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In the past few years, global economies have been hit severely by global warming, the Covid pandemic and recently, the Russian-Ukraine war. Developing economies and basic institutions such as insurance companies are not exempted from high... more
In the past few years, global economies have been hit severely by global warming, the Covid pandemic and recently, the Russian-Ukraine war. Developing economies and basic institutions such as insurance companies are not exempted from high inflation spikes, interest rates, and slow economic growth. This has raised the cause to examine the impact of inflation and interest rates on the life insurance companies in Ghana. Specifically, the study investigated how inflation and interest rates affect life insurance investment and underwriting profits. The study's results disclosed that although inflation had a negative impact and interest rate positively affected investment income, both were insignificant. However, the impact of both inflation and interest rate on underwriting profit was highly significant. Claims ratio had a negative relationship with investment income and underwriting profit, while premium growth positively impacted investment income but negatively affected underwriting profit. The life insurance industry must work to remain relevant and valuable to customers by offering innovative products and solutions that are more efficient and cost-effective. They can invest in technology and digitalization to automate various processes and operations to reduce costs, increase efficiency, and protect shareholders' capital.
Research Interests:
Craig Turnbull's 2020 book, Some Notes on the Methodology of Actuarial Science, is to be highly recommended, in general. However, from a historical perspective, one particular section of chapter one, on methodology, needs to be corrected... more
Craig Turnbull's 2020 book, Some Notes on the Methodology of Actuarial Science, is to be highly recommended, in general. However, from a historical perspective, one particular section of chapter one, on methodology, needs to be corrected in a future edition. The section is section 1.3, which deals with logical theories of probability, in general, and Keynes's logical theory, specifically. There are two areas of confusion that have been ongoing for over 100 years that appear in this section. The first area concerns Keynes's revisions to the Bernoulli-Laplace version of the Principle of Indifference(POI), originally called the Principle of Non Sufficient Reason. The second area concerns the foundations for the measurement of probability, which for Keynes was an improved version of Boole's upper-lower probability intervals, which Keynes called either non numerical probabilities ,inexact measurement or approximation. All three names refer to the technical derivation of upper-lower probability intervals, which in modern times is called imprecise probability. This name would be a better name to use than those used by Keynes, as it also incorporates Keynes's decision weighting creation, his conventional coefficient of weight and risk, c, which is the first such decision weight approach formulated in history. Thus, the claim, that Keynes's logical theory of probability has no way of measuring probability, has no support, as Keynes's method is the same as Boole's.
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The current technological revolution is rapidly changing the landscape of work and life in general. Society is now reliant on the internet, digital devices, skills and services for work and daily life. It is now crucial for people to be... more
The current technological revolution is rapidly changing the landscape of work and life in general. Society is now reliant on the internet, digital devices, skills and services for work and daily life. It is now crucial for people to be equipped with a variety of digital skills if they hope to fully participate and benefit in and from the growing digital economy and digital society. People with digital skills can qualify for jobs, start and grow businesses, access government services, access healthcare services, communicate with family, friends and colleagues, access their bank accounts, make transactions and so on.
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In the wake of Covid-19, a wave of changes has taken place in a number of industries. While the company is embracing a digital solution to address these changes, the greatest concern is how to adapt the psychological wellbeing of... more
In the wake of Covid-19, a wave of changes has taken place in a number of industries. While the company is embracing a digital solution to address these changes, the greatest concern is how to adapt the psychological wellbeing of employees. In this study, nine online interviews were conducted to identify the elements of insecurity, anxiety or even fear that employees experienced during the digital transformation. These interviews were conducted to identify how these elements affected the success of the process. As part of the transcription process, the transcript is coded and analysed using NVivo 12 Pro software. Research findings indicate that participants acknowledged that the upcoming solution, although unidentified, might greatly improve the process. However, fear of failure, threshold fear, and social fear were addressed most frequently, whereas existential fears, including status anxiety regarding institutionalized status, were not significant. The study also suggested the importance of an additional, collective fear of having chosen the wrong solution. Managers should profit from being aware of the different types of employee anxieties: as long as people affected are informed about the change in a transparent manner and have extensive information about what to expect, a lot of anxieties else to be expected will not arise.
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In 1776, Adam Smith, using his imprecise theory of probability, which was presented on pp.106-113 and p.714 of his The Wealth of Nations, showed that the firms composing the insurance industry do not use precise probability and do not... more
In 1776, Adam Smith, using his imprecise theory of probability, which was presented on pp.106-113 and p.714 of his The Wealth of Nations, showed that the firms composing the insurance industry do not use precise probability and do not need to use precise probability. All they need to do is to be able to establish a lower bound on the probable risk by the use of imprecise probability. In 1921, J M Keynes, using his imprecise theory of probability, on pp.22-34 of the A Treatise on Probability, likewise showed that the firms composing the insurance industry do not use precise probability and do not need to use precise probability. All they need to do is to be able to establish a lower bound on the probable risk. The analysis of both Smith and Keynes is based on their theories of imprecise probability and the existence of uncertainty. The interesting questions are why no academician in the 18th through the 21st centuries has realized what Smith had done and why no academician in the 20th through the 21st centuries has realized what Keynes had done, which was to explicitly base their analysis on imprecise probability. Apparently, no academician, especially economists and philosophers, in the 18th through 21st century actually read and/ or understood what Smith was doing in The Wealth of Nations while no academician, especially economists and philosophers, in the 20th through the early part of the 21st century, actually read and/or understood what Keynes was doing in his A Treatise on Probability. This then leads to the following conclusion. Academicians from the 18th through the 21 centuries have not read and/or understood the two most fundamental texts written in the last 250 years. This observation lends additional hard evidence to support Hishiyama's 1969 conjecture, which was that the A Treatise on Probability was never read. To this we add the fact that either Smith's Wealth of Nations has not been read or it has never been understood.
Research Interests: Uncertainty and Insurance
Fixed point theory has been applied to various practical problems of insurance and finance during several decades. In our earlier paper (Voutilainen, 2022) we have presented problem classes which have been tackled in the literature by... more
Fixed point theory has been applied to various practical problems of insurance and finance during several decades. In our earlier paper (Voutilainen, 2022) we have presented problem classes which have been tackled in the literature by equilibrium theoretical methods. In Voutilainen (2023) we study fixed point problem solution methods with the help of equilibrium problem solutions. For this paper we have gathered and commented on specific fixed point applications to the insurance and finance areas. Many of them also adopt other interesting theoretical areas.
