A proposal for an open-source financial risk model. Issue 3 (8th July 2014)

• Record Type: Journal Article
• Authors: Ho Hwang, Jong
• Is Part Of: Journal of financial regulation and compliance. Volume 22:Issue 3(2014)
• Page Start: 219
• Page End: 234
• Publication Date: 2014-07-08
• Subjects: Supervision -- Financial institutions -- Basel -- Open-source models -- Risk management framework -- Solvency II; Financial institutions -- Law and legislation -- Periodicals; Banking law -- Periodicals; Financial services industry -- State supervision -- Periodicals; Banks and banking -- State supervision -- Periodicals; Independent regulatory commissions -- Periodicals; 346.082
• DOI: 10.1108/JFRC-08-2013-0027
• Languages: English
• ISSNs: 1358-1988

Abstract

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.