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A proposal for an open-source financial risk model

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  • Ho Hwang, Jong

Abstract

This paper presents a policy proposal for building a new framework for gathering, measuring and disclosing financial risk information in the global economy. The paper examines the current state of the financial risk framework, notes its advantages and disadvantages and proposes a new construct that aims to address some of the shortcomings that are currently in place. The proposed open-source financial risk model separates the dual function that internal risk models perform within financial institutions, first to attempt to optimize the risk-return profile of mostly private economic rent-seeking entities, and second to maximize safety and soundness considerations for the public which is at risk of bearing the consequences of financial actors. The goals of a robust financial risk model are examined in order to determine the design of the proposed risk framework.

Suggested Citation

  • Ho Hwang, Jong, 2014. "A proposal for an open-source financial risk model," LSE Research Online Documents on Economics 59298, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:59298
    as

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    File URL: http://eprints.lse.ac.uk/59298/
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    References listed on IDEAS

    as
    1. Darrell Duffie, 2013. "Systemic Risk Exposures: A 10-by-10-by-10 Approach," NBER Chapters, in: Risk Topography: Systemic Risk and Macro Modeling, pages 47-56, National Bureau of Economic Research, Inc.
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    5. Dimitrios Bisias & Mark Flood & Andrew W. Lo & Stavros Valavanis, 2012. "A Survey of Systemic Risk Analytics," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 255-296, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    open; source; risk; financial; models; governance; public; regulation; supervision; global; institutions;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G2 - Financial Economics - - Financial Institutions and Services
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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