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Using a time series approach, this study investigates how natural resources impact financial development from a global perspective over the 1980-2019 period. Some important determinants of financial development (economic growth, trade... more
Using a time series approach, this study investigates how natural resources impact financial development from a global perspective over the 1980-2019 period. Some important determinants of financial development (economic growth, trade openness, population growth, and investment) have been added to the model as control variables. Unit root tests have revealed that all the variables are integrated of order one. Johansen cointegration test has shown that the variables are in a long-run equilibrium relationship. The vector error correction model (VECM) has estimated the coefficient of the error correction term (ECT) which suggests that the short-run values of natural resources, economic growth, trade openness, population growth, and investment contribute to financial development converging to its long-run equilibrium level by a 23.63% annual speed of adjustment. The estimated coefficients suggest that global natural resource rent has a statistically-significant negative impact on global financial development in the long-run (thereby validating the financial resource curse), but not in the short-run. Causality test results imply that neither global natural resource rent nor global financial development Granger-causes each other.
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The storm of widespread public and political concerns on corporate misgivings, particularly in the financial services industry has spurred growing regulatory demands worldwide making compliance an evergreen item on the leadership and... more
The storm of widespread public and political concerns on corporate misgivings, particularly in the financial services industry has spurred growing regulatory demands worldwide making compliance an evergreen item on the leadership and governance agenda. Compliance with prescribed regulatory standards affords the comfort of supervisory cushion and creates a perceived endorsement of organisational practices by regulatory authorities, vested with surveillance and enforcement powers, which mitigate post effects of alleged wrongdoings to some extent.
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The theory of economic equilibria is an important part of mathematical economics, and the theory of insurance equilibria a significant special case thereof. The origins of the theory of economic equilibria date back to early 1800's, and... more
The theory of economic equilibria is an important part of mathematical economics, and the theory of insurance equilibria a significant special case thereof. The origins of the theory of economic equilibria date back to early 1800's, and it has developed strongly during the last seventy years. The insurance equilibria have been studied since 1970's. We give a literature survey covering the most important research on insurance equilibria since 1980's. After an extensive chapter on the background to economic and insurance equilibria we discuss insurance market equilibrium, reinsurance, insurance markets with asymmetric information, adverse selection, monopolistic / competitive insurance markets, deposit insurance, moral hazard, Internet, signalling, reputation, linear equilibria, Nash equilibria, other research and remarks on the Finnish insurance market. We finish with concluding remarks. The purpose of this paper is to help researchers to discover relevant papers in the field of insurance equilibria.
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For the last 100 years it was been constantly claimed that Ramsey demolished and destroyed Keynes's logical theory of probability as presented in the A Treatise on Probability in 1921. A few, good examples of this 100 year old literature... more
For the last 100 years it was been constantly claimed that Ramsey demolished and destroyed Keynes's logical theory of probability as presented in the A Treatise on Probability in 1921. A few, good examples of this 100 year old literature are C. Misak's recent 2020 biography on Ramsey, a number of recent articles in the Stanford Encyclopedia of Philosophy on Ramsey in 2019 and Simon Blackburn's recent September, 2021 article in Mind.
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Bitcoin introduced a cryptographic peer-to-peer version of money that allows online payments to be sent directly from one party to another without going through a financial institution. Many recent studies evaluated and criticised... more
Bitcoin introduced a cryptographic peer-to-peer version of money that allows online payments to be sent directly from one party to another without going through a financial institution. Many recent studies evaluated and criticised Bitcoin's energy consumption through its Proof of Work (PoW) consensus mechanism without evaluating its efficiency compared to classical electronic payment system. Based on physics, information science and economics, we compute and compare the energy consumption and define what is the energy efficiency of both the current monetary payment system and Bitcoin cryptopayment system. We demonstrate that Bitcoin consumes at least 28 times less energy and can run today with 60 times less energy than the classical system. At a single transaction level and with total volumes accounted for, Bitcoin produces equivalent energy efficiency rates or better. When Bitcoin Lightning is compared to Instant Payment scheme, Bitcoin gains exponentially in scalability and efficiency, proving to be millions of times more energy efficient per transaction than Instant Payments.
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Despite the literature has devoted to understand how the aspects of financial and managerial educational attainments relate to corporate finance implications, extant literature has paid little attention to whether and how the literacy and... more
Despite the literature has devoted to understand how the aspects of financial and managerial educational attainments relate to corporate finance implications, extant literature has paid little attention to whether and how the literacy and learning strategies in financial educational attainments affect the students' learning outcome. Studies have found that Taiwan undergraduates' and high school students' poor financial literacy in risk management capability, investment management capability, tax and lending cognition ability. Improve students' financial literacy and enable them to can solve future financial problems, which is a goal that world education institutions seek to achieve today. The purpose of this article is to explore the guided scaffolding strategy via PjBL learning strategy will achieve exploring problems or processes, focus on learning goals, participation in educational activities, student group cooperation, use of scaffolding technology and presentation of works educational goals and to help design a course that combines financial capability with flipped learning.
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Using official data and new econometric models based on how the industry actually works, we show the benefits of scale for members are limited, and confined to the non-profit sector which is structured to incur relatively low fixed costs... more
Using official data and new econometric models based on how the industry actually works, we show the benefits of scale for members are limited, and confined to the non-profit sector which is structured to incur relatively low fixed costs compared with much higher variable costs. In Australian institutional superannuation, most efficiency gains, such as those from economies of scale, are captured as profits for financial intermediaries, with little benefit for members. Recent regulatory reforms on fee disclosure and scale requirements have the unintended consequences of further reducing competition and benefiting the large financial conglomerates.
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The paper provides an introductory guide for active managers that illustrates econometric techniques for alpha generation in active asset management. For modelling stock market returns three different model types are discussed: (i) fair... more
The paper provides an introductory guide for active managers that illustrates econometric techniques for alpha generation in active asset management. For modelling stock market returns three different model types are discussed: (i) fair value models that identify over-and undervaluations, (ii) explanatory return models that allow for scenario forecasting and (iii) forecasting models that provide implementable investment signals. We provide illustrative examples for SP500 data and show how active managers may integrate these models in their investment processes. Our results indicate the relevance of econometric models to add value in active management.
