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Which of the following statements best describes model risk as it applies to a financial institution? It is the risk: A. of using an incorrect model to hedge a complex financial asset. B. that different models using identical assumptions may produce different estimated values for an asset. C. that the asset value an institution calculates using a model and records on its financial records differs from the asset’s observed market value. D. that the magnitude of actual loss will exceed the amount of loss predicted by a model. |