The financial crisis revealed the inadequacies at the heart of the pricing, capital and risk calculation engines used by banks - and, following the collapse of AIG, insurers - worldwide. This paper proposes a new approach to risk management and highlights why internal models need to change.
- The impact of the financial crisis.
- The limitations of current risk management systems.
- New systems are needed.
- The importance of modelling shocks.
- Qualitative and quantitative solutions.