Research Interests:
Minority shareholders refer to those shareholders whose shares in the company are too small in proportion to be able to confer significant influence on the decisions which the firm takes. Therefore, these shareholders are more vulnerable... more
Minority shareholders refer to those shareholders whose shares in the company are too small in proportion to be able to confer significant influence on the decisions which the firm takes. Therefore, these shareholders are more vulnerable to being exploited by the majority shareholders. Often, they are deprived of a fair share of income from the companies, either in the form of salary or dividends. Moreover, they are not given any real voice in handling business affairs and, at times, are also denied information on important matters. This oppression can lead to harm in corporate enterprises, and the subsequent friction and litigation among shareholders can incur significant costs. According to the Doing Business Report 2019, Pakistan ranked 26 in Protecting Minority Investors indicator of the Ease of Doing Business Index. Thus, it is imperative to improve laws concerning shareholder protection in Pakistan to ensure that no rights are violated. The essay is divided into four parts and aims to elaborate on this matter. The first section analyses the issue created by having a Separate Corporate personality and how minority shareholders can be exploited by errant directors or other shareholders. The second section examines the laws regarding minority shareholders and director duties in Pakistan and compares them with those in the UK. The third section goes over practices in other jurisdictions and analyses whether those can be used as improvements in the context of Pakistan. Finally, the fourth section critically analyses the current situation in Pakistan and gives specific recommendations
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Risk management is a crucial process used to make investment decisions. One of the pillars of any investment is the riskreturn trade-off, where a greater degree of risk is supposed to be compensated by a higher expected return. This study... more
Risk management is a crucial process used to make investment decisions. One of the pillars of any investment is the riskreturn trade-off, where a greater degree of risk is supposed to be compensated by a higher expected return. This study Highlights 1. Market performance under common assumptions of normality seems not to accurately portray reality 2. CVaR estimates by Monte Carlo simulation is an effective approach to avoid a risk measure misleading 3. Unforeseen risks and risk blindness for diversified portfolio investments may be avoided by alternative use of Monte Carlo.
Research Interests:
Objectives-This study examines the impact of the remote working system during the COVID-19 pandemic on millennial employee performance in PT. Bank Mandiri (Persero) Tbk with employee motivation and employee engagement as mediating... more
Objectives-This study examines the impact of the remote working system during the COVID-19 pandemic on millennial employee performance in PT. Bank Mandiri (Persero) Tbk with employee motivation and employee engagement as mediating variables. Method-The study used a quantitative method by implementing a survey method where the data was collected from a questionnaire distributed to 367 respondents in PT. Bank Mandiri, Indonesia. The analysis is based on a sample from the population of millennial employees who have an experience of work from home during the COVID-19 pandemic. The data was analysed using SmartPLS ver.3.0. Results-This study found that remote work has a positive influence on employee performance, employee motivation, and employee engagement. The result also shows a mediating impact of remote work on employee performance through employee motivation and employee engagement. Regarding the pandemic, it is found that during the COVID-19 period, remote work provides millennial employees with flexible working arrangements and less commuting. However, not all employees have a suitable workspace in their homes. Remote work also develops interpersonal relationships between employees and managers. It is also found that millennial employees in Bank Mandiri have enthusiasm and inspiration when working remotely. Conclusion-The remote working system has a significant positive impact on millennial employees' performance, motivation, and engagement in PT. Bank Mandiri (Persero) Tbk during the COVID-19 pandemic situation. There is a mediation impact of remote work on employee performance by employee motivation and employee engagement.
Research Interests:
In 1973, Fischer Black and Myron Scholes published their seminal work on options pricing. Their model relied on a clever hedge which seemingly resulted in a risk-free portfolio. However, further analysis of this portfolio reveals that it... more
In 1973, Fischer Black and Myron Scholes published their seminal work on options pricing. Their model relied on a clever hedge which seemingly resulted in a risk-free portfolio. However, further analysis of this portfolio reveals that it may not be risk-free at all. A truly risk-free portfolio must be risk-free with respect to incremental changes to all variables on which the portfolio's value is dependent. However, the Black Scholes hedged portfolio is only risk-free in one dimensionchanges in the underlying stock value. In particular, the hedged portfolio may not be riskfree with incremental changes in time. The conclusion that this portfolio is risk-free is questioned, and with it the Black-Scholes pricing model which is dependent on the risk-free nature of this "hedged" portfolio.
Research Interests:
Owing to its grappling with a motley of intricate socioeconomic, as well as medico-legal, crises, Haiti has found itself bereft of some of its people, many of whom have had to leave the Caribbean country in search of improved lives... more
Owing to its grappling with a motley of intricate socioeconomic, as well as medico-legal, crises, Haiti has found itself bereft of some of its people, many of whom have had to leave the Caribbean country in search of improved lives elsewhere. Receiving some of the Haitian refugees fleeing abject poverty, unemployment, and other harms and barriers has been the United States, one of Haiti's northern neighbors and a country that has played an outcome-determinative, if not outsized, role in steering the country toward its presently hobbled state. Drawing on the U.S.’s recent treatment of Haitian refugees, this paper argues that U.S. reception of Haitian immigrants rubs salt in the wound of a long history of dehumanizing and oppressive abuses endured by Haitians. Furthermore, and more importantly, this paper posits that U.S. failure to wholly embrace its legal obligation to accept Haitian refugees under international law needs to be understood in the light of the specific horrors inflicted by science, in pre-independence Haiti, on non-consenting, Afro-Haitian experimental subjects. And by extension, such a contextually-nuanced understanding is crucial in shaping the delivery of healthcare services to Haitian refugees fortunate enough to remain in the U.S. —as an awareness and appreciation of the socio-historical context of patients' lived experiences, i.e., their complete social history, can furnish important clues vis-à-vis the presence and etiologies of disease, influence the foci of physical exams, and generally pave the way for the provision of cost-efficient and evidence-based care.
Research Interests:
This article focuses on the limited popularity of unit-linked life insurance in Asia. An analysis of the HNWI and UHNWI market in Asian countries (China, Hong Kong, Singapore, Indonesia) and the insurance models available in unit-linked... more
This article focuses on the limited popularity of unit-linked life insurance in Asia. An analysis of the HNWI and UHNWI market in Asian countries (China, Hong Kong, Singapore, Indonesia) and the insurance models available in unit-linked life insurance for high-net-worth individuals will be used to determine which products insurance companies can use to best meet the requirements and needs of these customer groups. For asset diversification and estate planning through unit-linked life insurance, high net worth private customers have so far primarily had universal life insurance at their disposal. However, the flexibility and potential returns of this insurance model are limited-despite modifications to the concept to find solutions for this. Universal life insurance is currently attractive mainly because of the general low-interest environment and for tax optimisation. Private placement insurances (PPLI), on the other hand, combine maximum flexibility in the implementation of investment strategies and insurance objectives with comprehensive tax optimisa-tion options. PPLIs thus go a long way towards meeting the requirements of HNWIs and UHNWIs. There are many indications that this insurance model is currently entering a relevant growth phase in Asia.
