Credit Risk Portfolio. Note Quote.


The recent development in credit markets is characterized by a flood of innovative credit risky structures. State-of-the-art portfolios contain derivative instruments ranging from simple, nearly commoditized contracts such as credit default swap (CDS), to first- generation portfolio derivatives such as first-to-default (FTD) baskets and collateralized debt obligation (CDO) tranches, up to complex structures involving spread options and different asset classes (hybrids). These new structures allow portfolio managers to implement multidimensional investment strategies, which seamlessly conform to their market view. Moreover, the exploding liquidity in credit markets makes tactical (short-term) overlay management very cost efficient. While the outperformance potential of an active portfolio management will put old-school investment strategies (such as buy-and-hold) under enormous pressure, managing a highly complex credit portfolio requires the introduction of new optimization technologies.

New derivatives allow the decoupling of business processes in the risk management industry (in banking, as well as in asset management), since credit treasury units are now able to manage specific parts of credit risk actively and independently. The traditional feedback loop between risk management and sales, which was needed to structure the desired portfolio characteristics only by selective business acquisition, is now outdated. Strategic cross asset management will gain in importance, as a cost-efficient overlay management can now be implemented by combining liquid instruments from the credit universe.

In any case, all these developments force portfolio managers to adopt an integrated approach. All involved risk factors (spread term structures including curve effects, spread correlations, implied default correlations, and implied spread volatilities) have to be captured and integrated into appropriate risk figures. We have a look on constant proportion debt obligations (CPDOs) as a leveraged exposure on credit indices, constant proportion portfolio insurance (CPPI) as a capital guaranteed instrument, CDO tranches to tap the correlation market, and equity futures to include exposure to stock markets in the portfolio.

For an integrated credit portfolio management approach, it is of central importance to aggregate risks over various instruments with different payoff characteristics. In this chapter, we will see that a state-of-the-art credit portfolio contains not only linear risks (CDS and CDS index contracts) but also nonlinear risks (such as FTD baskets, CDO tranches, or credit default swaptions). From a practitioner’s point of view there is a simple solution for this risk aggregation problem, namely delta-gamma management. In such a framework, one approximates the risks of all instruments in a portfolio by its first- and second-order sensitivities and aggregates these sensitivities to the portfolio level. Apparently, for a proper aggregation of risk factors, one has to take the correlation of these risk factors into account. However, for credit risky portfolios, a simplistic sensitivity approach will be inappropriate, as can be seen by the characteristics of credit portfolio risks shows:

  • Credit risky portfolios usually involve a larger number of reference entities. Hence, one has to take a large number of sensitivities into account. However, this is a phenomenon that is already well known from the management of stock portfolios. The solution is to split the risk for each constituent into a systematic risk (e.g., a beta with a portfolio hedging tool) and an alpha component which reflects the idiosyncratic part of the risk.

  • However, in contrast to equities, credit risk is not one dimensional (i.e., one risky security per issuer) but at least two dimensional (i.e., a set of instruments with different maturities). This is reflected in the fact that there is a whole term structure of credit spreads. Moreover, taking also different subordination levels (with different average recovery rates) into account, credit risk becomes a multidimensional object for each reference entity.
  • While most market risks can be satisfactorily approximated by diffusion processes, for credit risk the consideration of events (i.e., jumps) is imperative. The most apparent reason for this is that the dominating element of credit risk is event risk. However, in a market perspective, there are more events than the ultimate default event that have to be captured. Since one of the main drivers of credit spreads is the structure of the underlying balance sheet, a change (or the risk of a change) in this structure usually triggers a large movement in credit spreads. The best-known example for such an event is a leveraged buyout (LBO).
  • For credit market players, correlation is a very special topic, as a central pricing parameter is named implied correlation. However, there are two kinds of correlation parameters that impact a credit portfolio: price correlation and event correlation. While the former simply deals with the dependency between two price (i.e., spread) time series under normal market conditions, the latter aims at describing the dependency between two price time series in case of an event. In its simplest form, event correlation can be seen as default correlation: what is the risk that company B defaults given that company A has defaulted? While it is already very difficult to model this default correlation, for practitioners event correlation is even more complex, since there are other events than just the default event, as already mentioned above. Hence, we can modify the question above: what is the risk that spreads of company B blow out given that spreads of company A have blown out? In addition, the notion of event correlation can also be used to capture the risk in capital structure arbitrage trades (i.e., trading stock versus bonds of one company). In this example, the question might be: what is the risk that the stock price of company A jumps given that its bond spreads have blown out? The complicated task in this respect is that we do not only have to model the joint event probability but also the direction of the jumps. A brief example highlights why this is important. In case of a default event, spreads will blow out accompanied by a significant drop in the stock price. This means that there is a negative correlation between spreads and stock prices. However, in case of an LBO event, spreads will blow out (reflecting the deteriorated credit quality because of the higher leverage), while stock prices rally (because of the fact that the acquirer usually pays a premium to buy a majority of outstanding shares).

These show that a simple sensitivity approach – e.g., calculate and tabulate all deltas and gammas and let a portfolio manager play with – is not appropriate. Further risk aggregation (e.g., beta management) and risk factors that capture the event risk are needed. For the latter, a quick solution is the so-called instantaneous default loss (IDL). The IDL expresses the loss incurred in a credit risk instrument in case of a credit event. For single-name CDS, this is simply the loss given default (LGD). However, for a portfolio derivative such as a mezzanine tranche, this figure does not directly refer to the LGD of the defaulted item, but to the changed subordination of the tranche because of the default. Hence, this figure allows one to aggregate various instruments with respect to credit events.


