The development of Model Risk Management: a Luhmannian perspective
(2022) 1st MUSEES Conference Modeling Uncertainty in Social, Economic, and Environmental Sciences — Location: EMLyon Business School (16.March.2022)
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- Abstract
- In the wake of the subprime crisis, several criticisms have been addressed to the way in which financial institutions model risk: the underlying assumptions generally accepted to estimate the economic worth of financial instruments would give a false sense of confidence to financial actors by underestimating the probability of extreme events. In response, and under pressure from regulators, these institutions are now being led to integrate the danger of being fooled by methodological options – the “model risk” – into their risk management. Our contribution proposes to account for this evolution, in its possibilities and limits, based on a major sociological theory: Niklas Luhmann’s social systems theory.
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Citations
Duterme, T., & Thomas, Q. (2022). The development of Model Risk Management: a Luhmannian perspective. 1st MUSEES Conference Modeling Uncertainty in Social, Economic, and Environmental Sciences, EMLyon Business School. https://hdl.handle.net/2078.5/269335