Intraday Re-Pricing of Risk in Practice

I read the quote on Yahoo Finance: “Only weeks ago, the conflict in Georgia would likely have sent oil prices soaring. But the market has largely ignored the fighting because traders have already priced in the geopolitical risk, analysts say”. People have been throwing around similar terms like “repricing of risk” too. I suspect that this will likely manifest itself in some increase in vols and discount rates for derivatives and their underlying securities. So when new info comes in intraday are traders and analysts just guesstimating the increase/decrease in vols and rates and plugging them into valuation models on the fly or what? I can’t imagine people have much time to do a thorough analysis of every bit of new info incorporating all the financial theory when making intraday valuation decisions. I could see people easily missing the big moves that could make or break their positions.

Yeah right. It’s like all those traders were sitting there saying, “yeah, we knew the Russians were about to enter Georgia, so our prices incorporated that.” I’ve talked to numbers of traders. Save for the global macro guys, a lot of them would be hard pressed to point to Georgia on a map." (No, not the one next to Florida). To be fair though, the energy traders know where Georgia is. They might even know that that’s where Stalin was from.

Traders don’t know anything about geopolitical risk. That’s nuts. Energy traders don’t know where Georgia is either.

So that statement is more than likely bullsh!t, right?

Yes that statement means “I don’t know why the heck no one seems to be worried about what the Russians are doing. By the way, we’ve just set up a missile treaty with Poland and now the Russians say that this thing means Poland is now an acceptable nuclear target. And you know, we really need to protect those Russians that are being mistreated in the Baltics. But heck, we’re in the middle of a bear market rally and we don’t want to rain on anyone’s parade, so instead of saying that we’re ignoring the sitchuashun, we’re just going to say that we had all this crap built into the price.” Let’s all take a big deep breath and say “Sudetenland”.

Indeed, this might be a geopolitical turning point. Europe should be congratulated on moving quickly on the integration of East Europe. The last piece worth taking away from Russia is Ukraine - but that might now be difficult with Russia making waves. The age of opportunity lasted twenty years and, thankfully, Europe took advantage of it.

Isn’t the Ukraine radioactive? I say we let the Russians keep it.

The Russians poisoned the pro-EU presidential candidate with dioxins then rigged the subsequent election. But the people came out on the streets and ended up toppling the stooge. I say that’s a pretty good effort and we should try to look after them. Plus the prime minister is a MILF.

chrismaths Wrote: ------------------------------------------------------- > Plus the prime minister is a MILF. > Wow!

Yeah well I’ve never heard of a MILFADP (MILF after dioxin poisoning) so better get to it

She wasn’t poisoned. Even the Russkies appreciate a pretty face. That was the current President Viktor Yushchenko - before and after here: