The Lights Are On

Research Paper
October 1, 2006
Preview
After lamenting in our last issue that we had not seen any specific market events in 2006, we were delivered the Amaranth episode in September. Unfortunately, some of the loudest commentary in the aftermath has come from the "throw out the models" camp, lumping the recent natural gas market events with other surprises that models failed to recognize. We argue that this is misguided, and that in this case, particularly viewed from the perspective of how large the losses were, even simple risk models provided good warning signals of the trouble ahead. By no means are the models perfect, but the extremist conclusion that they are useless distracts us from saner lessons.

Read the full paper

Provide your information for instant access to our research papers.

The content of this page is for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information. Nothing herein is intended to recommend any product, tool or service. For all references to laws, rules or regulations, please note that the information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.