Any Regulation of Risk Increases Risk

Financial Markets and Portfolio Management, Forthcoming

25 Pages Posted: 11 Apr 2010 Last revised: 22 Apr 2012

See all articles by Philip Maymin

Philip Maymin

Fairfield University - Charles F. Dolan School of Business; Athletes Unlimited

Zakhar Maymin


Date Written: April 20, 2012


We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks taken on by the regulated financial entities are far more systemically concentrated than they would have been otherwise, making the entire financial system more fragile. This result leaves three directions for the future of financial regulation: continue regulating by enforcing risk measurement algorithms at the cost of occasional severe crises, regulate more severely and subjectively by fully nationalizing all financial entities, or abolish all central banking regulations including deposit insurance to let risk be determined by the entities themselves and, ultimately, by their depositors through voluntary market transactions rather than by the taxpayers through enforced government participation.

Keywords: regulation, crisis, portfolio management, value-at-risk, risk

JEL Classification: G18, G21, G28, G38

Suggested Citation

Maymin, Philip and Maymin, Zakhar, Any Regulation of Risk Increases Risk (April 20, 2012). Financial Markets and Portfolio Management, Forthcoming, Available at SSRN: or

Philip Maymin (Contact Author)

Fairfield University - Charles F. Dolan School of Business ( email )

N. Benson Road
Fairfield, CT 06824
United States

Athletes Unlimited ( email )

888 7th Avenue
New York, NY 10106
United States

Zakhar Maymin

Independent ( email )

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