Paul Wilmott answers questions over at QFINANCE:
- The press has recently vilified derivatives and Warren Buffett famously called them “weapons of financial mass destruction.” What’s your feeling?
- What’s the solution, then, as derivatives seem here to stay, be it for hedging and portfolio efficiency, or for unique different trading strategies? Is the answer greater transparency as some people have called for?
- What about the regulators, then? Increasingly, there have been calls for greater regulation to solve the problems within the system, such as the nature of compensation.
- Let’s talk about the instrument that’s been most in the press, credit default swaps (CDS), where the size of the market has become ridiculously large compared to the companies whose defaults they’re underwriting. What do you see as their future?
- One thing that seems certain is that leverage is not going to be the same going forward. What’s the bank of the future going to look like?
- Hedge funds have been particularly blamed for their role in the credit crunch. Were they culpable or just one of the culprits, along with banks and those investors who drove the demand for securitization?
- The problem has now moved on from the financial sphere into the real economy. How do you wean people off this easy credit?
- Quants have also had a rough ride recently thanks to CDOs and the like. What are your thoughts and what is the future for them?
- People often don’t realize that any theory is only as good as its axioms. So what can be done about this?
- Let’s end with the question that resonates most in the minds of financial leaders these days. What lessons, if any, can we take from the credit crunch?
Read the interview here.
Finance Focus