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Happy-Hour Trading

Published in Automated Trader Magazine Issue 18 Q3 2010

“Another double whisky, two packets of crisps, and seven million barrels of oil, please.”

And do have a barrel for yourself. Automated Trader’s Editor, William Essex, rounds off our section on risk with a quick look at a no-tech, uncomplicated, very, very simple question that nobody has ever been able to solve.

After the liquidity crisis, we all heard a lot about liquidity-risk management. Many experts on post-crash stable-door closure popped up to tell us what we should have done already, and how much they'd charge to help us do it now that it was too late. But then we had the volcano, and for the first time in the history of hindsight risk management, the experts - the eruption-risk strategists with, er, their fire extinguishers - failed to show. Maybe we'd learned that some risks can't be managed. Then, a young trader with an enthusiasm for oil took his laptop with him on a drinking spree. What measures should we have taken already, to stop him getting out of the building, and what, if anything, can we learn that might be useful for the future? Or should we just live with the fact that sometimes, for some traders, just buying a round of drinks isn't going to be enough?

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