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The board of an insurance company is the supreme governing body of the company. It has numerous stakeholders and many duties, which are discussed in this paper. After a literature review the relation of the board to the stakeholders and... more
The board of an insurance company is the supreme governing body of the company. It has numerous stakeholders and many duties, which are discussed in this paper. After a literature review the relation of the board to the stakeholders and the duties and obligations of the board are described.
Research Interests:
Throughout the writing of this dissertation, we have received a great deal of support and assistance. We would like to thank Dr. Serguey Khovansky PhD, University of Virginia whose guidance was invaluable in formulating the research... more
Throughout the writing of this dissertation, we have received a great deal of support and assistance. We would like to thank Dr. Serguey Khovansky PhD, University of Virginia whose guidance was invaluable in formulating the research questions and methodology.
Research Interests:
Actuarial function is one of the four key functions of an insurance company according to the Solvency II framework. Actuaries have numerous stakeholders both inside and outside the company. In the present article we show that duties for... more
Actuarial function is one of the four key functions of an insurance company according to the Solvency II framework. Actuaries have numerous stakeholders both inside and outside the company. In the present article we show that duties for actuaries are really diverse in an insurance company. After a review on current literature, we discuss the role of actuarial function in solvency, investments, reinsurance, risk management and product management. We discuss also actuarial rules, actuarial administration, and stakeholders of the actuarial function. We conclude by considering the challenges of the actuarial profession and the many opportunities it offers to a young mathematician.
Research Interests:
None of the articles published in the five centenaries/symposiums on Keynes's A Treatise on Probability (1921/TP)and /or Knight's Risk, Uncertainty, and Profit (1921/RUP) examine the urn ball models used by Keynes and Knight in their... more
None of the articles published in the five centenaries/symposiums on Keynes's A Treatise on Probability (1921/TP)and /or Knight's Risk, Uncertainty, and Profit (1921/RUP) examine the urn ball models used by Keynes and Knight in their discussions of uncertainty and risk. This failure is especially important as a study comparing and contrasting the urn models used by Keynes and Knight shows that the conclusions derived by Knight and Keynes from their urn models are identical. There are, however, two main differences between Keynes and Knight.
Research Interests:
Using Ergodicity Economics this paper shows that terminal wealth maximizing portfolios have betas that are substantially higher than the market portfolio (=). Simulations indicate that uncertainty about the future distribution of... more
Using Ergodicity Economics this paper shows that terminal wealth maximizing portfolios have betas that are substantially higher than the market portfolio (=). Simulations indicate that uncertainty about the future distribution of returns and the high cost of over-betting could be limiting factors to implementing such high beta portfolios. Another possibility is that investors do care about risk and are trying to maximize some form of risk adjusted growth rate.
Research Interests:
In the January,1922 issue of the Cambridge Magazine, F. P. Ramsey was allowed to publish an unrefereed,3-page review of Keynes's A treatise on Probability (1921) that consisted of 15 paragraphs .All 15 paragraphs are either completely... more
In the January,1922 issue of the Cambridge Magazine, F. P. Ramsey was allowed to publish an unrefereed,3-page review of Keynes's A treatise on Probability (1921) that consisted of 15 paragraphs .All 15 paragraphs are either completely wrong or partially wrong .Consider Ramsey's major claim in his review made on the very first page of his article: "Mr. Keynes takes probabilities or probability relations as indefinable, and says that if q has to p the probability relation of degree a, then knowledge of p justifies rational belief of degree a in q.
Research Interests:
Insurance company solvency is one of the most theoretically studied and at the same time very practical subject in insurance companies which deals with, not more or less, survival of the company. Solvency has been subject to both... more
Insurance company solvency is one of the most theoretically studied and at the same time very practical subject in insurance companies which deals with, not more or less, survival of the company. Solvency has been subject to both theoretical research and everyday work in companies almost as long as insurance companies have existed. In the area of EU, we have the new Solvency 2 legislation from which we have scientific research, but also practical experience since 2016. In this article we present a rather extensive literature review. Then we discuss Solvency 2 pillars, Standard formula for Solvency Capital Requirement, Solvency as a part of everyday activities of an insurance company, and finally give conclusions.
Research Interests:
Unlike box office returns in the film industry, the attendance records of two Chicago major league baseball teams do not display a resemblance to power law distributions. The difference may explain why baseball develops its "star"... more
Unlike box office returns in the film industry, the attendance records of two Chicago major league baseball teams do not display a resemblance to power law distributions. The difference may explain why baseball develops its "star" performers differently than does cinema.
Research Interests:
Actuaries and Insurance analysts need to seriously reconsider the merits of basing their frameworks on Keynes's logical theory of probability as presented in 1921 in his A treatise on Probability ,given the demonstration in my Part I... more
Actuaries and Insurance analysts need to seriously reconsider the merits of basing their frameworks on Keynes's logical theory of probability as presented in 1921 in his A treatise on Probability ,given the demonstration in my Part I paper that Russell's small, one footnote evaluation of Ramsey's 1922 attack on Keynes's propositional logic in his A Treatise on Probability(TP,1921), as contained on p.120 of Russell's July,1922 contribution to the Mathematical Gazette ,refutes the entire Ramseyian critique of Keynes. Russell never mentions the name of Ramsey in the review, but it is clear from his example, which contains a reference to Napoleon in his second proposition, that Russell is referring to Ramsey's page 3 example ,in his January, 1922 Cambridge Magazine article, where Ramsey's second proposition specifies Napoleon.
Research Interests:
Having a look at the GameStop share very recently raises the question of how such a phenomenon of enormous price explosion can arise. Technological and financial innovations such as the internet and commission-free trading platforms... more
Having a look at the GameStop share very recently raises the question of how such a phenomenon of enormous price explosion can arise. Technological and financial innovations such as the internet and commission-free trading platforms entail the emergence of new phenomena that were previously unknown and unimaginable. Since dueling narratives surrounded the stock's future opportunities which are reflected in investor expectations, one community in particular stands out as the traditionally uncoordinated and retail investor-driven side. In this context the subreddit wallstreetbets became very prominent recently, as it is clear that many investors have coordinated their activities there. This short paper argues in a casebased research manner that a novel configuration of driving influence factors has led to this novel phenomenon which reveals that private investors can now participate in trading activities which were previously reserved for professional investors.