Conjuncted: Avarice

Greed followed by avarice….We consider the variation in which events occur at a rate equal to the difference in capital of the two traders. That is, an individual is more likely to take capital from a much poorer person rather than from someone of slightly less wealth. For this “avaricious” exchange, the corresponding rate equations are

dck/dt = ck-1j=1k-1(k – 1 – j)cj + ck+1j=k+1(j – k – 1)cj – ckj=1|k – j|cj —– (1)

while the total density obeys,

dN/dt = -c1(1 – N) —– (2)

under the assumption that the total wealth density is set equal to one, ∑kck = 1

These equations can be solved by again applying scaling. For this purpose, it is first expedient to rewrite the rate equation as,

dck/dt = (ck-1 – ck)∑j=1k-1(k – j)cj – ck-1j=1k-1cj + (ck+1 – ck)∑j=k+1(j – k)cj – ck+1j=k+1cj —– (3)

taking the continuum limits

∂c/∂t = ∂c/∂k – N∂/∂k(kc) —— (3)

We now substitute the scaling ansatz,

ck(t) ≅ N2C(x), with x = kN to yield

C(0)[2C + xC′] = (x − 1)C′ + C —– (4)


dN/dt = -C(0)N2 —– (5)

Solving the above equations gives N ≅ [C(0)t]−1 and

C(x) = (1 + μ)(1 + μx)−2−1/μ —– (6)

with μ = C(0) − 1. The scaling approach has thus found a family of solutions which are parameterized by μ, and additional information is needed to determine which of these solutions is appropriate for our system. For this purpose, note that equation (6) exhibits different behaviors depending on the sign of μ. When μ > 0, there is an extended non-universal power-law distribution, while for μ = 0 the solution is the pure exponential, C(x) = e−x. These solutions may be rejected because the wealth distribution cannot extend over an unbounded domain if the initial wealth extends over a finite range.

The accessible solutions therefore correspond to −1 < μ < 0, where the distribution is compact and finite, with C(x) ≡ 0 for x ≥ xf = −μ−1. To determine the true solution, let us re-examine the continuum form of the rate equation, equation (3). From naive power counting, the first two terms are asymptotically dominant and they give a propagating front with kf exactly equal to t. Consequently, the scaled location of the front is given by xf = Nkf. Now the result N ≃ [C(0)t]−1 gives xf = 1/C(0). Comparing this expression with the corresponding value from the scaling approach, xf = [1 − C(0)]−1, selects the value C(0) = 1/2. Remarkably, this scaling solution coincides with the Fermi distribution that found for the case of constant interaction rate. Finally, in terms of the unscaled variables k and t, the wealth distribution is

ck(t) = 4/t2, k < t

= 0, k ≥ 0 —– (7)

This discontinuity is smoothed out by diffusive spreading. Another interesting feature is that if the interaction rate is sufficiently greedy, “gelation” occurs, whereby a finite fraction of the total capital is possessed by a single individual. For interaction rates, or kernels K(j, k) between individuals of capital j and k which do not give rise to gelation, the total density typically varies as a power law in time, while for gelling kernels N(t) goes to zero at some finite time. At the border between these regimes N(t) typically decays exponentially in time. We seek a similar transition in behavior for the capital exchange model by considering the rate equation for the density

dN/dt = -c1k=1k(1, k)ck —– (8)

For the family of kernels with K(1, k) ∼ kν as k → ∞, substitution of the scaling ansatz gives N ̇ ∼ −N3−ν. Thus N(t) exhibits a power-law behavior N ∼ t1/(2−ν) for ν < 2 and an exponential behavior for ν = 2. Thus gelation should arise for ν > 2.

Two Conceptions of Morphogenesis – World as a Dense Evolutionary Plasma of Perpetual Differentiation and Innovation. Thought of the Day 57.0


Sanford Kwinter‘s two conceptions of morhpogenesis, of which, one is appropriate to a world capable of sustaining transcendental ontological categories, while the other is inherent in a world of perfect immanence. According to the classical, hylomorphic model, a necessarily limited number of possibilities (forms or images) are reproduced (mirrored in reality) over a substratum, in a linear time-line. The insufficiency of such a model, however, is evident in its inability to find a place for novelty. Something either is or is not possible. This model cannot account for new possibilities and it fails to confront the inevitable imperfections and degradations evident in all of its realizations. It is indeed the inevitability of corruption and imperfection inherent in classical creation that points to the second mode of morphogenesis. This mode is dependent on an understanding of the world as a ceaseless pullulation and unfolding, a dense evolutionary plasma of perpetual differentiation and innovation. In this world forms are not carried over from some transcendent realm, but instead singularities and events emerge from within a rich plasma through the continual and dynamic interaction of forces. The morphogenetic process at work in such a world is not one whereby an active subject realizes forms from a set of transcendent possibilities, but rather one in which virtualities are actualized through the constant movement inherent in the very forces that compose the world. Virtuality is understood as the free difference or singularity, not yet combined with other differences into a complex ensemble or salient form. It is of course this immanentist description of the world and its attendant mode of morphogenesis that are viable. There is no threshold beneath which classical objects, states, or relations cease to have meaning yet beyond which they are endowed with a full pedigree and privileged status. Indeed, it is the nature of real time to ensure a constant production of innovation and change in all conditions. This is evidenced precisely by the imperfections introduced in an act of realizing a form. The classical mode of morphogenesis, then, has to be understood as a false model which is imposed on what is actually a rich, perpetually transforming universe. But the sort of novelty which the enactment of the classical model produces, a novelty which from its own perspective must be construed as a defect is not a primary concern if the novelty is registered as having emerged from a complex collision of forces. Above all, it is a novelty uncontaminated by procrustean notions of subjectivity and creation.

