Archive for December, 2009

Outlook for 2010

Today, there is a divide between the optimism of the public and the concerns of practitioners with in-depth market knowledge. Who will be right?

What does the theory of high frequency finance tell us?

Central banks and governments have the clout to skew market prices for extended periods of time. They are successfully doing this in response to the economic crisis by providing liquidity to lower short-term interest rates and by buying long dated debt to lower long-term interest rates. They succeeded in stopping the meltdown of the financial markets, but they cannot continue their skewing strategy indefinitely. They need to be aware that their actions will give rise to a rebound, which has the effect that interest rates will be higher than normal. Financial markets tend towards a dynamic equilibrium, where overshoots in one direction will ultimately be balanced out by overshoots in the other direction. (more…)

December 29th, 2009 | Market, News | | 1 Comment »

Global Economy under Siege: Possible Initiatives

The global crisis has fueled a debate of what needs to be changed. People have focused on regulatory reform and on the need of imposing restrictions on compensation packages for bankers. The debate has failed to address wider and more fundamental issues. In the following I give a brief overview of initiatives for change that I propose. My ideas have germinated over the course of thirty years. The proposals for the reform of the financial markets are based on my work in high frequency finance and hands on experience in building two businesses active in financial markets. The other proposals are inspired by my system theory, the theoretical foundation of my work in high frequency finance and also leverage insights gained by studying law. (more…)

December 14th, 2009 | Economics, News | | No Comments »