Model Risk Management: Limits and Future of Bayesian Approaches

J.P. Florens, C. Gourieroux and Alain Monfort

Annals of Economics and Statistics, 2019, issue 136, 1-26

Abstract: This paper discusses the use of Bayesian approaches when the models are misspecified (model risk). In particular we explore the limits and future of Bayesian approaches in order to provide answers to the following questions recently asked by the prudential supervision for Finance/Insurance: How to measure model risk? How to use in a coherent way the different misspecified models (as rating models) usually employed within and between financial institutions.

Keywords: Model Risk; Bayesian Approach; Model Choice; Validation. (search for similar items in EconPapers)
JEL-codes: C11 C14 C52 G38 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Working Paper: Model Risk Management: Limits and Future of Bayesian Approaches (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2019:i:136:p:1-26

DOI: 10.15609/annaeconstat2009.136.0001

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