« PRMIA Singapore 2010 Kickoff Event | Main | OpRISK Management Asia 2010 »
July 20, 2010
Market Risk Modelling - the Next Generation
The search for the Holy Grail of a perfect risk model acquired a new dimension at Dr. Elizabeth Sheedy’s presentation today (16 July 2010) at the PRMIA event organized by the Singapore chapter, sponsored by Macquarie University. The current imperative, according to Dr. Sheedy, is to develop a bottoms-up approach to risk management while keeping methodologies current and dynamic. Of course, this entails ongoing research-backed efforts to keep risk models relevant….while understanding all the time that there is no “perfect” model.
The need for relevance automatically brings in the overarching theme of “Market Liquidity Risk”. According to Dr. Sheedy, this aspect of risk is not just absent from existing market risk models; it is also not understood well enough. The fragility and asymmetry of liquidity risk coupled with the “volatility clustering” that follows an initial price shock need to be dynamically fed into the market risk model. Such models have a better chance of adapting to turbulent market conditions.
To read a copy of the full paper, please click on the "Download File" link below.
Posted by bearhug at July 20, 2010 01:05 PM