One of my classmates gave a presentation this week on the financial crisis from the perspective of a former hedge fund associate. As part of the presentation, he discussed the meaning of “hedge” as it relates to hedge funds. He also mentioned that he believed our current financial troubles to be temporary, and getting his MBA was essentially betting his career on a recovery.
Sometime during the question-and-answer portion at the end of the talk, Sergei raised his hand, and delivered this high-level pun:
First question is attempt at humor: You mention you are betting career on economic recovery. Have you hedged against position?
Little did we know, Sergei was just getting started. Later that day, we were discussing a simple case written from the perspective of an auto racing crew. A bit of number-crunching led us to conclude that we had a 29% chance of engine failure during the race, and we then had to decide whether or not to participate given the possible consequences. Sergei’s attitude was:
If we were in business of making baby diapers, then maybe 29% is big risk.
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