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Keynesian uncertainty and the shaky foundations of statistical risk assessment models

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Author Info

  • Alessandro Roncaglia

    ()
    (Sapienza University of Rome)

Abstract

With the financialization of the economy, increasing reliance has been put on statistical models for derivatives pricing and for risk assessment in the day-to-day business of financial operators as well as in financial regulation. This practice had already been criticized from many quarters and on different accounts before the crisis, but these criticisms were simply ignored by the prevailing consensus. This work reconsiders such criticisms from a different standpoint: though they are justified, they could have been put forward in even stronger terms had they relied on Keyness work on probability and his notion of uncertainty. I shall thus focus on the conceptual views underlying statistical risk assessment techniques rather than on the techniques in themselves. Finally, I set out some policy implications for regulation.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10197/10086
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Bibliographic Info

Article provided by Economia civile in its journal PSL Quarterly Review.

Volume (Year): 65 (2012)
Issue (Month): 263 ()
Pages: 437-454

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Handle: RePEc:psl:pslqrr:2012:45

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Related research

Keywords: risk assessment; probability; uncertainty; financial regulation;

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References

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  1. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720, October.
  2. Danielsson, Jon, 2002. "The emperor has no clothes: Limits to risk modelling," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1273-1296, July.
  3. Francesco cannata & Simone Casellina & Gregorio Guidi, 2012. "Inside the labyrinth of Basel risk-weighted assets: how not to get lost," Questioni di Economia e Finanza (Occasional Papers) 132, Bank of Italy, Economic Research and International Relations Area.
  4. Forni, Mario & Lippi, Marco, 1997. "Aggregation and the Microfoundations of Dynamic Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198288008.
  5. Carlo D'Ippoliti & Alessandro Roncaglia, 2011. "L'Italia: una crisi nella crisi," Moneta e Credito, Economia civile, vol. 64(255), pages 189-227.
  6. Alessandro Roncaglia, 2009. "Keynes and probability: An assessment," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 16(3), pages 489-510.
  7. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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Cited by:
  1. Mario Tonveronachi, 2013. "De-globalising bank regulation," PSL Quarterly Review, Economia civile, vol. 66(267), pages 371-385.
  2. Carlo D'Ippoliti, 2012. "Josef Steindl: Introduzione: sulle cause reali della crisi finanziaria (Introduction: on the real causes of the financial crisis)," Moneta e Credito, Economia civile, vol. 65(260), pages 279-292.
  3. Mario Tonveronachi & Elisabetta Montanaro, 2012. "Financial re-regulation at a crossroads: How the European experience strengthens the case for a radical reform built on Minsky's approach," PSL Quarterly Review, Economia civile, vol. 65(263), pages 335-383.
  4. Elisabetta Montanaro, 2013. "Regole di Basilea e modelli di vigilanza: quale convergenza? (Basel rules and supervisory models: What convergence?)," Moneta e Credito, Economia civile, vol. 66(264), pages 415-442.

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