Misadventures in Risk Management

| While A.I.G. continues to dominate the news, it’s worth reading this 2002 Economist article, which cast doubt on the insurance giant’s early forays into the derivatives market. Back then, A.I.G. argued that “derivatives play an important part in reducing the company’s overall risk.” By 2009, those same investments had left the company so badly damaged that it posed a risk to the entire financial system. Talk about unintended consequences. [%comments]