Steven Vanduffel gave a Seminar entitled “Assessing Model Risk”.
Vanduffel spoke about the risk assessment of high dimensional portfolios, a core task in the regulation of financial institution. Besides the difficulties in the estimation of the joint distribution of the portfolios, there is not a consensus on quantifying model risk. A natural way could be finding the extreme values of a chosen risk measure in a family of candidate models.
Vanduffel discussed several probabilities to integrate dependence and he discussed the impact on risk bounds. He proposed extended versions of the Rearrangement Algorithm (RA) that deal with the availability of dependence information.
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