Regulation and financial models: Complexity kills

Models Regulations

Complex financial models and intricate assets structures meant extraordinary profits before the crisis. Markets for structured products became overly inflated as even the banks did not have a clear view of the state of their investments. Given complexity's role in today's mess, future regulation should focus on variables that are easy to measure and hard to manipulate (e.g. leverage ratios).


Models and risk | Financial Regulation, Systemic Risk, Stability and AI

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© Jon Danielsson