Professor G. Scandolo: Assessing Financial Model Risk
Professor G. Scandolo (University of Verona and Firenze) holder et seminar med tittelen: Assessing Financial Model Risk
Model risk has a huge impact on any risk measurement procedure and its quantification is therefore a crucial step. In this paper, we introduce three quantitative measures of model risk when choosing a particular reference model within a given class: the absolute measure of model risk, the relative measure of model risk and the local measure of model risk. Each of the measures has a specific purpose and so allows for ﬂexibility. We illustrate the various notions by studying some relevant examples, so as to emphasize the practicability and tractability of our approach.