Nomological Possibility and Necessity


An event E is nomologically possible in history h at time t if the initial segment of that history up to t admits at least one continuation in Ω that lies in E; and E is nomologically necessary in h at t if every continuation of the history’s initial segment up to t lies in E.

More formally, we say that one history, h’, is accessible from another, h, at time t if the initial segments of h and h’ up to time t coincide, i.e., ht = ht‘. We then write h’Rth. The binary relation Rt on possible histories is in fact an equivalence relation (reflexive, symmetric, and transitive). Now, an event E ⊆ Ω is nomologically possible in history h at time t if some history h’ in Ω that is accessible from h at t is contained in E. Similarly, an event E ⊆ Ω is nomologically necessary in history h at time t if every history h’ in Ω that is accessible from h at t is contained in E.

In this way, we can define two modal operators, ♦t and ¤t, to express possibility and necessity at time t. We define each of them as a mapping from events to events. For any event E ⊆ Ω,

t E = {h ∈ Ω : for some h’ ∈ Ω with h’Rth, we have h’ ∈ E},

¤t E = {h ∈ Ω : for all h’ ∈ Ω with h’Rth, we have h’ ∈ E}.

So, ♦t E is the set of all histories in which E is possible at time t, and ¤t E is the set of all histories in which E is necessary at time t. Accordingly, we say that “ ♦t E” holds in history h if h is an element of ♦t E, and “ ¤t E” holds in h if h is an element of ¤t E. As one would expect, the two modal operators are duals of each other: for any event E ⊆ Ω, we have ¤t E = ~ ♦t ~E and ♦E = ~ ¤t ~E.

Although we have here defined nomological possibility and necessity, we can analogously define logical possibility and necessity. To do this, we must simply replace every occurrence of the set Ω of nomologically possible histories in our definitions with the set H of logically possible histories. Second, by defining the operators ♦t and ¤t as functions from events to events, we have adopted a semantic definition of these modal notions. However, we could also define them syntactically, by introducing an explicit modal logic. For each point in time t, the logic corresponding to the operators ♦t and ¤t would then be an instance of a standard S5 modal logic.

The analysis shows how nomological possibility and necessity depend on the dynamics of the system. In particular, as time progresses, the notion of possibility becomes more demanding: fewer events remain possible at each time. And the notion of necessity becomes less demanding: more events become necessary at each time, for instance due to having been “settled” in the past. Formally, for any t and t’ in T with t < t’ and any event E ⊆ Ω,

if ♦t’ E then ♦E,

if ¤t E then ¤t’ E.

Furthermore, in a deterministic system, for every event E and any time t, we have ♦t E = ¤t E. In other words, an event is possible in any history h at time t if and only if it is necessary in h at t. In an indeterministic system, by contrast, necessity and possibility come apart.

Let us say that one history, h’, is accessible from another, h, relative to a set T’ of time points, if the restrictions of h and h’ to T’ coincide, i.e., h’T’ = hT’. We then write h’RT’h. Accessibility at time t is the special case where T’ is the set of points in time up to time t. We can define nomological possibility and necessity relative to T’ as follows. For any event E ⊆ Ω,

T’ E = {h ∈ Ω : for some h’ ∈ Ω with h’RT’h, we have h’ ∈ E},

¤T’ E = {h ∈ Ω : for all h’ ∈ Ω with h’RT’h, we have h’ ∈ E}.

Although these modal notions are much less familiar than the standard ones (possibility and necessity at time t), they are useful for some purposes. In particular, they allow us to express the fact that the states of a system during a particular period of time, T’ ⊆ T, render some events E possible or necessary.

Finally, our definitions of possibility and necessity relative to some general subset T’ of T also allow us to define completely “atemporal” notions of possibility and necessity. If we take T’ to be the empty set, then the accessibility relation RT’ becomes the universal relation, under which every history is related to every other. An event E is possible in this atemporal sense (i.e., ♦E) iff E is a non-empty subset of Ω, and it is necessary in this atemporal sense (i.e., ¤E) if E coincides with all of Ω. These notions might be viewed as possibility and necessity from the perspective of some observer who has no temporal or historical location within the system and looks at it from the outside.

Evental Sites. Thought of the Day 48.0


According to Badiou, the undecidable truth is located beyond the boundaries of authoritative claims of knowledge. At the same time, undecidability indicates that truth has a post-evental character: “the heart of the truth is that the event in which it originates is undecidable” (Being and Event). Badiou explains that, in terms of forcing, undecidability means that the conditions belonging to the generic set force sentences that are not consequences of axioms of set theory. If in the domains of specific languages (of politics, science, art or love) the effects of event are not visible, the content of “Being and Event” is an empty exercise in abstraction.

Badiou distances himself from\ a narrow interpretation of the function played by axioms. He rather regards them as collections of basic convictions that organize situations, the conceptual or ideological framework of a historical situation. An event, named by an intervention, is at the theoretical site indexed by a proposition A, a new apparatus, demonstrative or axiomatic, such that A is henceforth clearly admissible as a proposition of the situation. Accordingly, the undecidability of a truth would consist in transcending the theoretical framework of a historical situation or even breaking with it in the sense that the faithful subject accepts beliefs that are impossible to reconcile with the old mode of thinking.

However, if one consequently identifies the effect of event with the structure of the generic extension, they need to conclude that these historical situations are by no means the effects of event. This is because a crucial property of every generic extension is that axioms of set theory remain valid within it. It is the very core of the method of forcing. Without this assumption, Cohen’s original construction would have no raison d’être because it would not establish the undecidability of the cardinality of infinite power sets. Every generic extension satisfies axioms of set theory. In reference to historical situations, it must be conceded that a procedure of fidelity may modify a situation by forcing undecidable sentences, nonetheless it never overrules its organizing principles.

