The thoughtful forecaster case
1. Given the importance of forecasting in finance and business generally, what is the “base
case” forecast? How is this forecast augmented in practice?
2. The note talks about twin cognitive biases that afflict the decision-makers in the financial
industry. Do you think you are afflicted by these biases? If so, how might you cope with
it to keep your decisions optimal?
3. What is Behavioral Finance? Based on your research, what have been some notable
results to date that might/or have affected business practice and policy.
4. Recently, prior to and since the financial crises of 2007-2009, there is talk of Black
Swans and tail-risk. What is meant by these phrases? How has these concerns impacted
the functioning of the banking industry in the context of Basel III regulations?