UC’s Bookstaber urges use of agent-based models

Pension fund’s CRO says buy side should go beyond stress tests and try to model systemic risk

Richard Bookstaber
Rick Bookstaber thinks he may be the only institutional risk manager to use an agent-based model

Rick Bookstaber, chief risk officer (CRO) for the University of California’s $110 billion pension and endowment scheme, is testing what he calls the third version of risk modelling.

Existing approaches – measuring value-at-risk or conducting stress-testing simulations of possible scenarios – are flawed, says Bookstaber. Risk modelling version 3.0 aims to model reactions to the reactions to possible losses – the total ramifications of a ‘what if?’.

Known as agent-based modelling, it tries to

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