Tag: Risk Analytics

What Bankers Need to Know About Economic Predictions

Probabilistic Bank Predictions

In the Wall Street Journal, on Bloomberg radio or on CNBC, economists and pundits predict the future of the US economy.  On any given day, in the same paper or show, various economists will be outspoken and confident about their predictions – their hubris is striking.  One analyst will state that the S&P will continue to decline, another will state the opposite.  One pundit will predict that the price of oil will fall, and a

VAR for Enterprise Risk Management

Value-at-risk for banks graphic

Two risk managers were discussing their fear of flying and crashing to their deaths in an airplane.  One of the risk managers stated that he had a morbid fear of being on a plane that is blown up by an onboard bomb.  The second risk manager asked how he handled this fear, to which the first risk manager replied - “Simple, I bring on board with me a bomb that I have control over, and of course I would never detonate it.”  “How does that help?” said the second risk manager.  The first risk manager replied, “The chanc

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