||
[[Operations]] people deal with ''actual'' risks; [[legal eagle]]s and fellow [[Controllers|controller]] [[subject matter expert]]s deal with ''[[first-order derivative]]s'' of those actual risks — what the consequences are if the risk comes about — and [[middle management]] and [[internal audit]] deal with ''[[second-order derivative]]s'', being derivatives of those [[first-order derivatives]] of the underlying risk: what the [[RAG status]] on the [[opco]] dashboard should look like if a [[NAV trigger]] is hit; whether the template [[confidentiality agreement]] as been reviewed within the six-month time limit arbitrarily prescribed by some policy for the review of standard form legal agreements — that kind of thing. | [[Operations]] people deal with ''actual'' risks; [[legal eagle]]s and fellow [[Controllers|controller]] [[subject matter expert]]s deal with ''[[first-order derivative]]s'' of those actual risks — what the consequences are if the risk comes about — and [[middle management]] and [[internal audit]] deal with ''[[second-order derivative]]s'', being derivatives of those [[first-order derivatives]] of the underlying risk: what the [[RAG status]] on the [[opco]] dashboard should look like if a [[NAV trigger]] is hit; whether the template [[confidentiality agreement]] as been reviewed within the six-month time limit arbitrarily prescribed by some policy for the review of standard form legal agreements — that kind of thing. |