Cyberlibris blog

Risk can be securitized, information may not and that means heading for trouble...

Securitization has become a panacea on financial markets.

Indeed, it is predicated on the simple idea that balance sheets are more often than not the best parking for risks. In other (shareholders) words, they are the most costly parking you can find. Hence, commercial banks with the structuring help of Wall Street firms have "shipped" assets and liabilities that were so far stored in their balance sheets to investors.

It sounds like a marvelous and lucrative never ending innovation spiral à la Merton where banks can do more business, investors have access to a wider spectrum of securities and risks are more efficiently shared.

Too good to be true: The subprime mess is a wake up call, one that calls for deep thinking.

There are some things that do not change. In October 1987, the equity market crashed and portfolio insurance was designated as the culprit. Portfolio insurance used to be considered as the solution to downside risk protection. Investors hate downside risk even more than they love upside. University of Berkeley mavericks, Hayne Leland and Mark Rubinstein (co-founders if LOR), came up with a technique that promised to replicate what a long put option does, namely pay off, when the market goes south. The "trick" was simply to use Black-Scholes-Merton option hedging argument to replicate the put option payoff. In other words, they were selling stock index futures (mechanically/dynamically) and going long T-bills (cash) when the equity market was tanking. When the market was rallying up, they did the opposite. That's why when the market crashed in October 87, LOR was accused of provoking/amplifying the downward trend. The argument is a bit odd: Mark Rubinstein rightly pointed out that nobody praised LOR when the market was going up for making the growth even stronger.

The truth is that while portfolio insurance is in effect more of car insurance than earthquake insurance type there is an important market item that it paradoxically "destroys": Information. Indeed, when lots of investors are willing to buy put options bidding the price up they signal their bearishness to the market. What portfolio insurance does is to break down a single (put) transaction into two separate transactions: stock index futures and T-bills. Information about market expectations may get distorted in the process as it is hard for the rest of the market to decipher the initial intent. Worse, as shown by Sanford Grossman and others when portfolio insurers sell mechanically to dynamically replicate the target put, people may mistakenly think that this signals bad news. Asymmetric information problems have increased and we know both from the seminal works of George Akerlof, Michael Spence and Joseph Stiglitz and casual business experience that this is a sure recipe for trouble.

Sadly enough, the same holds true with securitization as witnessed by the subprime mess. Bad loans have been securitized. As a result the shareholders of the originating banks do not bear the consequences, good or bad, of their loan activity anymore. They have no incentive anymore to monitor these loans that get "diluted" in securitization vehicles. Hence while risks seem to have been more efficiently cut into pieces and shared the overall situation has worsened drastically because asymmetric information problems are now more toxic (1). Asymmetric information is a market killer and we end up collectively harvesting what others have planted.

Not convinced. Well, think of what microfinance does. It does exactly the opposite: It reduces information asymmetries by putting monitoring and safety devices in the micro-lending process: Lend only to women, in a village where everybody knows each other, make the borrowers collectively liable when one of them defaults etc... This is why it is successful.

So, next time innovation in the form of sophisticated securitization knocks at your door, ask yourself whether information and incentives have been reduced or not before joining the bandwagon. If portfolio insurance and the subprime can teach us one thing or two, it is precisely this.



(1) Not to mention the fact that it becomes very hard, almost impossible, to restructure the (securitized) loans when disaster strikes.

S'il vous plaît, dessine-moi une bibliothèque: de la bibliothèque euclidienne à la bibliothèque numérique

Qu’aurait répondu Saint-Exupéry si le Petit Prince lui avait demandé:

« S’il vous plaît... dessine moi une bibliothèque? » 

Un mouton n’est pas facile à dessiner, alors une bibliothèque... Sur l’astéroïde B612 du Petit Prince à quoi les bibliothèques ressemblent-elles ? Y trouve-t-on des livres sagement alignés sur des étagères rectilignes comme sur la Terre? Les livres y sont-ils méthodiquement classés et rangés ? Cette question qu’aurait pu poser le Petit Prince à Saint-Exupéry est loin d’être candide. Une bibliothèque nous dit quelque chose sur nous-même. Elle nous invente tout comme nous l’inventons.

