Regulation and financial models: Complexity kills
September 29, 2008
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).
Published on VoxEU.org
Models and risk
Bloggs and appendices on risk, models, regulations, cryptocurrencies and related topics© All rights reserved, Jon Danielsson,