Advancing the Field of Quantitative Finance
formerly the IAFE

Events

Event: Assessing Risk in Risk Assessments
Date: April 23
Time: 5:30 pm Registration Begins, 6 pm Program Begins
Location:
Goldman Sachs
180 Maiden Lane
Sponsor:
PricewaterhouseCoopers

Description:

Assessing Risk in Risk Assessments

A Talk by Steve Figlewski
Professor of Finance, New York University Stern School of Business
and IAFE Board Member

A cocktail reception will follow the program.

This event is held in partnership with PRMIA.

To view a PowerPoint presentation of Steve´s talk, please click here.

Common procedures for assessing financial risk exposure, such as Value at Risk, involve predicting the lower tail of the probability distribution of asset value or return. But the statistical estimation error in the calculation is typically ignored. In practice, a ´tail event´ may represent a truly rare occurrence, or it may simply be a not-so-rare occurrence at a time when the predicted volatility is an underestimate of the true volatility. The problem grows worse the further in the tail one is trying to predict, especially when volatility varies over time. Results from an extensive simulation study of this issue will be presented, and we hope that in the general discussion afterwards, members of the audience will share their thinking and experience on ways to deal with estimation risk in real-world risk management.

Steve Figlewski´s Bio