Another notion which cannot be located within the generic theory of truth without extreme consequences is evental site. An evental site – an element “on the edge of the void” – opens up a situation to the possibility of an event. Ontologically, it is defined as “a multiple such that none of its elements are presented in the situation”. In other words, it is a set such that neither itself nor any of its subsets are elements of the state of the situation. As the double meaning of this word indicates, the state in the context of historical situations takes the shape of the State. A paradigmatic example of a historical evental site is the proletariat – entirely dispossessed, and absent from the political stage.

The existence of an evental site in a situation is a necessary requirement for an event to occur. Badiou is very strict about this point: “we shall posit once and for all that there are no natural events, nor are there neutral events” – and it should be clarified that situations are divided into natural, neutral, and those that contain an evental site. The very matheme of event – its formal definition is of no importance here is based on the evental site. The event raises the evental site to the surface, making it represented on the level of the state of the situation. Moreover, a novelty that has the structure of the generic set but it does not emerge from the void of an evental site, leads to a simulacrum of truth, which is one of the figures of Evil.

However, if one takes the mathematical framework of Badiou’s concept of event seriously, it turns out that there is no place for the evental site there – it is forbidden by the assumption of transitivity of the ground model M. This ingredient plays a fundamental role in forcing, and its removal would ruin the whole construction of the generic extension. As is known, transitivity means that if a set belongs to M, all its elements also belong to M. However, an evental site is a set none of whose elements belongs to M. Therefore, contrary to Badious intentions, there cannot exist evental sites in the ground model. Using Badiou’s terminology, one can say that forcing may only be the theory of the simulacrum of truth.

Conjuncted: Operations of Truth. Thought of the Day 47.1


Conjuncted here.

Let us consider only the power set of the set of all natural numbers, which is the smallest infinite set – the countable infinity. By a model of set theory we understand a set in which  – if we restrict ourselves to its elements only – all axioms of set theory are satisfied. It follows from Gödel’s completeness theorem that as long as set theory is consistent, no statement which is true in some model of set theory can contradict logical consequences of its axioms. If the cardinality of p(N) was such a consequence, there would exist a cardinal number κ such that the sentence the cardinality of p(N) is κ would be true in all the models. However, for every cardinal κ the technique of forcing allows for finding a model M where the cardinality of p(N) is not equal to κ. Thus, for no κ, the sentence the cardinality of p(N) is κ is a consequence of the axioms of set theory, i.e. they do not decide the cardinality of p(N).

The starting point of forcing is a model M of set theory – called the ground model – which is countably infinite and transitive. As a matter of fact, the existence of such a model cannot be proved but it is known that there exists a countable and transitive model for every finite subset of axioms.

A characteristic subtlety can be observed here. From the perspective of an inhabitant of the universe, that is, if all the sets are considered, the model M is only a small part of this universe. It is deficient in almost every respect; for example all of its elements are countable, even though the existence of uncountable sets is a consequence of the axioms of set theory. However, from the point of view of an inhabitant of M, that is, if elements outside of M are disregarded, everything is in order. Some of M because in this model there are no functions establishing a one-to-one correspondence between them and ω0. One could say that M simulates the properties of the whole universe.

The main objective of forcing is to build a new model M[G] based on M, which contains M, and satisfies certain additional properties. The model M[G] is called the generic extension of M. In order to accomplish this goal, a particular set is distinguished in M and its elements are referred to as conditions which will be used to determine basic properties of the generic extension. In case of the forcing that proves the undecidability of the cardinality of p(N), the set of conditions codes finite fragments of a function witnessing the correspondence between p(N) and a fixed cardinal κ.

In the next step, an appropriately chosen set G is added to M as well as other sets that are indispensable in order for M[G] to satisfy the axioms of set theory. This set – called generic – is a subset of the set of conditions that always lays outside of M. The construction of M[G] is exceptional in the sense that its key properties can be described and proved using M only, or just the conditions, thus, without referring to the generic set. This is possible for three reasons. First of all, every element x of M[G] has a name existing already in M (that is, an element in M that codes x in some particular way). Secondly, based on these names, one can design a language called the forcing language or – as Badiou terms it – the subject language that is powerful enough to express every sentence of set theory referring to the generic extension. Finally, it turns out that the validity of sentences of the forcing language in the extension M[G] depends on the set of conditions: the conditions force validity of sentences of the forcing language in a precisely specified sense. As it has already been said, the generic set G consists of some of the conditions, so even though G is outside of M, its elements are in M. Recognizing which of them will end up in G is not possible for an inhabitant of M, however in some cases the following can be proved: provided that the condition p is an element of G, the sentence S is true in the generic extension constructed using this generic set G. We say then that p forces S.

In this way, with an aid of the forcing language, one can prove that every generic set of the Cohen forcing codes an entire function defining a one-to-one correspondence between elements of p(N) and a fixed (uncountable) cardinal number – it turns out that all the conditions force the sentence stating this property of G, so regardless of which conditions end up in the generic set, it is always true in the generic extension. On the other hand, the existence of a generic set in the model M cannot follow from axioms of set theory, otherwise they would decide the cardinality of p(N).

The method of forcing is of fundamental importance for Badious philosophy. The event escapes ontology; it is “that-which-is-not-being-qua-being”, so it has no place in set theory or the forcing construction. However, the post-evental truth that enters, and modifies the situation, is presented by forcing in the form of a generic set leading to an extension of the ground model. In other words, the situation, understood as the ground model M, is transformed by a post-evental truth identified with a generic set G, and becomes the generic model M[G]. Moreover, the knowledge of the situation is interpreted as the language of set theory, serving to discern elements of the situation; and as axioms of set theory, deciding validity of statements about the situation. Knowledge, understood in this way, does not decide the existence of a generic set in the situation nor can it point to its elements. A generic set is always undecidable and indiscernible.

