Model risk

Model risk

Risk of loss arising from valuing financial instruments with a model that is inaccurate (e.g. makes incorrect underlying assumptions, does not capture all scenarios that could occur in reality, or fails under extreme market conditions). Also known as model uncertainty.
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para]]Crowe Horwath LLP introduces Crowe Model Risk Manager[[/para]]
The floor is meant to mitigate model risk and measurement error stemming from internally-modelled approaches," said the Basel Committee.
He joins Berkshire from M&T Bank where he was VP of enterprise risk management, leading the Model Validation and Model Risk functions.
O'Hanlon cited, "Institutions are increasingly looking to design products more holistically - looking at profitability end-to-end, taking into account everything from counterparty risk to liquidity risk, model risk and even operational risk across the full life cycle.
Oracle said its financial services model risk management tool should permit clients to assess flaws in their investment models and allow for constant assessment of risk.
derivatives markets, model risk, risk management, swaps and other financial innovations.
However, PCs are not made for continuous operation and companies using this model risk losing their valuable data, along with facing reduced operational efficiency.
Model risk, the failure to recognize the shortcomings of models, comes in at number two, and regulatory intervention, something many fear will be overly heavy-handed, is listed as third.
Model risk can be derived from numerous sources, which makes managing the process particularly challenging.
Specific topics include Levy processes in distinguished by their coarse and fine path properties, simulation methods with Levy processes, a pure jump perspective on risks in returns, model risk for exotic and moments derivatives, symmetries and pricing of exotic options in Levy models, static hedging of Asian options under stochastic volatility using fast Fourier transform, impact of market crises on real options, moment derivatives and Levy-type market completion, pricing perpetual American options driven b spectrally one-sided Levy processes, and the spread option optimal stopping game.
Model risk is a very important chapter for institutions that plan to use internal models.

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