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Thursday, October 14, 2004

A Lesson
A conversation from the Financial Investment Strategies class:

prof: All we'll study about is pricing a commodity for a given risk. Risk; that's the key term. Why do we have financial risk?

bright student: Err! Well, the market doesn't exactly behave the way it is supposed ...

prof: I see where you are going - I am searching for something more basic.

bright student no.2: Well, shares are often overpriced and we have the risk of ...

prof: Once again, I am searching for something more basic and general. What is the cause of financial risk?

(Now there is a collage of answers that start pouring from all corners of the class - bankruptcy, dot com, fraud, high production cost, bad management)

prof: You guys are all right but I was searching for something more basic - we have financial risk for one simple reason - because shit happens!

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