Simple models won’t cut it for systemic risk

Understanding interconnectedness and capturing it within models is a key challenge, say quants

Interconnected
Modern financial markets are highly interconnected

Monitoring the build-up of systemic risk across the financial system is a key concern for policymakers seeking stability. Unfortunately, it is also a difficult task. Models for this most dangerous of risks – whether market- or network-based – started simple, but simple models won’t cut it going forward.

The most obvious problem is the extraneous, multi-faceted nature of systemic risk. Models need to embrace several channels of risk at the same time, with the aim of determining better policy out

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: