Nematrian
/


Creating portfolio risk and return models [10]

Go to: Summary | Previous | Next   
Bullet points include: Hierarchy naturally explained by desire to explain Fundamental and/or econometric models may be preferred to purely statistical models because although they (should) fit the past less well they hopefully will fit the future better, i.e. because they offer greater intrinsic meaning Again an example of imposing your own prior / expert judgement They also provide an ‘explanation’ ‘Story’ versus ‘challenge’ Is the risk function’s role primarily to paint a convincing picture that can then be used to make money for the firm? Or is it to challenge other decision-makers’ stories, so that the firm avoids pitfalls?

NAVIGATION LINKS
Contents | Prev | Next | ERM Lecture Series

Desktop view | Switch to Mobile