Silicon Valley Bank could easily have avoided its mark-to-market write-down and bankruptcy.  Its managers, their outside consultants, and the steward of the banking system – the Federal Reserve Bank – should all have been required to read, understand, confirm and apply the constraints immanent in Burton Malkiel’s five theorems, especially Theorem 2, in his 1962 essay:

Malkiel, Burton, Expectations, Bond Prices, and the Term Structure of Interest Rates, Quarterly Journal of Economics Vol. LXXVI (May 1962) pp. 197-218 (Cambridge, Mass.: Harvard University Press) [Malkiel, 1962]: Continue reading →