Each time I check out visuals on anything to do with ‘Financial Markets’ I see the same old boring images of a flow diagrams, line graphs, people shouting in the pit (yeah, very current) or something to that effect (check out ‘Financial Markets’ in Google and look at Google Images). Banking-Finance guys are apparently quite visually boring. Or perhaps the industry just does not foster individual creativity.
I’ve come to break those perceptions and ‘bring sexy back’ like Timberlake with these new Illustrator illustrations:
Anarchy in Financial Markets
This theme combines the chaotic movement of the markets with the punk-angst of the Sex Pistols (a suitable tandem if you ask me). The message is clear: We all have to just get used to the new normal; it’s here to stay.
What is the real danger in financial models? Well they’re only as good (or as flawed) as the inputs and assumptions in them.
Investopedia explains Mark-to-Model versus Mark-to-Market quite nicely:
The pricing of a specific investment position or portfolio based on internal assumptions or financial models. This contrasts with traditional mark-to-market valuations, in which market prices are used to calculate values as well as the losses or gains on positions. Assets that must be marked-to-model either don’t have a regular market that provides accurate pricing, or valuations rely on a complex set of reference variables and time frames. This creates a situation in which guesswork and assumptions must be used to assign value to an asset.
– Investopedia (Mark-to-Model)
A good way to explain Credit Derivatives is by example, for which I will once again divert to Investopedia:
For example, a bank concerned that one of its customers may not be able to repay a loan can protect itself against loss by transferring the credit risk to another party while keeping the loan on its books.
– Investopedia (Credit Derivatives)
Sweet. With that explanation, Credit Derivatives are nothing more than insurance. These products have been blamed for the financial crises in 2008, specifically for the collapse of Bear Stearns. I therefore felt that it was fitting to use a Bermuda Triangle-like effect to portray these products where the world collapses into the abyss.
[of course I’ll reserve my own personal views on these products for another day. This is of course nothing more than exercise in creativity].
People are quite passionate about their Accounting Rules and I find that an accountant is either a GAAP-man or an IFRS-man. Some might call out the differences, advantages and disadvantages between the two but at the end of the day, they’re either for one or the other. What a better way to call that out then a badge-style design, which if you use your imagination might read ‘Vote #1 <GAAP, IFRS>‘.
You can read more about the debate in this excellent PDF.
This one is rather playful and presents positive alpha being in front of the eight ball (to be behind the eight ball is to be in a ‘bad situation’ if ever you play pool).
As for the financial terms itself, our good site Investopedia has got us covered once again:
A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.
– Investopedia (Alpha)
That’s alpha. Now let’s check out positive alpha:
A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%.
– Investopedia (Alpha)
Options Payoff confounded me when I first came across them. Then as I began to draw them out, I saw the payoff pattern that take shape which stuck in my head (above).
The ball is in reference to the use of options as an insurance mechanism. Of course I appreciate its other use as a profit maximising product but that’s another story.
You can read more about options payoff here.
That’s a wrap
These illustrations are a break from the random efforts I used to put up. I quite enjoyed the process of picking a financial concept up and playing around with ideas in my own little creative space. I will continue this piece at some future point with a view to actually explaining some concepts visually.
I have also uploaded my designs on Behance.
‘Trust in god, but always lock your car‘