In the US, a disruptive new way for small companies to raise capital is putting a spotlight on the readiness of a tightly regulated securities market to adopt the openness of the Internet. It has sparked debate about whether the change will spur economic growth or become another vehicle for fraud.
How do financial mathematics specialists imagine the markets in five to ten years? What exactly will their role look like? To understand these issues, we need to take a closer look at the way this field has developed and at the issues that have shaped the discipline.
The Bitcoin bubble bursting is but one small part of a bigger story. The most exciting part is not speculation, but challenging the banks' control over payment solutions. This is what we should discuss. Starting now.
As the recent successful campaign to fund a movie based on the television show Veronica Mars proves, crowdfunding is now recognized as a reliable funding avenue for both start-ups and established firms. But the growth of the sector also creates more regulatory challenges and raises questions about the risks that funders take when they put their money behind a project.
Since 2008 and the collapse of Lehman Brothers, global efforts have been undertaken to improve the management of finance, reduce leveraging and increase the equity capital of financial institutions. However, all these measures lack a genuine unity and show considerable differences between nations. The implementation of the new prudential banking regulation of 2012, Basel III, is being postponed indefinitely in the United States. Back to square one for global finance?
Concern is on the rise regarding financial uncertainty, its form and its nature. Is it merely exacerbated during a temporary crisis? Or, with the most unexpected phenomena always possible, is any attempt at forecasting doomed to be vain? It turns out both commonplace statements are missing the point: financial uncertainty is permanent, malleable, and resistant - it is by no means an abstraction that could be dismissed through means of calculation. Far from being constant, its structure varies throughout history: it depends on the given institutional frameworks that allow the flow and recording of economic information.
Smartphone credit cards and card readers, prepaid debit cards and other burgeoning electronic payment systems are making it easier than ever to move through the world without carrying cash. While going cashless offers some convenience to consumers, it also comes with potential fees and penalties from banks, credit card companies and others. As observers from Wharton and elsewhere note, cash is the more expensive proposition for those who handle financial transactions. But it will be tough for firms to convince consumers that dollars and cents have become a mere curio of the past.
The CEO of Paris-based AXA Private Equity is on the Forbes list of the world's 100 most powerful women. Recently, Senequier has turned her attention to the U.S. market, acquiring investment portfolios from Bank of America and Citigroup. In this interview, she discusses the European debt crisis and notes that although the private equity market will perform strongly in the long term, exits may get delayed in the new environment.
Europe's economic crisis continues, and the way it plays out will decide the future course of the world economy. Among those who are trying to steer the continent, and especially the euro zone, away from the edge of the precipice is Christine Lagarde, managing director of the International Monetary Fund. She has recommended policies such as deeper economic integration and higher firewalls to turn Europe around. Ms. Lagarde also has the delicate task of restructuring the IMF so that fast-growing emerging economies have a voice in the institution that is commensurate with their increasing economic clout, without alienating other member countries.
Bitcoin is a new payment application available on the internet since January 2009. In a way, by virtue of its open source publication, it is similar to the World Wide Web, the hugely successful internet application of the internet that now enables so many others. Much like the WWW has redefined the way mankind produces and shares knowledge, bitcoin transforms the social code underlying money supply to bring about a new degree of economic freedom. Can it be seen as a new monetary reform vehicle?
Whether it comes from ethics or from theory, the impression is that the days of the contemporary speculator are numbered. For this moody character is reckless: he is one to confuse the stock market and roulette. Economic theory has a hard time understanding him. Nevertheless, a theory of the speculator is possible.
Have you heard of Twollars yet? Maybe not, but by now you've probably heard of Facebook credits. Social networks are developing virtual currencies who could be used by hundreds of millions of consumers, with consequences whose scale we are just beginning to measure. Where will the cash flows derived from these transactions transit?
Till 2007, a large part of the global growth was fueled by leveraging and debt creation. With governments and central banks struggling to save the banks, the private debt crisis has evolved into a public debt crisis. The next ten years could be brutal. Will governments and financial institutions be able to manage the great deleveraging?
The regulation that followed in the wake of the financial crisis has only partially addressed the challenges exposed by the collapse. Restrictive measures on equity levels and liquidity requirements have been taken but have been restrained by fears over endangering the very instruments necessary to finance the fragile recovery. The need for a global framework, and a more explicit separation of market and credit risk, would complete the picture as would reinforcement in scope and power for the bodies charged with enforcing the new regime.
Traffic regulations have become more constraining as technology grows ever more sophisticated. In finance the opposite is true and progress has been measured by the suppression of previous regulatory safeguards and the complete absence of a new framework with which to replace them. To extend the analogy of the automobile it is as if whoever has the desire, can drive any vehicle while creating their own rules and according to any route. Is this the path we want to be taking?
As recently as mid-February copper prices hit an all time high of $10,157 a metric ton on the London Metal Exchange. While the market has cooled off in the intervening months the spike set off alarm bells for decision makers in government and business on how to approach overheated commodities and energy markets. Should the current climate be viewed as a passing anomaly or a permanent reality? Just how real is the threat of a shortfall?
High-speed, computer-driven trading is increasingly controlling the investment markets. Most analysts agree that it is adding liquidity and reducing trading costs for everyone. Some critics argue, however, that leaving people out of the loop, except for a few mathematicians who tinker with algorithms after the fact, has created new and still dimly understood systemic risks that pose ever greater dangers to market stability.
Mathematics, and by extension mathematicians, have been blamed for precipitating the financial crisis. Poor understanding of the nature of risk, allowed financiers to take refuge in elegant formulae they did not fully understand. In the short run, the profits were too compelling and instant for anyone to question the sustainability of a model mathematicians always said was imperfect for risk assessment. So who's to blame?
The global financial crisis is having -and will continue to have- a huge impact on private equity. For starters, bank debt to finance investments has all but evaporated and new regulation is coming into force. As such, the industry simply can't continue with business as usual. It must return to basics, with a focus on three key areas: closer partnerships with portfolio companies, stronger operational excellence, and increased transparency and reporting.
How should business leaders manage the conflicting logic of the industrial and the financial worlds when running an industrial company? Bertrand Collomb, who headed the cement giant Lafarge for 18 years, explains the dilemma this poses from his personal experience.