Research Interests:
A historical myth has been created in the 20th and 21st centuries that F P Ramsey uncovered major technical and logical flaws in Keynes's logical theory of Probability that was presented in his 1921 A Treatise on Probability. It has been... more
A historical myth has been created in the 20th and 21st centuries that F P Ramsey uncovered major technical and logical flaws in Keynes's logical theory of Probability that was presented in his 1921 A Treatise on Probability. It has been accepted in academia that Ramsey showed in 1922 ,in his book review in the January issue of Cambridge Magazine, and then again with greater force in his 1926 paper, titled "Truth and Probability", that Keynes's relational propositional logic contained serious logical mistakes that made it impossible to base probability and statistics on. However, it has been completely overlooked for 100 years that it took Bertrand Russell only one small footnote to refute all of Ramsey's claims , that supposedly demonstrated the logical errors in Keynes's relational propositional logic as presented by Keynes on pp.4-6 and pp.53-56 of the A Treatise on Probability, with one small counter example that refutes Ramsey's entire argument. Russell's refutation occurs in his July,1922 review ,published in the Mathematical Gazette on pp.119-125.Russell's refutation takes place on page 120 in a footnote. This explains why Ramsey's work on probability and statistics is never mentioned by Russell in his monumental 1948 Human Knowledge :Its scope and limits.The reason is that Ramsey's positive contributions to his own subjective theory of probability are severely marred because these positive contributions are hopelessly intertwined with a series of false claims made about Keynes's logical theory of probability. These false claims are identical in nature to the false claims contained in Ramsey's first critique of Keynes in 1922. It is thus imperative that insurance analysts seriously think about reconsidering Keynes's theory as it is built upon a Boolean algebra and logic that is the foundation of many fields today such as artificial intelligence and computer languages.
Research Interests:
As more and more mechanisms for utility and value accrual are explored for cryptocurrencies and tokens, a comprehensive list and analysis of the different types of token economics designs currently being employed can be a useful starting... more
As more and more mechanisms for utility and value accrual are explored for cryptocurrencies and tokens, a comprehensive list and analysis of the different types of token economics designs currently being employed can be a useful starting place either for people getting into the space or for teams considering their own implementations. Furthermore, many if not most people outside of crypto still have the mental model of a currency as what all tokens are trying to be. In 2022, this way of thinking is too reductionist and leads great investors and builders to underestimate or even dismiss the space.
Research Interests:
Why do firms from some countries use no equity in the compensation mix, while others use amounts equivalent to that observed in the U.S.? We examine this issue by investigating compensation data from 381 firms in 43 countries over the... more
Why do firms from some countries use no equity in
the compensation mix, while others use amounts
equivalent to that observed in the U.S.? We
examine this issue by investigating compensation
data from 381 firms in 43 countries over the 1996 to
2000 period. The data indicate that firms use more
equity-based compensation in countries with equityoriented capital markets and where shareholder
rights are strongly protected. After controlling for
these country-level macro-factors, we test for how
the firm-specific agency costs of debt and equity
impact compensation structure. We find that firms
with higher growth opportunities (and therefore
higher agency costs of equity) and lower risk of
default (and therefore lower agency costs of debt)
use more equity in the compensation mix. This is
consistent with the predictions of contracting
theory.
the compensation mix, while others use amounts
equivalent to that observed in the U.S.? We
examine this issue by investigating compensation
data from 381 firms in 43 countries over the 1996 to
2000 period. The data indicate that firms use more
equity-based compensation in countries with equityoriented capital markets and where shareholder
rights are strongly protected. After controlling for
these country-level macro-factors, we test for how
the firm-specific agency costs of debt and equity
impact compensation structure. We find that firms
with higher growth opportunities (and therefore
higher agency costs of equity) and lower risk of
default (and therefore lower agency costs of debt)
use more equity in the compensation mix. This is
consistent with the predictions of contracting
theory.
Research Interests:
This paper provides an overview of the potential macroeconomic effects of HIV/AIDS in Botswana, focusing on the key channels through which the pandemic is likely to affect the economic outlook and on the uncertainties involved. To... more
This paper provides an overview of the potential macroeconomic effects of HIV/AIDS in Botswana, focusing on the key channels through which the pandemic is likely to affect the economic outlook and on the uncertainties involved. To estimate the impact of HIV/AIDS, a dual-economy equilibrium model is constructed and simulated under different scenarios. Depending on exactly how AIDS affects the outlook, GDP growth is projected to fall from around 5½ percent a year without the pandemic to between 1½ and 2½ percent a year with AIDS. Non-negligible redistribution effects across sectors and labor skill categories are also likely to arise. Finally, the paper draws attention to the potential effects of HIV/AIDS on the long-term fiscal position of Botswana, highlighting the need for increased international support and/or lower drug prices so that the widespread introduction of antiretroviral drug treatments is feasible.
Research Interests:
Investments are important for any insurance company as is also good success in investment operations. Bad investment performance may ruin a company even if underwriting business would be profitable. In this article investment discussion... more
Investments are important for any insurance company as is also good success in investment operations. Bad investment performance may ruin a company even if underwriting business would be profitable. In this article investment discussion is mostly based on the author's experience in executive positions in insurance companies. It is possible to find numerous theoretical papers on insurance company investments, but this text is intended to be closer to practise and to gather useful knowledge from various sides of the topic. The literature review helps a reader to find more theoretical literature. The core of the paper consists of eligible investment instruments and methods, investment risks and solvency. Solvency and especially solvency capital requirement are discussed from the investment risk point of view.
Research Interests:
The study examined the relationship between claims management, risk management, and financial performance of selected composite insurance companies in Nigeria. There are thirteen composite insurers in the industry out of which seven were... more
The study examined the relationship between claims management, risk management, and financial performance of selected composite insurance companies in Nigeria. There are thirteen composite insurers in the industry out of which seven were randomly selected with full consideration to their annual report for 10 years (2010-2019) through the Nigerian Insurers Association Digest. The ex-post facto research design was employed. The findings show that underwriting practice, Premium valuation, worth of the Net claim, and derived claim ratio are positively significant to influence risk management practices. The study, therefore, concluded that underwriting guidelines employed by insurance companies in Nigeria increase the value of an investment and have a positive effect on the financial performance of composite insurance firms in Nigeria. Adjusting claims and benefits paid to policyholders of insurance firms increase the value of investment thus resulting in acceptable costs for every person which is usually determined by observed costs based on risk factors. The study recommends that the management of insurance firms should consider adopting Premium valuation methods to ensure the financial performance of composite insurance firms in Nigeria. This will allow management to create a comprehensive understanding that can be leveraged to influence stakeholders and create better decisions.
