Avoiding crowds: BlackRock leads push to model 'endogenous' risk

A known flaw in conventional risk models is becoming hard to ignore in current markets

For Edward Fishwick, BlackRock's London-based global co-head of risk and quantitative analysis, what stands out about January's market falls is how hard they are for traditional risk models to explain. "Not much changed," he says. "If you think about European monetary policy, China, oil, the US economy: everything true now was true three months ago, probably six." At the same time, implied volatility remained relatively low, with the CBOE Volatility Index peaking at 32.09 on January 20, but