These slides are prepared for a brainstorming session on application of strategic analysis to evaluating systematic risks such as those evident in the financial crisis of 2008.

1. Surplus Capital Demand for Capital Quest for Liquidity Desire to Hedge Asian Savings Western Real Estate Collateralized Debt Obligations Credit Default Swaps Counter-Party Risk Loose Standards Reliance on Models

3. Value at Risk (VAR) models fall apart at tail risk. Negatively correlated assets move into correlation.

4. If the Dow Jones Industrial Average followed a normal distribution, it should have moved by more than 3.4% on 58 days between 1916 and 2003; in fact it did so 1,001 times. It should have moved by more than 4.5% on six days; it did so on 366. It should have moved by more than 7% only once in every 300,000 years; in the 20th century it did so 48 times. Benoit Mandelbrot findings referenced in The Economist , January 22, 2009 Dow is between 1,726% and 144,000% more volatile than normally distributed models would predict.