Entering the Fall 2026 | Living on the Edge (of Volatility)

What This Video Is About

The video features a fireside chat between Mike and David, where David shares his background and career experiences, including his time at Banker's Trust and the derivatives group. He discusses the true nature of risk and volatility, highlighting the limitations of the Sharp ratio in measuring risk.

Major Ideas Discussed

• The Sharp ratio has limitations in measuring risk, as it focuses on averages rather than the path through time.
• Convexity and asymmetric returns are crucial for managing risk and increasing potential returns, allowing for more aggressive risk-taking.
• The regulatory framework can incentivize the wrong behavior, such as suppressing volatility, which can lead to increased leverage and risk in the system.
• Geopolitical uncertainty is increasingly impacting investment decisions, with countries competing for debt issuance, resources, and technological advancement, described as the "Hunger Games".
• The concept of convexity is illustrated through an analogy of a race car, where having good brakes enables driving faster.
• The financial industry benefits from selling structured products and derivatives, often to regulated entities like insurance companies and pension funds.

What to Watch Next

The speaker believes it is essential to monitor geopolitical uncertainty, the supply of volatility, and the demand for yield, as well as the regulatory framework and its impact on the financial system. David's motto, "Participate and Protect," emphasizes the need to participate in asset inflation while protecting against unforeseen events.