Therefore, from the perspective of knowledge, it is not possible to establish, whether a situation is still the ground-model or it has undergone a generic extension resulting from the occurrence of an event; only the subject can interventionally decide this. And it is only the subject who decides about the belonging of particular elements to the generic set (i.e. the truth). A procedure of truth or procedure of fidelity (Alain Badiou – Being and Event) supported in this way gives rise to the subject language. It consists of sentences of set theory, so in this respect it is a part of knowledge, although the veridicity of the subject language originates from decisions of the faithful subject. Consequently, a procedure of fidelity forces statements about the situation as it is after being extended, and modified by the operation of truth.

Topological Drifts in Deleuze. Note Quote.

Brion Gysin: How do you get in… get into these paintings?

William Burroughs: Usually I get in by a port of entry, as I call it. It is often a face through whose eyes the picture opens into a landscape and I go literally right through that eye into that landscape. Sometimes it is rather like an archway… a number of little details or a special spot of colours makes the port of entry and then the entire picture will suddenly become a three-dimensional frieze in plaster or jade or some other precious material.

The word fornix means “an archway” or “vault” (in Rome, prostitutes could be solicited there). More directly, fornicatio means “done in the archway”; thus a euphemism for prostitution.

Diagrammatic praxis proposes a contractual (push, pull) approach in which the movement between abstract machine, biogram (embodied, inflected diagram), formal diagram (drawing of, drawing off) and artaffect (realized thing) is topologically immanent. It imagines the practice of writing, of this writing, interleaved with the mapping processes with which it folds and unfolds – forming, deforming and reforming both processes. The relations of non-relations that power the diagram, the thought intensities that resonate between fragments, between content ad expression, the seeable and the sayable, the discursive and the non-discursive, mark entry points; portals of entry through which all points of the diagram pass – push, pull, fold, unfold – without the designation of arrival and departure, without the input/output connotations of a black boxed confection. Ports, as focal points of passage, attract lines of resistance or lines of flight through which the diagram may become both an effectuating concrete assemblage (thing) and remain outside the stratified zone of the audiovisual. It’s as if the port itself is a bifurcating point, a figural inflected archway. The port, as a bifurcation point of resistance (contra black box), modulates and changes the unstable, turbulent interplay between pure Matter and pure Function of the abstract machine. These ports are marked out, localized, situated, by the continuous movement of power-relations:

These power-relations … simultaneously local, unstable and diffuse, do not emanate from a central point or unique locus of sovereignty, but at each moment move from one point to another in a field of forces, marking inflections, resistances, twists and turns when one changes direction or retraces one’s steps… (Gilles Deleuze, Sean Hand-Foucault)

An inflection point, marked out by the diagram, is not a symmetrical form but the difference between concavity and convexity, a pure temporality, a “true atom of form, the true object of geography.” (Bernard Cache)


Figure: Left: A bifurcating event presented figurally as an archway, a port of entry through order and chaos. Right: Event/entry with inflexion points, points of suspension, of pure temporality, that gives a form “of an absolute exteriority that is not even the exteriority of any given interiority, but which arise from that most interior place that can be perceived or even conceived […] that of which the perceiving itself is radically temporal or transitory”. The passing through of passage.

Cache’s absolute exteriority is equivalent to Deleuze’s description of the Outside “more distant than any exterior […] ‘twisted’, folded and doubled by an Inside that is deeper than any interior, and alone creates the possibility of the derived relation between the interior and the exterior”. This folded and doubled interior is diagrammed by Deleuze in the folds chapter of Foucault.

Thinking does not depend on a beautiful interiority that reunites the visible ad articulable elements, but is carried under the intrusion of an outside that eats into the interval and forces or dismembers the internal […] when there are only environments and whatever lies betwen them, when words and things are opened up by the environment without ever coinciding, there is a liberation of forces which come from the outside and exist only in a mixed up state of agitation, modification and mutation. In truth they are dice throws, for thinking involves throwing the dice. If the outside, farther away than any external world, is also closer than any internal world, is this not a sign that thought affects itself, by revealing the outside to be its own unthought element?

“It cannot discover the unthought […] without immediately bringing the unthought nearer to itself – or even, perhaps, without pushing it farther away, and in any case without causing man’s own being to undergo a change by the very fact, since it is deployed in the distance between them” (Gilles Deleuze, Sean Hand-Foucault)


Figure: Left: a simulation of Deleuze’s central marking in his diagram of the Foucaultian diagram. This is the line of the Outside as Fold. Right: To best express the relations of diagrammatic praxis between content and expression (theory and practice) the Fold figure needs to be drawn as a double Fold (“twice twice” as Massumi might say) – a folded möbius strip. Here the superinflections between inside/outside and content/expression provide transversal vectors.

A topology or topological becoming-shapeshift retains its connectivity, its interconnectedness to preserve its autonomy as a singularity. All the points of all its matter reshape as difference in itself. A topology does not resemble itself. The möbius strip and the infamous torus-to-coffe cup are examples of 2d and 3d topologies. technically a topological surface is totalized, it can not comprise fragments cut or glued to produce a whole. Its change is continuous. It is not cut-copy-pasted. But the cut and its interval are requisite to an emergent new.

For Deleuze, the essence of meaning, the essence of essence, is best expressed in two infinitives; ‘to cut ” and “to die” […] Definite tenses keeping company in time. In the slash between their future and their past: “to cut” as always timeless and alone (Massumi).

Add the individuating “to shift” to the infinitives that reside in the timeless zone of indetermination of future-past. Given the paradigm of the topological-becoming, how might we address writing in the age of copy-paste and hypertext? The seamless and the stitched? As potential is it diagram? A linguistic multiplicity whose virtual immanence is the metalanguage potentiality between the phonemes that gives rise to all language?


