The modelling business

Sophisticated quantitative analysis is producing ever more effective risk modelling techniques and the area of credit risk has been a particular beneficiary of this evolution. Navroz Patel charts the recent history of risk models and peers into the near future

Even without stepping foot on a trading floor, it’s possible to gauge just how important a sophisticated mathematical understanding of risk management has become.

The cream of people with maths and physics PhDs now often opt to work on derivatives desks, rather than take a position at an elite research lab. And where a decade ago there were few quantitative finance graduate programmes, there are now scores, all scrambling to provide enough places to satisfy demand.

Modelling developments have