This paper establishes the case for a fallacy of economies of scale in large aggregate institutions and the effects of scale risks. The problem of rogue trading and excessive risk taking is taken as a case example. Assuming (conservatively) that a firm exposure and losses are limited to its...

Sample measures of top centile contributions to the total (concentration) are downward biased, unstable estimators, extremely sensitive to both sample and population size and concave in accounting for large deviations. It makes them particularly unfit in domains with power law tails, especially...