An overview diagram of diagrammatic praxis based on Deleuze’s diagram of the Foucaultian model shown below. The main modification is to the representation of the Fold. In the top figure, the Fold or zone of subjectification becomes a double-folded möbius strip.

Four folds of subjectification:

1. material part of ourselves which is to be surrounded and folded

2. the fold of the relation between forces always according to a particular rule that the relation between forces is bent back in order to become a relation to oneself (rule ; natural, divine, rational, aesthetic, etc)

3. fold of knowledge constitutes the relation of truth to our being and our being to truth which will serve as the formal condition for any kind of knowledge

4. the fold of the outside itself is the ultimate fold: an ‘interiority of expectation’ from which the subject, in different ways, hopes for immortality, eternity, salvation, freedom or death or detachment.



Causation is a form of event generation. To present an explicit definition of causation requires introducing some ontological concepts to formally characterize what is understood by ‘event’.

The concept of individual is the basic primitive concept of any ontological theory. Individuals associate themselves with other individuals to yield new individuals. It follows that they satisfy a calculus, and that they are rigorously characterized only through the laws of such a calculus. These laws are set with the aim of reproducing the way real things associate. Specifically, it is postulated that every individual is an element of a set s in such a way that the structure S = ⟨s, ◦, ◻⟩ is a commutative monoid of idempotents. This is a simple additive semi-group with neutral element.

In the structure S, s is the set of all individuals, the element ◻ ∈ s is a fiction called the null individual, and the binary operation ◦ is the association of individuals. Although S is a mathematical entity, the elements of s are not, with the only exception of ◻, which is a fiction introduced to form a calculus. The association of any element of s with ◻ yields the same element. The following definitions characterize the composition of individuals.

1. x ∈ s is composed ⇔ (∃ y, z) s (x = y ◦ z)
2. x ∈ s is simple ⇔ ∼ (∃ y, z) s (x = y ◦ z)
3. x ⊂ y ⇔ x ◦ y = y (x is part of y ⇔ x ◦ y = y)
4. Comp(x) ≡ {y ∈ s|y ⊂ x} is the composition of x.

Real things are distinguished from abstract individuals because they have a number of properties in addition to their capability of association. These properties can be intrinsic (Pi) or relational (Pr). The intrinsic properties are inherent and they are represented by predicates or unary applications, whereas relational properties depend upon more than a single thing and are represented by n-ary predicates, with n ≥ 1. Examples of intrinsic properties are electric charge and rest mass, whereas velocity of macroscopic bodies and volume are relational properties.

An individual with its properties make up a thing X : X =< x, P(x) >

Here P(x) is the collection of properties of the individual x. A material thing is an individual with concrete properties, i.e. properties that can change in some respect.

The state of a thing X is a set of functions S(X) from a domain of reference M (a set that can be enumerable or nondenumerable) to the set of properties PX. Every function in S(X) represents a property in PX. The set of the physically accessible states of a thing X is the lawful state space of X : SL(X). The state of a thing is represented by a point in SL(X). A change of a thing is an ordered pair of states. Only changing things can be material. Abstract things cannot change since they have only one state (their properties are fixed by definition).

A legal statement is a restriction upon the state functions of a given class of things. A natural law is a property of a class of material things represented by an empirically corroborated legal statement.

The ontological history h(X) of a thing X is a subset of SL(X) defined by h(X) = {⟨t, F(t)⟩|t ∈ M}

where t is an element of some auxiliary set M, and F are the functions that represent the properties of X.

If a thing is affected by other things we can introduce the following definition:

h(Y/X ) : “history of the thing Y in presence of the thing X”.

Let h(X) and h(Y) be the histories of the things X and Y, respectively. Then

h(Y/X) = {⟨t,H(t)⟩|t ∈ M},

where H≠ F is the total state function of Y as affected by the existence of X, and F is the total state function of X in the absence of Y. The history of Y in presence of X is different from the history of Y without X .

We can now introduce the notion of action:

X ▷ Y : “X acts on Y”

X ▷ Y =def h(Y/X) ≠ h(Y)

An event is a change of a thing X, i.e. an ordered pair of states:

(s1, s2) ∈ EL(X) = SL(X) × SL(X)

The space EL(X) is called the event space of X.

Causality is a relation between events, i.e. a relation between changes of states of concrete things. It is not a relation between things. Only the related concept of ‘action’ is a relation between things. Specifically,

C'(x): “an event in a thing x is caused by some unspecified event exxi“.

C'(x) =def (∃ exxi) [exxi ∈ EL(X) ⇔ xi ▷ x.

C(x, y): “an event in a thing x is caused by an event in a thing y”.

C(x, y) =def (∃ exy) [exy ∈ EL(x) ⇔ y ▷ x

In the above definitions, the notation exy indicates in the superscript the thing x to whose event space belongs the event e, whereas the subscript denotes the thing that acted triggering the event. The implicit arguments of both C’ and C are events, not things. Causation is a form of event generation. The crucial point is that a given event in the lawful event space EL(x) is caused by an action of a thing y iff the event happens only conditionally to the action, i.e., it would not be the case of exy without an action of y upon x. Time does not appear in this definition, allowing causal relations in space-time without a global time orientability or even instantaneous and non-local causation. If causation is non-local under some circumstances, e.g. when a quantum system is prepared in a specific state of polarization or spin, quantum entanglement poses no problem to realism and determinism. The quantum theory describes an aspect of a reality that is ontologically determined and with non-local relations. Under any circumstances the postulates of Special Relativity are violated, since no physical system ever crosses the barrier of the speed of light.

