His answer: Because the only kind of storm less well predicted than hurricanes and tornadoes are financial storms. In my keynote today, I will frame this conference in a more positive tone, as I see a lot of merit in financial risk modelling – and in weather forecasting, too, for that matter.
Yet during and after the financial crisis we witnessed severe instances of risk model failure – where internal calculations of many banks grossly underestimated actual risks. Remember for example the systematic underestimation of a market freeze or a price bubble before the subprime crisis broke.