Most commonly used market risk models in financial institutions


New Member
Hi there,

I am curious to have professional opinions on the following one. I noticed a lot of time through my (short) experience, that mathematical models have some basic assumptions which make the model invalid most of time (such as the iid assumption) but are still used in "real world" by professionals. Also, I am not sure about what is the state of commonly accepted risk measurement method today in market risk.
For instance, I am not sure if the popular gaussian copula in part responsible for the financial crisis of 2008-2009, is still in use today. But this is just an example. I would like to start this thread and please see it as a free discussion about assessing the risk of a given financial product. We may start the discussion by the following question.

What is the most used methodology today for a currency portfolio, historical, delta normal or Monte Carlo simulation? And how the covariance matrix is calculated?

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