Banking: Difference between revisions

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 ===Risk management===
-During the 1990’s, ''Value-at-Risk'' computer programs based upon portfolio theory were widely adopted for measuring market risk in banking  portfolios - despite objections by Barry du Toit
-<ref> Barry du Toit ''Risk, theory, reflection: Limitations of the stochastic
-model of uncertainty in financial risk analysis'' Riskworx June 2004 [http://www.riskworx.com/insights/theory/theory.pdf]</ref>
-and Avinash Persaud
-<ref> Avinash Persaud: ''Sending the Herd Off the Cliff Edge: The disturbing interaction between herding and market-sensitive risk management practices'', Jacques de Larosiere Prize Essay, Institute of International Finance, December 2000 [http://www.erisk.com/ResourceCenter/ERM/persaud.pdf]</ref> that they used data that had been contaminated by previous rescues, and that their use generated herding behaviour that itself contributed to instability.
-Some were sufficiently sophisticated to embody a recognition that probability distributions other than the familiar bell-shaped ''normal distribution''. Many had been  "stress-tested" - meaning that they had been successfully applied to past situations. However all were based upon data from the period of historically low economic volatility that started in the early 1980s and came to be known as the "great moderation"

Revision as of 10:11, 4 December 2008