Industry reliance on third-party risk models creates severe systemic market risk
Seth Masters · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · Jan 29, 2018 · at 47:11
Seth Masters discusses how commercialization and standardization of risk models among investment managers has introduced dangerous groupthink.
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“Almost everybody these days actually uses risk models that someone else developed. There's only a few someone else's, and they're all competing with each other in a marketplace. So guess what? There's conversion thinking on this, which is really bad, because everybody's using the same risk model, which is itself a risk.”
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