Abstract
Risk modelling is a risky business, but the burden of risk model failure is often borne by society in general rather than the firm in particular. This division of the ultimate cost ensures that risk models systemically underestimate the risk, as they are designed to capture only that part of the risk borne by the firm. In short, the risk models that underestimate risk will drive out the more reliable risk models that entail a lower return on their increased capital.
Keywords: Enterprise Risk Management
Page
63-65
Year
2008
Categories
Actuarial Applications and Methodologies
Enterprise Risk Management
Publications
Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications
