Bank models are built on foundations of sand
Despite the remarkable advances made over the past 25 years, David Rowe argues the industry’s existing risk models are not fit for purpose when it comes to stress testing and analysis of tail risk
“He was like a foolish man who built his house upon the sand; and the rain fell, and the floods came, the winds blew and beat against that house... and great was the fall thereof” (Matthew 7:26–27).
This year marks the fiftieth anniversary of the publication of Thomas Kuhn’s highly influential book The Structure of Scientific Revolutions. It argued that the popular view of science – developing through a slow, steady accumulation of small advances – only tells part of the story. Less frequent but
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