Why the survival of internal models is vital for financial stability

Risk quants say stampede to standardised approaches heightens herding and systemic risks

In the same way that money is central to the exchange of goods and services in modern economies, over-the-counter derivatives are central to risk distribution and hedging in the economy. Money is the currency used to exchange value; derivatives are the currency used to exchange risk. For that reason, they are central to wealth creation. OTC derivatives provide an invaluable service by diminishing