Mark-to-Market

[This is an automatic translation of the original post in Spanish and has not been edited yet.]

On the morning of September 15, 2008, I went out early for a walk down Calle de Génova in Madrid. I had arrived the week before to give a talk on Orthogonal Polynomials at a Carlos III conference, and I had decided to stay a few more days to enjoy the city. The sky was bright, without any clouds, and the weather was warm and pleasant. It was Monday, and the city was abuzz with that typical early-week activity. With me I carried a notebook full of equations I was working on in those days, and also a fantastic book that I had started to read on that trip: Failure is not an Option, the memoirs of the great Gene Kranz, NASA flight director during the Apollo mission.

After walking for half an hour, I decided to stop at the Gran Cafetería Santander, which is there at the exit of the Alonso Martínez station. I sat at one of the tables facing the Plaza de Santa Bárbara and ordered a black coffee and some churros. While waiting for my breakfast I decided to look at a newspaper that someone had left on one of the seats next to me. It was El País, which with gigantic letters announced the headline:

CRISIS ON WALL STREET. LEHMAN BROTHERS DECLARES IN BANKRUPTCY.

I had never heard of that signature, and although I tried to understand what was happening, the news seemed cryptic, distant, even irrelevant. Why did they give so much importance to that event? He knew that stocks went up and down, and that there were people who made a lot of money, and others who lost everything. But I had never really been interested in markets, especially when I had such interesting mathematical problems in my head to work on. Bored, I folded the newspaper and put it back where it was. I went back to my breakfast, my notebook, and my book. Life went on.

So there I was, so cool and naive, as the biggest financial telluric event in the last eighty years shook the markets with ruthless force. At that moment I was happy thinking about other things, sure that whatever was happening was never going to touch me, and even more, that it would never be something that was on the radar of my interests.

But of course, everything changed. The Lehman bankruptcy was that moment of catharsis that opened the doors for the world as we knew it to change. How could we have imagined that morning that the amplifications of that event would reach all corners of the planet, even right there, in that sunny and pleasant Madrid?

For my part, the turns of life led me to work precisely in the bowels of the financial system, and now not a day goes by without me not reading about the stock market, or monitoring the levels of certain indices, or not working on how to do more rapid valuation of certain derivatives. And I think back to that morning in September, and it seems to me such a distant life, so far away. So simple.

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