Blind spots in current risk management practices: Measurement error

Yuval D. Bar-Or

Journal of Risk Management in Financial Institutions, 2008, vol. 1, issue 4, 435-438

Abstract: While significant progress has been made in the field of risk management over recent decades, much work remains. One area requiring further attention and rigour is ‘measurement error’. In contrast to the physical sciences, financial measures of risk, especially credit risk, are rarely reported with error bars. The implication of this deficiency is that decision makers fail to recognise imprecision in reported numbers, leading to suboptimal decisions.

Keywords: measurement error; credit risk management; risk management; economic capital; blind spot; subprime (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2008
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