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Banks were big, global, had utter faith in the supposed perfection of unfettered markets, and were all operating the same mathematical models of risk.
But the governor hoped new models of risk or early warning systems might emerge from detailed analysis of the bank's vast, granular datasets.
Its practitioners devised not only the exotic, mortgage-backed securities that proved so troublesome, but also the mathematical models of risk that suggested these securities were safe.
By John Cassidy April 27 , 2010First up, sincere apologies to the organizers and attendees of the Milken Global Forum, in Los Angeles, where I was due to appear this afternoon at a session about economic models of risk.
Lots of lenders, borrowers and home buyers did, or would have done, foolish things without the aid of securitization.I think that there are some pretty clear benefits to securitisation, including the distribution of risk (one suspects that models of risk are being re-calibrated just a bit in the wake of the housing crash and crisis).
Multiple models of risk have been reported with variable discriminatory performances, and it remains unclear how design factors affect performance.
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All have long worked on the model of risk aggregation.
That model of risk management changed radically during the Industrial Revolution.
Advocates of the plan say new management could shift the banks away from the traditional approach of lending based on personal, political and corporate relationships and adopt a Western-style model of risk evaluation.
The Dutch had evolved a highly sophisticated model of risk assessment, but it was prevented from being adopted in the UK because it would open "a can of worms".
The cognitive appraisal model is used by integrating it with a model of risk.
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