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Second-order derivative: Difference between revisions
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So if an event “ƒ” is an event happening out there in TV land — for example, a customer failing to pay — then in risk management terms the [[first-order derivative]] of ƒ is the effect ƒ would have, were it to actually happen in the practical world. E.g., someone in [[credit]] or [[market risk]] going, “Oh, my days! Oh, my lungs and liver! Oh, my hair’s on fire! Oh, [[Legal]] what should I do??!” | So if an event “ƒ” is an event happening out there in TV land — for example, a customer failing to pay — then in risk management terms the [[first-order derivative]] of ƒ is the effect ƒ would have, were it to actually happen in the practical world. E.g., someone in [[credit]] or [[market risk]] going, “Oh, my days! Oh, my lungs and liver! Oh, my hair’s on fire! Oh, [[Legal]] what should I do??!” | ||
This much we all understand. This is part of the ordinary, irrational panic that boils over in any sizeable institution should any of its risk controllers be asked, without sufficient warning, to deal with a situation that appears to | This much we all understand. This is part of the ordinary, irrational panic that boils over in any sizeable institution should any of its risk controllers be asked, without sufficient warning, to deal with a situation that appears to require ''controlling'' some ''risk''. | ||
The [[second-order derivative|''second-''order derivative]] of that function ƒ is more subtle. This is a derivative of the [[first-order derivative]] of that function, and it sits in the hands of the management layer. It manifests only in wing-dings and traffic lights on [[PowerPoint]]s. 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 [[PowerPoint]] that advises management of a warning light on a control panel that says the main reactor has scrammed because there is a fault in the coolant system and the uranium rods are exposed. | The [[second-order derivative|''second-''order derivative]] of that function ƒ is more subtle. This is a derivative of the [[first-order derivative]] of that function, and it sits in the hands of the management layer. It manifests only in wing-dings and traffic lights on [[PowerPoint]]s. 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 [[PowerPoint]] that advises management of a warning light on a control panel that says the main reactor has scrammed because there is a fault in the coolant system and the uranium rods are exposed. | ||