L’essayiste argentin Alberto Manguel a consacré tout un livre à cette étrange alchimie intitulé « La bibliothèque, la Nuit ».  Le titre est quelque peu surprenant. Néanmoins, dans l’esprit de Manguel, la nuit est inséparable de la bibliothèque. Comme il le dit en réponse à la question d’un journaliste qui s’étonnait de cette association:

« Parce chaque nuit, ma bibliothèque me dit une nouvelle chose de moi-même. Le jour, l’ordre y est plus visible, c’est un labyrinthe de lignes droites où l’on n’est pas censé se perdre, mais trouver. De même qu’il est plus facile de faire l’amour la nuit, il est plus aisé de réfléchir dans une bibliothèque la nuit. Les bruits y sont étouffés, les pensées plus sonores. Je me sens moins tenu de respecter les ordres visibles pour réimaginer le monde.... Libérés des contraintes quotidiennes, mes yeux et mes mains se promènent entre les rangées bien ordonnées et recréent le chaos. Un livre en  appelle un autre inopinément... »

Alors, que dessiner, une bibliothèque le jour ou une bibliothèque la nuit ? Qu’elle est celle qui m’en apprendra le plus sur elle et sur moi ? Les questions ne s’arrêtent pas là. Elles auraient même tendance à se compliquer à l’ère du numérique. Les bibliothèques « physiques » ne sont plus seules à contenir nos livres.  Nos livres se sont progressivement dématérialisés et ont trouvé au sein des bibliothèques numériques un nouvel habitat.

Une bibliothèque numérique ne peut être embrassée d’un seul regard par ces capteurs que sont nos yeux. L’impuissance de nos yeux à restituer la bibliothèque numérique alors qu’ils nous permettent de saisir la bibliothèque physique est un aveu qui mérite qu’on s’y arrête, qu’on en « mesure » les implications. C’est précisément le propos de cet article qui se veut une invitation à une promenade un peu particulière, une promenade géométrique. Pourquoi géométrique ?

Parce que dessiner, comme le Petit Prince le demande au pilote perdu, c’est faire de la géométrie. Il s’agit de représenter dans le plan qu’est la feuille de papier une figure donnée. Déambuler le long des rayonnages d’une bibliothèque municipale, c’est aussi faire de la géométrie. Nos yeux balaient ces lignes droites et parallèles que sont les étagères. Classer les livres sur  des étagères, c’est encore faire de la géométrie. Cela implique de placer dans un ordre pré-établi des livres à angle droit avec les planches destinées à les accueillir. Mieux encore, recommander des livres à un lecteur dont on connaît les goûts, c’est toujours faire de la géométrie.  Mais, là, cela se complique et mérite quelques explications supplémentaires.

La suite  se trouve ici: Download Briys_Nock.pdf :-)

From the best minds of finance, marketing, economics....

What if you were to find in one place, in one go? :

• Deborah J. Macinnis ,Professor of Marketing at the Marshall School of Business, USC,
  

• Joanna Shepherd, Professor of Law, Emory Law School,
  

• Martin Gaynor, E.J. Barone Professor of Economics and Health Policy, Northwestern University,
  

• Jack Meyer, Professor of Economics, Michigan State University,
  

• Narayan Naik, Professor of Finance, London Business School,
  

• Dominique Hanssens, Bud Knapp Professor of Marketing, UCLA,

• Yakov Amihud, Ira Leon Rennert Professor of Entrepreneurial Finance,

• Howard Kunreuther, Cecilia Yen Koo Professor of Decision Sciences and Business and Public Policy, The Wharton School,

• Aswath Damodaran, Professor of Finance, New York University,

• Robert C. Merton, John and Natty McArthur University Professor, Harvard Business School,

• John H. Cochrane, Myron S. Scholes Professor of Finance, University of Chicago,

• Rajnish Mehra, Professor of Finance, University of California, Santa Barbara,

• Donald Kuratko, The Jack M. Gill Chair of Entrepreneurship, Indiana University,

and many more....

The contributions of these bright academic spirits are available online full-text in Cyberlibris Academia thanks to Cyberlibris partnership with Now Publishers. Just type the name of the authors in Cyberlibris search box or, even better, just type Now Publishers in the search box and you'll get immediate access to 46 magnificent pieces of work.

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OpenID = Ex-Libris = Bookplate = Forget about DRM?

From openid.net:

OpenID: OpenID is a free and easy way to use a single digital identity across the Internet.

