Speech to Risk Europe May 2010
I write from Frankfurt, where I gave a speech today to the RISK Europe conference. It was an interesting time to be in Frankfurt with a bunch of risk managers. Secretary Geithner was also in town for talks with ECB President Trichet, but you wouldn’t know it from the discussions at RISK Europe. Instead, the risk managers gathered there seemed to be pretty introspective and preoccupied in figuring out how behavioral economics and scenario analysis can be used to take them past VAR and meet the growing demands on their discipline.
Links to my slides and speech are attached. For this conference, I focused on the importance that scenario analysis can play in augmenting VAR analysis, an how important it is for scenario analysis to take into consideration the role that sovereigns now play in so many parts of the market. The message is pretty simple: there are rigorous and structured ways to assess global regulatory and political trends…and it is imperative that risk managers augment their quantitative analysis with these kinds of tools if they are to avoid underestimating or mis-pricing the risks in various market and exposure segments. There is also an abbreviated history of the Basel regulatory capital framework.
The slides show a time series of OTC derivatives transactions volume (measured in gross market values).
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