The UBS-Adoboli Scandal Shows the Problem of Negatively-Skewed Risk is Still With Us

In my banking courses, I point to negatively skewed trading strategies as a key cause of the crash of 2008. The recent loss of more than $2 billion attributed to rogue trades by Kweku Adoboli at Swiss banking giant UBS shows that the problem of negatively skewed risk is still with us. It is an old story, but with a new twist.

The problem of negatively skewed risk arises from the way incentives change when you gamble with someone else's money. >>>Read more