FDR Framework

For new readers of this blog, your humble blogger would like to suggest the following posts as they provide the intellectual foundation to the the FDR Framework. 

The FDR Framework recognizes that our capital markets reflect a philosophy of disclosure combined with the principle of caveat emptor [buyer beware].  For the capital markets to function properly, each must be present:
  • Governments are responsible for insuring that investors have access to all the useful, relevant information in an appropriate, timely manner and not endorsing a specific investment.
  • Investors are responsible for doing their own homework prior to investing and so long as they hold the investment.  This is known as trust, but verify.
With the ability to do their own homework, investors accept their losses knowing that investing is not risk-free and do not look to be bailed-out of their losses.

Finally, there is The Brown Paper Bag Challenge.  This challenge uses a physical model to show why disclosure of asset-level data on an observable event basis is needed for both structured finance securities and financial institutions.