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A proposal for an open‐source financial risk model

A proposal for an open‐source financial risk model Purpose – The purpose of this paper is to present a policy proposal for building a new framework for gathering, measuring and disclosing financial risk information in the global economy. Design/methodology/approach – The paper examines the current state of the financial risk framework, notes its advantages and disadvantages and proposes a new construct that aims to address some of the shortcomings that are currently in place. The goals of a robust financial risk model are examined to determine the design of the proposed risk framework. Findings – The proposed open‐source financial risk model separates the dual function that internal risk models perform within financial institutions, first to attempt to optimize the risk–return profile of mostly private economic rent‐seeking entities, and second to maximize safety and soundness considerations for the public which is at risk of bearing the consequences of financial actors. Practical implications – The model allows widespread use of robust financial risk models. Social implications – The model enables a more transparent and democratic process for risk management. Originality/value – The study proposes a new global supervisory framework. Practical implications – The model allows widespread use of robust financial risk models. Social implications – The model enables a more transparent and democratic process for risk management. Originality/value – The study proposes a new global supervisory framework. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Regulation and Compliance Emerald Publishing

A proposal for an open‐source financial risk model

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References (13)

Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1358-1988
DOI
10.1108/JFRC-08-2013-0027
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to present a policy proposal for building a new framework for gathering, measuring and disclosing financial risk information in the global economy. Design/methodology/approach – The paper examines the current state of the financial risk framework, notes its advantages and disadvantages and proposes a new construct that aims to address some of the shortcomings that are currently in place. The goals of a robust financial risk model are examined to determine the design of the proposed risk framework. Findings – The proposed open‐source financial risk model separates the dual function that internal risk models perform within financial institutions, first to attempt to optimize the risk–return profile of mostly private economic rent‐seeking entities, and second to maximize safety and soundness considerations for the public which is at risk of bearing the consequences of financial actors. Practical implications – The model allows widespread use of robust financial risk models. Social implications – The model enables a more transparent and democratic process for risk management. Originality/value – The study proposes a new global supervisory framework. Practical implications – The model allows widespread use of robust financial risk models. Social implications – The model enables a more transparent and democratic process for risk management. Originality/value – The study proposes a new global supervisory framework.

Journal

Journal of Financial Regulation and ComplianceEmerald Publishing

Published: Jul 8, 2014

Keywords: Supervision; Financial institutions; Basel; Open‐source models; Risk management framework; Solvency II

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