From Wikipedia:

Bookplate: also known as ex-librīs [Latin, "from the books of..."], is usually a small print or decorative label pasted into a book, often on the inside front cover, to indicate its owner. Simple typographical bookplates are termed 'booklabels'.

What if instead of putting people in DRM jails (which is what the book industry seems to be heading for despite the music painful e-adventures), e-books were without DRM but carrying the OpenID of their owners?

This is a simple idea which is not really new: Ex-Libris have been around for a while!

Instead of penalizing e-book buyers and readers with ineffective DRMs, why not make them proud and responsible owners of the content they download?

Cyberlibris 2.0

We've just added two new widgets to the Netvibes ecosystem. These widgets relate to the brand new service we have co-developped with FNAC.

The first one tells you which books are added to their personal bookshelves by FNAC subscribers. The second one yields the keywords that are typed by subscribers to launch their searches.

These two are just an "avant-goût" of what we're currently cooking along Web 2.0 and Web 3.0 lines. If you have any suggestions of applications in a digital library that would make your life easier, do not hesitate to share with us by leaving a message on this blog :-)

La FNAC et Cyberlibris lancent les premières bibliothèques numériques à destination du grand public!

Les bibliothèques numériques ne sont désormais plus l'apanage des seuls cénacles professionnels et académiques. Le cercle familial aura lui aussi accès dans quelques jours à ses bibliothèques numériques.

A l'origine de l'initiative se trouvent la FNAC et Cyberlibris. L'agitateur culturel bien connu des Français et Cyberlibris, entreprise pionnière dans le domaine des bibliothèques numériques, s'associent pour donner naissance à des services jusqu'ici inaccessibles en France et ailleurs.

Chaque internaute aura le choix entre 7 bibliothèques thématiques qu'il pourra panacher: Cuisine et Vins, Argent Pratique, Juridique Pratique, Maison et Loisirs, Tourisme et Voyages,  Santé et Famille, Sciences Humaines. Les modalités sont simples: abonnement mensuel libre résiliable à tout moment. Le premier mois est tarifé à 0,99 €. Les ouvrages en provenance des meilleures maisons d'édition sont consultables en ligne en texte intégral.  L'impression est autorisée et chaque abonné est en mesure de composer ses étagères personnelles et d'y entreposer les ouvrages qu'il aura préalablement enrichi de ses notes, surlignages etc...

Avec cette offre, la bibliothèque s'invite à la maison pour le plus grand bénéfice de tous les membres de la famille.

Cette initiative témoigne si besoin était de la vitalité numérique des éditeurs francophones, de leur volonté de faciliter la rencontre entre contenus riches, variés et internautes qui ont fait du Net un lieu de recherche documentaire et culturelle privilégié et de favoriser avec Cyberlibris l'émergence d'un modèle économique respectueux des intérêts de chacun.

Vox Academia: And the Golden Palm goes to...

Vox Academia has been live for almost six months now. We want to thank all the contributors and readers who have made it a rising success. 29 contributors have registered so far and many of them do post chronicles on a regular basis.

Since the 2007 Cannes Festival is currently taking place, we have decided that we too can attribute "palms" :-)

As a matter of fact, we have decided to grant two sets of palms: a static one and a dynamic one.

The static "palm" ranking is based on the number of visits since the inception of Vox Academia. This ranking is of course only a partial picture as the old chronicles have, other things being equal, more chance to be in the ranking that brand new ones.

That's why we come up with the dynamic "palm" ranking. In a nutshell, this ranking is based on the observed trend of current consultations. It means that if the trend we observe now stays the same, this is the ranking we may reasonably expect in the near future.

So much for comments! Let's turn to the results.
 
VOX Academia / Cyberlibris Hall of Fame:

The SP (static palm) Ranking:

1. The Golden Palm goes to Olivier Germain for his chronicle: "M6: Une Petite Histoire de (la) Stratégie".
2. The Silver Palm goes to Didier Joos de ter Beerst for his chronicle"Réseaux et Guildes au Moyen-Age: Le Renvoi d'Ascenceur"
3. The Bronze Palm goes to Marianne Hauchecorne for her chronicle "La Symbolique des Couleurs Côté Web"

The DP (dynamic palm) Ranking:

1. The Golden Palm goes to Didier Joos de ter Beerst for his chronicle "Réseaux et Guildes au Moyen-Age: Le Renvoi d'Ascenceur"
2. The Silver Palm goes to Aïda N'Diaye for her chronicle "Travailler Moins Pour Gagner Plus?: Qu'est-ce qu'une Méritocratie?"
3. The Bronze Palm goes to Bernard Paranque for his chronicle "Valeur Travail - Valeur du Travail"

Congratulations to all of them! Congratulations to all of you and pass on the good word: Academic conversations are not boring! They are fun and informative.

