Model risk and the implications for risk management, macroprudential policy, and financial regulations

Danielsson, Jon ORCID: 0009-0006-9844-7960, James, Kevin R., Valenzuela, Marcela and Zer, Ilknur (2014) Model risk and the implications for risk management, macroprudential policy, and financial regulations. VoxEU.

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Abstract

Risk forecasting is central to financial regulations, risk management, and macroprudential policy. This column raises concerns about the reliance on risk forecasting, since risk forecast models have high levels of model risk – especially when the models are needed the most, during crises. Policymakers should be wary of relying solely on such models. Formal model-risk analysis should be a part of the regulatory design process.

Item Type:	Article
Official URL:	http://www.voxeu.org/
Additional Information:	© 2015 The Authors
Divisions:	Finance Financial Markets Group Systemic Risk Centre
Subjects:	H Social Sciences > HA Statistics H Social Sciences > HG Finance
Date Deposited:	22 May 2015 11:25
Last Modified:	01 Oct 2024 03:04
URI:	http://eprints.lse.ac.uk/id/eprint/62065

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