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Keynesian uncertainty and the shaky foundations of statistical risk assessment models

  • Alessandro Roncaglia

    ()

    (Sapienza University of Rome)

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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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
Contact details of provider: Web page: http://www.economiacivile.it

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  1. 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.
  2. 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.
  3. Carlo D'Ippoliti & Alessandro Roncaglia, 2011. "L'Italia: una crisi nella crisi," Moneta e Credito, Economia civile, vol. 64(255), pages 189-227.
  4. Jon Danielsson, 2000. "The Emperor has no Clothes: Limits to Risk Modelling," FMG Special Papers sp126, Financial Markets Group.
  5. Forni, Mario & Lippi, Marco, 1997. "Aggregation and the Microfoundations of Dynamic Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198288008.
  6. repec:cup:cbooks:9780521096720 is not listed on IDEAS
  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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