Manipulation of Balance Sheets may have its advantages if uncovered. Credit Rating Agencies use Balance Sheets to come up with their ratings (‘come up’ and not compute as ratings, according to CRAs are opinions) which means that cooked books can get you a better rating. Public companies manipulate their Balance Sheets to look good on … More Uncovering Balance Sheet Manipulation
The search for early warning signs is one of the key issues for decision makers, managers and investors. The advantages of knowing in advance the evolution towards critical situations are obvious. Complexity is a new and powerful indicator that quantifies the degree of sophistication and governability of a business and which impacts its Resistance to … More Complexity-based Identification of Defaulting Companies
The two most important events of this year are the Brexit and the election of the President of the US. In the case of the Brexit, predictions were indicating a clear ‘yes’ while the result was a ‘no’. In the case of US elections, Clinton was going to win. Not only she lost, Trump won … More Trump, Brexit and the Failure of Predictive Analytics
The Brexit is now reality, the situation in Greece is still critical. The ECB cannot get inflation on track. The flawed ‘design’ of the EU and its currency is widely recognized. However, we ought to consider a few things: • The EU is a super-huge system, no matter how you look at it (size, population, … More A Systemic Look at the Eurozone
The two opposed versions of the economy may be epitomized (albeit simplistically) by the visions of Keynes and Friedman. The state and regulations versus a deregulated and shock-therapy philosophy. According to the Wikipedia: “Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the public … More Keynes vs Friedman – What is the Mix Today?
Knowledge is an organized and dynamic set of interdependent rules. An example of a rule: “if UNEMPLOYMENT increases then NEW HOUSE CONSTRUCTION decreases”. This is an example of a fuzzy rule – no numbers just a global trend. Rules can be more or less fuzzy (or crisp) depending on how many experiments (data samples) they … More What is Critical Complexity?
From Wikipedia: “A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. The credit rating represents an evaluation of a credit rating agency of … More Confronting Science With Opinions: RtS Versus PoD.
A less complex business is, generally speaking: easier to understand and govern more efficient more profitable more predictable easier to fix less fragile (vulnerable) – has less margins of maneuver more difficult to grow and expand This not only sounds like common sense but has also been proven in a scientific manner over the past … More Why is Less Complex Better?
Situation on 30-th september, 2016 Resistance to shocks, or the so-called RtS rating, measures the ability to withstand the turbulence of markets, corporations, or systems thereof. The table below reports the RtS ratings of a series of markets, as well as market segments, such as pharma, automotive, O&G, etc. It is interesting to note that … More Global Finance and Markets – Where are the Vulnerabilities
Funds are composed of ensembles of securities. A schematic of a Complexity Map of a system of funds is indicated below. The map reveals that, for example, fund 10 is the hub of the system and of the 8 securities composing it, number 6 and 8 have the biggest footprint in terms of its … More Analysis of Funds – A Systemic Approach