August, 2013

Archive

Quant Chalkboard: A New Way to Aggregate

The Gumbel copula is the best way to aggregate losses in economic capital, says Yimin Yang, Director of Model Risk and Capital Management Practice at Protiviti, a global consulting firm. “This copula has asymmetrical behaviour and can model fat tails the best” of the numerous copulas he has tried recently. He was speaking at a GARP webinar on August 20, 2013. Yang began by explaining that a copula was a broad class of mathematical function that could be used to describe the joint distribution function between two or more other functions. Such a joint cumulative distribution function (CDF) must determine […]

Quant Chalkboard: Data, Models & Concepts

“People are more likely to believe something that comes as data,” said Joe Pimbley, Principal, Maxwell Consulting, “but you shouldn’t necessarily believe the data.” Pimbley, a lead investigator for the examiner appointed by the Lehman Brothers bankruptcy court, addressed financial risk management professionals at a GARP webinar on August 6, 2013. Pimbley said that model builders must always look at data with the eyes of a skeptic. With a PhD in physics he is conversant with models devised to predict the “real world” and is aware of the false security that data-based models can provide. He cited as an example […]