Ignorance isn’t bliss : Over-reliance on numerical estimates of risk

Today’s highly quantitative risk management industry is the product of simultaneous advances in computing power and finance theory since the 1960s.

Exponential increases in computation speeds have allowed academics and practitioners to create a wide range of mathematical models, able to process vast amounts of historical data and create large numbers of projections of the future.

While undoubtedly useful when used appropriately, the resulting tools (now ubiquitous across the industry) have created an over-reliance on numerical estimates of risk.

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