Lyotardian Libidinal Energies


For Lyotard, the turn away from philosophy encompassing the libidinal energy to PoMo was primarily based on his concern with the problem of representation, and with the commitment to the ontology of events. In the Libidinal Economy, Lyotard gets quite tied up in trying to resolve the problems associated with structures that harbor libidinal energies, as they tend to become hegemonic. With the investment of such hegemonic status, these structures are vulnerable to deny other libidinal intensities/energies themselves by claiming sole right to themselves as stable structures, and subsequently become nihilistic and limiting. Since, libidinal energies can exist only within structures, Lyotard fails to show a way out for liberating desire, and also does not set up a place beyond representation that would be immune to the effects of nihilism, but instead, comes up with a metaphysical system, in which both the structures and intensities are essential components for functioning libidinal economy. Nihilism of structures could only be checked by an adherence to notions of dissimulation, by considering the very libidinal energy as the event dormant with under-exploited, potentiality waiting for its release to other structures.

Human Rights, (Badiou + Rancière)

“Human Rights are axioms. They can co-exist on the market with many other axioms, notably those concerning security or property, which are unaware of or suspend them even more than they contradict them: “the impure mixture or the impure side by side,” said Nietzsche. Who but the police and armed forces that co-exist with democracies can control and manage poverty and the deterritorialization-reterritorialization of shanty towns? What social democracy has not given the order to fire when the poor come out of their territory or ghetto? Rights save neither men nor a philosophy that is reterritorialized on the democratic State. Human rights will not make us bless capitalism. A great deal of innocence or cunning is needed by a philosophy of communication that claims to restore the society of “consensus” to moralize nations, States, and the market. Humans rights say nothing about the immanent modes of existence of people provided with rights.” 

— Deleuze and Guattari (1996, 107)

The quote from Deleuze and Guattari’s ‘What is Philosophy?’ nicely sums up the abstraction, pure, empty abstraction that Deleuze calls the party line for odious intellectuals. Deleuze does not pay much heed to the notion of human rights, but, instead broods over life rights.

My intention is not to delve into the Deleuzean version of Human/Life Rights, but to look at the conception of human rights from the point of view of two French philosophers who have made an impact in the English speaking world. The thinkers in question here are  Badiou and Rancière who with their delivery of political agencies are not only complexly similar on many grounds, but provide many insights into the differences between one another. Their writings  delve into human rights as a base for their versions of political agencies.

The time was February, 2008, when a group of the so called new philosophers signed a petition in Le Monde calling the practices of the United Nations as diametrically opposed to the ideals of human rights. It was further commented that there was a cause of concern with the institution becoming a caricature. Although we are ensconced in a multicultural world, the level of tolerance could be said to be reaching a nadir of sorts as was substantially proved in the petition detailing religious criticism as a form of racism, thus highlighting the tide against the basic ideas of Human Rights. The petition then called for the return to the Universal Ideals on Human Rights.

It would be far fetched, but still appropriate to call the new philosophers as sandwiched between viewing the ideals of 1948 as problematic with their emphasis on a return to ideals. That the new philosophers are sandwiched between the two poles is attributable to one pole being that of Arendt and Agamben with their insistence on Human Rights as infringing of the political into the private sphere and the other of Badiou and Rancière calling for a political agency critiquing both the view points. Arendt dismisses the idea of Human rights by calling it necessity based as action by the nation state to impose its control over the huge mass of refugees created in the aftermath of the second world war, when the refugees that had been rendered stateless had nothing left but their humanity. This way, for Arendt, the nation state gets to determining who gets the rights and who doesn’t or who is part of humanity and who is not, thus quashing the ideals meant to protecting rights. Despite the good intentions behind the formulation of the Universal Ideals, it is nothing but an apparatus through which, the state exercises its total power over the stateless by making the latter submissive to it and other allied organs of power. This indeed proves the thesis that an interventionist approach is taken up by the nation state into the private sphere.

Arendt’s thesis is pressed upon by Agamben, when he calls the peril of our present time as lying alongside an intercourse of the political power into the bare public life as omnipresent. Agamben links the notional intercourse as no different from what the refugees had to face in concentration camps. For him, the human rights act in a totalizing manner as now the most basic human existence is intricately surrendered to power structures thus making existence politicized. To quote Agamben,

“…until a completely new politics – that is, a politics no longer founded on the exception of bare life – is at hand, every theory and every praxis will remain imprisoned and immobile, and the “beautiful day” of life will be given citizenship only either through blood and death or in the perfect senselessness to which the society of the spectacle condemns it.”

Ernst Hemel reads the following quote in a dual way, viz. the seizure of private bare life by the structures of power and the deprivations of the individual in engaging with true emancipatory politics. The institutionalization of human rights is therefore seen as a part of the imprisoned and immobile life that somehow fails in its approach to reach the blunt political situation we are all faced up with. This reaches its aporetic limit in a way to invent a new political situation after criticizing the entire idea underlining human rights. So for both Arendt and Agamben, the codification of the Universal Declaration of Human Rights is fraught with a critique that runs counter to new philosopher’s insistence on attaining the ideal.

Badiou and Rancière both show their aversion to these readings and in their own ways of constructing the political agency exhibit displeasure in treating human rights as an ideal on the one hand and refusing to believe in the all encompassing political dominion on the other. Rancière brilliantly unearths the tautology in Arendt’s version of human rights by noting that the rights of man are the rights of the unpoliticized person, or they are the rights of those who have no rights, thus amounting to nothing and rights of man are the rights of the citizen, that is, they are being attached to the fact of being a citizen, thus connoting rights of man as rights of citizens. This in conflation amounts to a tautology. In effect, there is abandonment of human rights in Arendt according to Rancière since it is based on state power who has the discretion of providing rights to those who are excluded. This argument is taken forward to deal with Agamben, wherein it is noted that any kind of emancipatory political action is in retreat. Rancière quotes from his ‘The Politics of Aesthetics’,

“There was at least one point where ‘bare life’ proved to be ‘political’: there were women sentenced to death as enemies of the revolution. If they could lose their ‘bare life’ out of the public judgment based on political reasons, this meant that even their bare life – their life doomed to death – was political. If, under the guillotine, they were as equal, so to speak, as men, they had the right to the whole of equality, including equal participation to political life.”

