article · Finance and Economics Discussion Series · 2014
Model Risk of Risk Models
Ilknur Zer, Jón Danı́elsson, Kevin J. James, Marcela Valenzuela
Cited by 4Open access
Abstract
This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with and caused by market uncertainty. During calm periods, the underlying risk forecast models produce similar risk readings hence, model risk is typically negligible. However, the disagreement between the various candidate models increases significantly during market distress, with a no obvious way to identify which method is the best. Finally, we discuss the main problems in risk forecasting for macro prudential purposes and propose an evaluation criteria for such models.
Cite this paper
Zer, I., Danı́elsson, J., James, K. J., & Valenzuela, M. (2014). Model Risk of Risk Models. Finance and Economics Discussion Series, 2014.0(34), 1–32. https://doi.org/10.17016/feds.2014.34
Zer, Ilknur, et al. “Model Risk of Risk Models.” Finance and Economics Discussion Series, vol. 2014.0, no. 34, 2014, pp. 1–32, https://doi.org/10.17016/feds.2014.34.
Zer, Ilknur, Jón Danı́elsson, Kevin J. James, and Marcela Valenzuela. 2014. “Model Risk of Risk Models.” Finance and Economics Discussion Series 2014.0 (34): 1–32. https://doi.org/10.17016/feds.2014.34.
Zer, I. et al. (2014) ‘Model Risk of Risk Models’, Finance and Economics Discussion Series, 2014.0(34), pp. 1–32. Available at: https://doi.org/10.17016/feds.2014.34.
@article{zer2014model,
title = {{Model Risk of Risk Models}},
author = {Zer, Ilknur and Danı́elsson, Jón and James, Kevin J. and Valenzuela, Marcela},
journal = {Finance and Economics Discussion Series},
volume = {2014.0},
number = {34},
pages = {1--32},
year = {2014},
doi = {10.17016/feds.2014.34}
}Made from the index record. Check names, capitalisation and page numbers against the paper. Need another style? AI for Research has over 10,000.