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CRO RISK FORUM: Storm-proof capital management
28 July 2009
Recent events have shown that risk models need to be stress tested, says Munich Re group chief risk officer Jo Oechslin
A myriad of analysts, journalists, politicians and other observers are analysing and commenting the causes and the implications of the global economic crisis. Some think management compensation has been at the heart of it, others believe that the bankruptcy of Lehman was the decisive factor, and many think that the Americans have caused the turmoil with their excessive debt-financed consumption.
Yet in my view, none of them seems to me of outstanding individual relevance. Much more, there has been a combination of several factors which on an individual basis have been problematic but not devastating, while their combination has indeed been devastating. Some of these factors are:
1. A tremendous accumulation of wealth primarily in emerging markets over the past 10 or 20 years that wanted to be invested in fixed income assets because of its perceived safety. This has essentially created the demand necessary for the structured credit...
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