It is only in these situations that the totality is fissured in that there is a sense of inclusion but not belonging that is governed by exclusion that is only brought to light through acts of dissensions. This Rancièrean point is closely linked up with what Badiou has been maintaining with his ‘Event’. ‘Event’ is the coming into being of what was never thought of (accidental) in the conceptual structuring of the present scenario. To explicate on the coming into existence of the ‘Event’, one needs to change the conceptuality and his idea behind this is borrowed from Cantorian set theory of placing the element inside the set, but at the same time not belonging to the set. This is philosophically pertinent to the distinction between the political inclusion but non-belonging, in that, inclusion shares the possibilities in the world, whereas belonging-ness presents a systemic snapshot congruent with the given world view. In the moment of the ‘Event’, a person is faced with an ethical choice, by either denying what happened as new and trying to fit it in the existing template or by accepting it and building upon new consequences. To draw on these consequences is brought about by the act of naming. For Badiou, the notion of human rights is incapable of accommodating truth and is an attempt on the part of the dominant structure to be be able to account for all elements of the set. As he writes,

“The refrain of “human rights” is nothing other than the ideology of modern liberal capitalism: We won’t massacre you, we won’t torture you in caves, so keep quiet and worship the golden calf. As for those, who don’t want to worship it, or who don’t believe in our superiority, there’s always the American army and its European minions to make them be quiet.”

For Badiou, the only universality is that which resists structuring and becomes tangible in the notion of an ‘Event’. If Universality be equated with Truth, then according to his thesis in Manifesto of Philosophy, ‘Truth makes a hole in knowledge‘ and therefore it could now be inferred why for Badiou human rights as a kind of universality in equality, in freedom is anything but a form of dominant western ideology. To quote him again,

“The latest violence, the presumptuous arrogance inherent in the currently prevalent conception of human rights derives from the fact that these are actually the rights of the finitude […]. By way of contrast, the eventual conception of universal singularities requires that human rights be thought of as the rights of the infinite.”

So for Badiou, codification of the situations along the prefixed lines of universality results in redundancy alone and little wonder why he admonishes the case for human rights to be thought of as that which is included but not belonging. He takes a similar viewpoint towards justice by claiming the irrelevance of justice in the creation of anything new and thereby is more concerned with the conditions of possibilities of new politics rather than improving the sphere of juridicalness. In a way, what Badiou is looking for is very similar to what Rancière aims at and that being looking at human rights as an affirmative action. For both the thinkers, it is the exclusive situation where the insight into the human rights is to be taken up, to be formulated in a reconstructive manner. The exclusive situation is normed as disruption by the thinkers and this disruption is then the affirmation for the coming into being of affirmative changes in the socio-political aspect. Since, this aspect of coming into existence is missing in the universal declaration, it becomes non-political in its conception as far as gauging the totality of the situation is concerned. Rancière sees this as the inability of the logic that dictates who is part of the situation, who has the right to voice claims and who forms the basis of political agency. For Badiou, it is the false totality altogether as it is impossible to envisage anything new or radical getting to the surface concretely. Since, there is absence of anything radically new, it is doomed to repeat the dominant power based ideology.

Although there are similarities in the ways the thinkers look at human rights, there are some differences that are stark in nature. For Rancière, it is the un-belongingness that counts cardinally despite the fact of the subject being inclusive in the system under consideration, whereas for Badiou, it is the subject getting called onto witnessing the ‘Event’ and thereby faced up with the radical choice that is ethical in nature. Badiou’s invoking of mathematics to first name the ‘Event’ and thereafter follow it up to rewrite the radicality of the situation differs from reinterpreting human rights as suggested by Rancière. Most importantly, Rancière uses disruption as a singular revelation in that he is constrained in the expansionary vision/force of the dissensus. Badiou on the other hand emphasizes on the extensibility of the ‘Event’. Rancière works within the existing system and is not concerned much with restructuring and vacillates between dissensus and consensus thereby giving it a more democratic feel of basing itself on negotiation, where Badiou aims at a revolutionary agency that he calls militant in nature.

The only universal human right that Badiou and Rancière envision is the right to intervene in the name of infinite universality, and they remain far from any institutionalization of universal human rights. Instead their theories  are geared towards a critical evaluation of the underlying presuppositions  of doing politics, and providing rights. This critical evaluation is done in  preparation of ‘truthful’ politics,   which entails for both Rancière and  Badiou a radical break with notions of politics that are defined in terms  such as citizenship, freedom of speech or a return to ideal enlightenment values. Politics aim at a constant possibility.

Agamben, G. (1998) Homo Sacer: Sovereign Power and Bare Life. Stanford: Stanford University Press.

Arendt, H. (1973) The Origins of Totalitarianism. New York: Harcourt Brace Jovanovich Inc.

Badiou, A. (2004) ‘Huit Thèses sur l’Universel’.

    – (2001/2002) ‘On Evil : An Interview with Alain Badiou’. Cabinet Magizine Online, 5,

Deleuze, G and Guattari, F (1996) ‘What is Philosophy?’. New York: Columbia University Press.

Hemel, Ernst van den. (2008) Krisis:  Journal for Contemporary Philosophy.

Rancière, J. (2004) The Politics of Aesthetics. New York: Continuum.