Research Interests:
Knight spent all of chapter VII of his Risk, Uncertainty, and Profit (1921) wrestling with what to Knight appeared to be a monumentally difficult and intractable logical problem-how to deal technically and mathematically with his third... more
Knight spent all of chapter VII of his Risk, Uncertainty, and Profit (1921) wrestling with what to Knight appeared to be a monumentally difficult and intractable logical problem-how to deal technically and mathematically with his third category, "estimates", which concerned the degree of confidence a decision maker could have when facing uninsurable uncertainties; however, he made limited progress (urn ball models) in the face of what to him appeared to be an immense and insurmountable logical problem that he described as involving "…the greatest logical difficulties of all, and no very satisfactory discussion of it can be given…" (Knight, 1921, p.225). This paper will show that Keynes had already solved Knight's logical problems in chapters XV, XVII (interval valued probability) and chapter XXVI of his A Treatise on Probability with his conventional coefficient of weight and risk, c, which incorporated an index of evidential weight, w, that serves as a measure of the confidence a decision maker has in his estimates of the probabilities (risk).The specific form is 2w/(1+w).
Research Interests: Uncertainty and Risks
In this reprint article, we challenge the life model, the medical research model and the disease treatment model used in medicine. We show that human life is controlled by multiple factors and chronic diseases are manifestation of... more
In this reprint article, we challenge the life model, the medical
research model and the disease treatment model used in medicine.
We show that human life is controlled by multiple factors and chronic
diseases are manifestation of small departures in multiple processes
attributes in distinctive personal biological or metabolic pathways
networks. We thus reaffirm the validity of the ancient life model. We
will show that every assumption and every presumption used in
medicine are deeply flawed and unfit for modeling human life and
health. Flaws can be found in mathematical models, statistical
models, data analysis methods, disease classifications, diagnosis
methods, etc. More detailed analysis reveals that flaws can be found
even in the number scale, number additivity, number significance and
things that have never been questioned before. Due to overwhelming
flaws, the medical research model lacks required accuracy for
accurately characterizing chronic diseases; the nature of metabolic
pathways networks implies that chronic diseases cannot be cured by
using drugs and that medical treatments not only fail to cure chronic
diseases but must hurt patients. Now human activities and social
practices are often guided by benefits-and-risks ratios determined by
researches conducted by using flawed research models. Due to all
identified flaws, the actual adverse effects of any drug, chemical, and
pollutant on human life are larger than the perceived risks or the
nominal ratings by thousands of times, and the true adverse impacts
of a toxic substance on economy is much more than what has been
believed. We will show that the worst danger comes from using the
convention that treats the adverse health effects of each toxic
substance independent of others. Those flaws have the effect of
“writing off” the total stress of all toxic substances on lives by
millions to billions times (although the number depends on the
evaluation model). We believe that massive problems in
environment, ecosystem and climate can never be fixed if the flaws in
medicine are not corrected. We believe that errors in medicine are
responsible for human evolutionary crisis.
research model and the disease treatment model used in medicine.
We show that human life is controlled by multiple factors and chronic
diseases are manifestation of small departures in multiple processes
attributes in distinctive personal biological or metabolic pathways
networks. We thus reaffirm the validity of the ancient life model. We
will show that every assumption and every presumption used in
medicine are deeply flawed and unfit for modeling human life and
health. Flaws can be found in mathematical models, statistical
models, data analysis methods, disease classifications, diagnosis
methods, etc. More detailed analysis reveals that flaws can be found
even in the number scale, number additivity, number significance and
things that have never been questioned before. Due to overwhelming
flaws, the medical research model lacks required accuracy for
accurately characterizing chronic diseases; the nature of metabolic
pathways networks implies that chronic diseases cannot be cured by
using drugs and that medical treatments not only fail to cure chronic
diseases but must hurt patients. Now human activities and social
practices are often guided by benefits-and-risks ratios determined by
researches conducted by using flawed research models. Due to all
identified flaws, the actual adverse effects of any drug, chemical, and
pollutant on human life are larger than the perceived risks or the
nominal ratings by thousands of times, and the true adverse impacts
of a toxic substance on economy is much more than what has been
believed. We will show that the worst danger comes from using the
convention that treats the adverse health effects of each toxic
substance independent of others. Those flaws have the effect of
“writing off” the total stress of all toxic substances on lives by
millions to billions times (although the number depends on the
evaluation model). We believe that massive problems in
environment, ecosystem and climate can never be fixed if the flaws in
medicine are not corrected. We believe that errors in medicine are
responsible for human evolutionary crisis.
Research Interests:
While supports for people with disabilities have increased, significant healthcare and financial barriers persist. Stateadministered Medicaid Buy-In programs for working people with disabilities, distinct from broader buy-in discussions... more
While supports for people with disabilities have increased, significant healthcare and financial barriers persist. Stateadministered Medicaid Buy-In programs for working people with disabilities, distinct from broader buy-in discussions that have emerged as some states consider expanding access to health insurance, are intended to incentivize employment and protect against a loss of Long-Term Services and Supports. Loss of these services would be detrimental to a person's ability to access daily living and workforce participation supporting services. This paper explores identified drivers of and barriers to participation, outcomes, and the current state of programs that are currently in place. Authors conducted a systematic literature search to identify evidence published in peer-review journals. Additionally, a policy scan using information from government sources for the 45 stateadministered buy-in programs was completed. The results indicate that state Medicaid Buy-In programs vary dramatically in their construction and presentation, with eligibility and administration information or lack thereof having the potential to significantly affect a person's decision making around benefit enrollment and employment. Findings are discussed in the context of additional recent state and federal policy efforts to improve outcomes around employment, income, and asset generation for people with disabilities.
Research Interests:
The aim of this paper is to measure the financial performance of six insurance companies operating in the UAE with the goal of comparing the performance between three Islamic and three conventional insurance companies during the financial... more
The aim of this paper is to measure the financial performance of six insurance companies operating in the UAE with the goal of comparing the performance between three Islamic and three conventional insurance companies during the financial crisis of 2008. The primary data source for the collection of financial data was the National bank of Abu Dhabi's publication known as the Local Shares Directory. Performance on five types of indicators was assessed in order to test profitability levels for the years 2005 through to 2009. The general findings of the analysis show an industry wide, in-discriminant decline in the profit levels of insurance companies during the financial crisis followed by an uptick in performance being seen in the year 2009. However, a more thorough analysis showed that conventional insurance companies experienced greater returns than their Islamic counterparts did.
