The Once Holy Grail
Research Paper
January 1, 2008
Preview
Ten years ago, the integration of market and credit risk was seen as the great challenge in risk modeling. While we have seen advances in modeling since then, the greater development is that the challenge has changed. Some of the new challenges are due to the evolution of the marketplace, particularly default risk in trading portfolios, while others, in particular the persistent cultural divide between credit and market risk groups in banking, are still as prevalent as a decade ago. Here, we attempt to describe which challenges have been solved, which have emerged, and which have been ignored for too long.
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