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Quantification of model risk

Risk management and treasury specialists are using diverse models on a daily basis to manage various risks. It is easy to forget about the risk that is implied in using the model itself. What we refer to as ‘model risk’ can arise due to misuse of the model, incorrect model choices or inappropriate model use.

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Time for collective risk mitigation

In April 2018, The Economist wrote about the sharp increase of methane in the atmosphere during the past 10 years. This increase is worrying because, like carbon dioxide, methane retains heat and contributes to the heating of the earth. Scientists don’t agree on the cause of the increase either.

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Zanders Model Risk Framework

As automation and digitalization are adopted more widely in the financial industry, the number of financial models used is also steadily growing. As a result, an institution’s success or failure depends increasingly on the accuracy and reliability of those models.

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The risks of creating the wrong impression

In the film Margin Call, a recently dismissed banker, Eric Dale, talks about one of his accomplishments as an engineer before he went into banking. He explains that he’d helped to build a bridge from Dills Bottom in Ohio to Moundsville in West Virginia, the bottom line of which was that, collectively, motorists would have to drive 487,872,000 kilometers less every year.

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The balance between trust and control

Back in 2010, the American Economic Review published the article Growth in a time of debt, which was penned by Carmen Reinhart and Kenneth Rogoff (Reinhart and Rogoff).

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