Research Interests:
As central counterparties can act as shock absorbers but may also lead to financial stability problems themselves, this paper explores the financial risk management practices of central counterparties around the world. Furthermore, we... more
As central counterparties can act as shock absorbers but may also lead to financial stability problems themselves, this paper explores the financial risk management practices of central counterparties around the world. Furthermore, we compare European with third-country CCPs to see whether different risk management practices are being applied. Our results indicate that CCPs in the EU require more money to be deposited at a central bank of issue as initial margins compared to non-EU CCPs. The former also demand a higher fraction of prefunded clearing member contributions. In addition, asset segregation is more common at EU CCPs. In terms of investment risk management, EU CCPs prefer to deposit cash at central banks, while non-EU CCPs tend to have cash deposits at commercial banks. European CCPs have almost three times as many liquid resources as non-EU CCPs.
When this article is submitted for reprint, at least 252 million of U.S. residents or 76% of the population in the U.S. have received at least one dose of mRNA vaccines. I started predicting the dangers of mRNA vaccines before March 2021... more
When this article is submitted for reprint, at least 252 million of U.S. residents or 76% of the population in the U.S. have received at least one dose of mRNA vaccines. I started predicting the dangers of mRNA vaccines before March 2021 and update my article periodically. My prior model study enabled me to identify many flaws in the foundation of medicine, and I also considered consistent failure in predicting drug side effects in the past and systematic failure of FDA in keeping out dangerous drugs such as Diethylstilbestrol (DES) and swine flu vaccine from the market. By studying mRNA expression dynamics and kinetics, I predicted that mRNA vaccines may adversely affect brain, all vital organs, cancer growth, human genome integrity, viral evolution, pre-existing chronic diseases, fetus development, etc. I found that the number of deaths caused by mRNA vaccines was grossly underestimated, and that 95% effectiveness rate and 90% death rate reduction are misleading whereas the actual vaccine benefits are realized in less than 1% of recipients but latent side effects are expected to affect all vaccinated persons. Cases reflecting damages to the CNS, kidneys, liver, and immune system start appearing. The write-off of a massive number of acute personal injuries and latent side effects can be attributed to human massive organ reserves, the interference effects of thousands of life factors, expected lags in damages realization, the use of symptom-based method, etc. I will discuss how this humanity disaster will affect U.S. economy and urge societies and people to take the matter seriously.
Research Interests:
Both data and people's self-reports reveal that there is an undersaving problem. Behavioral economics seeks to explain this phenomenon with the concept of hyperbolic discounting. In essence, short-term actions are inconsistent with... more
Both data and people's self-reports reveal that there is an undersaving problem. Behavioral economics seeks to explain this phenomenon with the concept of hyperbolic discounting. In essence, short-term actions are inconsistent with long-term goals. This is applied to the German pension system in this text. The results lean on a theoretical life-cycle model that is simulated in Matlab, whereby the parameters are calibrated to match the German economy. It is shown that myopic preferences lead to deviations from outcomes that would be desirable from a normative point of view. The savings rate is considerably lower for hyperbolic discounters, compared to standard discounters. Moreover, a fully funded pension scheme seems preferable to the current Pay-As-You-Go system.
Research Interests:
Social protection has been a beneficial tool used by the government and other stakeholders to address challenges faced by the most vulnerable members of society. It is a valuable strategy to include the poor as participants in our... more
Social protection has been a beneficial tool used by the government and other stakeholders to address challenges faced by the most vulnerable members of society. It is a valuable strategy to include the poor as participants in our neo-liberal economy that disregards the weak. It gives the poor a fighting chance, an opportunity to have some semblance of a dignified life. Incomes in Kenya are largely low and insecure, making social protection funds vital assistance for the poor to meet basic conveniences such as nutrition, healthcare and education. Cash transfers programs have protected the elderly, orphans, persons living with disability as well as their care givers from abject poverty. Health insurance provides the same group with access to health services promoting wellness for workers which has direct impact on the economy. Social protection, therefore, is a catalyst for economic growth and development at micro and macro levels.
Research Interests:
F P Ramsey wrote a review of Keynes's A Treatise on Probability in 1922 for Cambridge Magazine. It is filled with obvious errors such as "First, he (author's note-Keynes) thinks that between any two nonself-contradictory propositions... more
F P Ramsey wrote a review of Keynes's A Treatise on Probability in 1922 for Cambridge Magazine. It is filled with obvious errors such as "First, he (author's note-Keynes) thinks that between any two nonself-contradictory propositions there holds a probability relation (Axiom I), for example between 'My carpet is blue' and 'Napoleon was a great general'…".Ramsey,1922,p.3;1989,pp.219-220). First, nowhere in the A Treatise on Probability did Keynes state "… that between any two non-self-contradictory propositions there holds a probability relation…"(Ramsey,1922,p.3).Second, there is no such axiom one "…Axiom I…"(Ramsey,1922,p.3) in the A Treatise on Probability. Third, Ramsey's "…'My carpet is blue' and 'Napoleon was a great general'…" (Ramsey,1922,p.3) example is ruled out by Keynes's argument form specifying that the h proposition(s) must contain relevant evidence upon which to base a conclusion ,a, so that P(a/h)=α,0 ≤α ≤1,where α is a degree of rational belief and P stands for the logical relation that holds between h and a. The analysis on pp.54-56 , the development of Keynes's relevance irrelevance logic, also rules out Ramsey's claims. The claim ,that Ramsey destroyed and demolished Keynes's logical theory in 1922, is simply false. How is it possible for Ramsey's note to be considered a "brilliant", "fine", "astute", and "meticulous " review? In his July,1922 review of Keynes's A Treatise on Probability for the Mathematical Gazette, on page 120 in his star footnote, Bertrand Russell(Russell,1922,p120) showed that all of Ramsey's examples of supposed logical errors are worthless because they are prevented from occurring by Keynes's relevance-irrelevance logic. They are also ruled out by Keynes's argument form requirements on pp.4-6 of Keynes's A Treatise on Probability.
How do the total expected lifetime cash flows compare between Single Premium Immediate Annuities (SPIAs) and managing the portfolio in the markets? Use of Period Life Tables provides a better definition of the distribution period, a sense... more
How do the total expected lifetime cash flows compare between Single Premium Immediate Annuities (SPIAs) and managing the portfolio in the markets?
