Creating and validating risk models [24]

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Bullet points include: Calculations involve many subtleties May therefore appear arbitrary and / or opaque Benchmark versus what others consider to be industry standards In credit risk space, one reference point is Basel II / III Based on capital formulae that depend on explicit correlation assumptions for different types of loan In asset allocation space / risk aggregation space, one reference point is Solvency II Bear in mind regulator / political overrides, e.g. Solvency II standard formula SCR includes no diversification between operational and other risks

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