Abstract
The current financial crisis had its origins in the US subprime mortgage market and led to downturns in global equity, credit and commodity markets. This paper identifies the lack of economic information in risk valuation models as one reason why the financial industry was unable to predict, mitigate and cover the current losses. This is at first sight rather surprising as credit and credit derivative products have existed for centuries. However, the markets have experienced an exponential growth in size as well as variety. In particular, the associated transparency may have not matched this development in relation to the underlying risks, risk models and model risks.
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