Use of Period Life Tables provides a better definition of the distribution period, a sense for probability of outliving certain ages, and recognition that the distribution period's length is a rolling time period rather than to a set, fixed age.
Assets should be retained and managed in the markets, before the purchase of a SPIA should be considered, until older ages than currently thought.
Key factors in order of impact on decision: Age (SPIA appropriate for older retirees), Longevity (higher likelihood of outliving peers), Allocation (breakeven depends on age & longevity expectations), Adviser Fees (least impact). All these factors should be considered in unison.
SPIAs should not be considered for approximately two-thirds of the general population, and only at older ages for the rest.
Research in the first part of this paper uses the "general population" Social Security tables. How does using a "healthier population" table like the 2000 Annuity Table affect the breakeven choice?
Tables that have a shorter expected longevity period will favor managed portfolios while tables that have a longer expected longevity period will favor SPIA solutions.
Longevity tables are different statistical subsets of the same overall population.
The Annual Payout Rate (APR) that insurance companies calculate is a useful metric to simplify calculation of the breakeven point between retaining management of the assets and a SPIA.
As interest rates increase, the APR may also increase. A practical application is described so that this comparative process may be simplified and a comparison may be made in the future as insurance company Annual Payout Rates rise or fall.
As the retiree ages, conditions may suggest switching to a SPIA (e.g., continued good health/longer expected longevity than cohorts); however, the APR comparison may be helpful for this determination.
Use of Period Life Tables provides a better definition of the distribution period, a sense for probability of outliving certain ages, and recognition that the distribution period's length is a rolling time period rather than to a set, fixed age.
Assets should be retained and managed in the markets, before the purchase of a SPIA should be considered, until older ages than currently thought.
Key factors in order of impact on decision: Age (SPIA appropriate for older retirees), Longevity (higher likelihood of outliving peers), Allocation (breakeven depends on age & longevity expectations), Adviser Fees (least impact). All these factors should be considered in unison.
SPIAs should not be considered for approximately two-thirds of the general population, and only at older ages for the rest.
Research in the first part of this paper uses the "general population" Social Security tables. How does using a "healthier population" table like the 2000 Annuity Table affect the breakeven choice?
Tables that have a shorter expected longevity period will favor managed portfolios while tables that have a longer expected longevity period will favor SPIA solutions.
Longevity tables are different statistical subsets of the same overall population.
The Annual Payout Rate (APR) that insurance companies calculate is a useful metric to simplify calculation of the breakeven point between retaining management of the assets and a SPIA.
As interest rates increase, the APR may also increase. A practical application is described so that this comparative process may be simplified and a comparison may be made in the future as insurance company Annual Payout Rates rise or fall.
As the retiree ages, conditions may suggest switching to a SPIA (e.g., continued good health/longer expected longevity than cohorts); however, the APR comparison may be helpful for this determination.
Research Interests:
The emergence of newly developed technology within the Fintech field presents a significant challenge to the aim of reaching a mature stage of systematic development in the financial industry. This research explores the topic of recent... more
The emergence of newly developed technology within the Fintech field presents a significant challenge to the aim of reaching a mature stage of systematic development in the financial industry. This research explores the topic of recent technological change within the Fintech field, highlighted the applications of seven key functions of the technology innovation system (TIS) in the financial industry. Past research focused on the development of a single technology within the industry, while very limited research discusses the key elements of the greatest impact. However, the dynamic view provided by the TIS framework describes the causes and elements of the technological diffusion of Fintech throughout the financial industry, and actively promotes the development of the financial industry and enhances innovation efficiency. This study tests the moderating role of innovative entrepreneurial activity, legitimacy and their effect on the relationship between the guidance of research and market formation. It uses a PROCESS moderation model and uses a sample that includes 174 reports, representing a 40.5% response rate, from Taiwan’s financial Listed companies. Our results show that guidance of research exerts an influence on market formation and that innovative entrepreneurial activity positively affects this relationship; in contrast, legitimacy negatively affects this relationship. This means that the government has not effectively incorporated Fintech as part of the policy system. Moreover, our findings could guide the government to extend policies appropriately that prompt the financial industry to develop innovative entrepreneurial activity and establish a marketing strategy for innovations that may enhance innovation development.
Research Interests:
Alternative ownership models of an insurance company are considered. After listing the most important models each one is discussed based on literature and the author's own experience. Special attention is paid to mutual/stock ownership... more
Alternative ownership models of an insurance company are considered. After listing the most important models each one is discussed based on literature and the author's own experience. Special attention is paid to mutual/stock ownership models, but the question of their superiority is left unanswered. In the conclusion the problem is still analysed, and a proposal for further research is given.
Research Interests:
• This paper broadens the perspective on sustainable distributions by expanding into three dimensions, introducing transitory states as well as all those states existing simultaneously. • Withdrawal rates alone do not tell a complete... more
• This paper broadens the perspective on sustainable distributions by expanding into three dimensions, introducing transitory states as well as all those states existing simultaneously. • Withdrawal rates alone do not tell a complete sustainable distribution story; withdrawal rates are time dependent. • The Probability of Failure (POF), a time independent variable, is more useful for true comparison of withdrawal rates over any time period or asset allocation. • Comparison of POF surfaces, and their shift between strategies, illustrates how effective one strategy is as compared to another. • The methodology presented provides an ability to evaluate sustainable withdrawal rates and exposure to sequence risk together.
Research Interests:
This summary policy analysis provides a simple diagnosis of the sub-prime lending debacle and consequent systemic financial crisis: The Fed fueled an asset bubble, housing policy steered it to housing, and the extreme leverage required to... more
This summary policy analysis provides a simple diagnosis of the sub-prime lending debacle and consequent systemic financial crisis: The Fed fueled an asset bubble, housing policy steered it to housing, and the extreme leverage required to fund political housing policy magnified losses instead of profits. The financial sector bailout, housing market and homeowner bailout, and fiscal and monetary stimulus were all more of the same. A financial sector meltdown was avoided, but at the expense of greater systemic risk prospectively. The Great Recession ended, but the recovery remained weak with economic costs in the aftermath many multiples those during the lending bubble and prospective economic risks are worse still. The only relevant economic precept is the originalincentives matter. Understanding the financial crisis requires no more than an explanation of how politicians perverted them. The simple prescription to avoid future systemic financial crises is to limit discretionary monetary policy, separate subsidy from finance, impose appropriate capital requirements, improve political oversight and reintroduce market discipline, the opposite of the Dodd-Frank legislation.