Navigating Uncharted Model Waters
Significant losses suffered by financial institutions in recent decades due to mispricing of financial contracts have prompted regulators to explicitly address the model risk, that is, the risk of working with a generally inadequate model. Academic research in the field broadly interprets model inadequacy as model uncertainty/misspecification, incorrect implementation, but also incorrect estimation of the input model parameters. The risk associated with incorrect valuation of complex products due to the unobservable parameters is what is known as calibration risk.
Ioannis will reflect on his personal scholarly journey to address this important problem, introducing a framework that is relevant for decision makers in financial institutions, regulators in their prudent valuation principles, market participants and risk managers who are interested in knowing what parameter estimation endangers. He will refer to challenging issues encountered along the way, the approaches employed to address them, the tools borrowed from his past research in quantitative methods, and his opening to the research field of sensitivity analysis, along with his thoughts and plans for further investigation.
About the speaker
Ioannis first joined Bayes Business School (then newly established Cass Business School) in 2002 as a student in the BSc in Actuarial Science. Following his undergraduate studies, he furthered his education with postgraduate and doctoral studies at LSE and Bayes, and subsequently engaged in a fixed-term role at Lloyd’s Treasury and Investment Management, before returning to his alma mater as a Lecturer in 2011.
Since then, he worked on the development of quantitative methods and their application in the fields of operations research and management science, finance, actuarial science, and sector studies, including derivatives, risk management, shipping, commodities, pension product design and communication, stock returns forecasting and mutual funds performance.
His research contributions have appeared in the Journal of Financial and Quantitative Analysis, Review of Finance, European Financial Management, Operations Research, European Journal of Operational Research, Mathematics of Operations Research, Tourism Management, Transportation Research Part E, and others. He currently serves as Editor of the International Journal of Finance & Economics and Associate Editor of the Decisions in Economics and Finance and the Annals of Actuarial Science. He is co-Chair of the Finance and Business Analytics Conference.
At Bayes, he is the director of the world-renowned master’s degrees in Actuarial Science and Actuarial Management. He holds a Diploma in Actuarial Techniques, is an affiliate member of the Institute and Faculty of Actuaries and acts as an independent examiner at accredited universities.
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