Rehabilitating innovation

The financial crisis has put greater focus on the accuracy of models, with some regulators criticising banks for placing too much reliance on model outputs. In an introduction to this month's Cutting Edge section, Mauro Cesa, Risk's technical editor, and Laurie Carver, assistant technical editor, look at how credit models are changing in the wake of the crisis

One credit quant has a stark message for his bank, the failures of which led to a rescue by its home government. "We got what we deserved," he says. It's a damning indictment of the bank's business model, in which quantitative analysts played a key role. Prior to the crisis, his team's job was essentially to find the highest-yielding assets that would meet rating agency criteria, so the bank's