By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
Partner, RSD Solutions Inc.
Risk managers are well aware of model risk. For instance, every risk manager can cite the
well-worn adage that “all models are wrong but some are useful”. However how often do we consider measurement
risk, namely the risks that arise from inaccurate measurements, or the fact
that the measurements are not measuring what we (want to) believe they are
measuring?
Models are only as good as the measurement of
the data that is put into them. Risk
decisions are only as good as the measurement of the data on which they are
based.
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