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Systemic risk models and risk management 

January 21, 2014
Ron Rimkus, Gulfnews

Investing requires people to make tradeoffs between expected risk and expected return. Consequently, many investors have turned to sophisticated models to help develop their expectations. Ron Rimkus evaluates why these models only capture risk relative to the market and do not do an adequate job of assessing systemic risk.

We hear a lot about systemic risk, what exactly is it?

Systemic risk refers to the risks that originate from the functioning of the financial system as a whole. Unfortunately, we have come to a point in time where the risk in the system is growing for a variety of reasons. As an industry, we do a poor job of managing that risk as evidenced by the financial crisis that began in 2007 and spread around the world.

Read more: Gulfnews

 
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