model error

Learning objectives: Identify and explain errors in modeling assumptions that can introduce model risk. Explain how model risk can arise in the implementation of a model. Questions: 604.1. According to Crouhy, Galai & Mark, JPMorgan's London Whale incident "showed that model risk has no...

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Learning outcomes: Identify challenges related to mapping of risk factors to positions in making VaR calculations. Identify reasons for the failure of the long-equity tranche, short-mezzanine credit trade in 2005 and describe how such modeling errors could have been avoided. Identify two major...

Learning outcomes: Describe ways that errors can be introduced into models. Describe how horizon, computational and modeling decisions can impact VaR estimates. Questions: 504.1. In finance, a standard model of the behavior over time of an asset price or risk factoris the geometric Brownian...