Do yourself a favor: Become a chronicler on Vox Academia and/or convert friends to become both chroniclers and readers!

Cyberlibris Cognito: La Bibliothèque Numérique des Sciences Humaines et Sociales

Nous sommes heureux d'annoncer la mise en ligne de Cyberlibris Cognito, la bibliothèque numérique des sciences humaines et sociales.

Cyberlibris Cognito est née de la rencontre entre Cyberlibris et le Professeur Vincent Engel, professeur de littérature à l'Université Catholique de Louvain. Vincent Engel, qui avait fondé il ya quelques années e-Montaigne, assure la direction scientifique de Cyberlibris Cognito.

De nombreux éditeurs de sciences humaines et sociales ont confié leurs contenus à Cyberlibris Cognito. Cognito présente l'originalité de combiner dans un même catalogue livres, monographies et revues académiques.

Parmi les revues académiques, on notera Les Lettres Romanes, Cadmos, Médiatiques, Les Cahiers Electroniques de l'Imaginaire, Les Cahiers du SIRL etc...

Les utilisateurs ont par ailleurs accès à un menu de veille (voir photo ci-contre) qui leur assure un suivi et un accès à de nombreuses autres revues de sciences humaines et à des articles de presse consacrés à la littérature et à la culture.

Chaque utilisateur a la possibilité de confectionner son étagère personnelle dans laquelle il peut consigner ses ouvrages favoris.

Nous annoncerons prochainement l'arrivée de nouvelles maisons d'édition et de nouvelles revues.

Restez à l'écoute !

Who said academic conversation was boring!: Vox Academia is live!

We said we would do it. We've done it. Vox Academia is live! Vox Academia is the place for academic chronicles.

It is the place for starting academic conversations and, indeed, from what I've seen already these conversations are far from boring!

So, join Vox Academia and let's have a buoyant worldwide academic conversation!

Books: A Truly Bright Collective Future

Once upon a time there was a writer who was solitary at his desk. All his life had been dedicated to books. From dawn to twilight, his pen was chasing the right word, the definitive sentence. Days were passing by. Each new day was a step towards his Magnus Opus. Was he happy? Nobody knew, not even himself. Were King Arthur and his knights happy? They knew about one thing only: The Holy Grail was what their lives were all about. There was no place for sorrow or happiness. Pain for sure. Our writer believed in what they believed: Lonely perspiration will get you there, to your Magnus Opus. His publisher shared the same faith although, from times to times, he doubted the Magnus Opus would ever see the public light. The Magnus Opus seemed like a never ending story. No publisher, even the shrewdest, knew how not to lose money on a never ending Magnus Opus copyright.

Sometimes the publisher would hear some silly stories about books that were written online, crowdsourced, the product of multiple anonymous pens. How can it be? By what stretch of imagination could books end up as a collective knowledge factory, always at work, where you cannot distinguish between writers and readers. Why would the Magnus Opus be exposed to all eyes, to all brains while it should have been kept as a genuine secret until publishing time?

Are books dead? Should the writer give up his cherished solitary desk and strive for something else?

No, books are not dead. They are different. Why? Because we are different too. The Magnus Opus is not dead either: It will become even "more Magnus" simply because we are more and as a crowd we are able to transform perspiration into inspiration.

No, we won't pretend that each of us is a good as the solitary writer at his desk, only that we can make him or her even better should he or she and his or her publisher accept us in his or her writing cabinet. 

Writing and publishing should not remain solitary exercises. Otherwise they'll become a dry land of failed and lost opportunities, the opportunities many of us were willing to share thanks to the many digital tools our voices can embrace.

Life is not perspiration or inspiration, solitary or collaborative, closed or open, all rights reserved or no rights reserved. It is all of this. And, in all of this, books, writers and publishers have a bright future, the future of our collective collaborative wisdom.