In September a House subcommittee conducted a hearing on risk modeling and its role in the financial crisis. The testimony of several witnesses at the hearing pointed to risk models, particularly value-at-risk models, as playing a key role in the economic meltdown.

Blame for the financial crisis cannot legitimately be laid on the doorstep of the risk models. Models are designed to reflect reality and prepare us for anticipated future states of reality. Risk cannot be fully represented if the analysis fails to include all the risky positions.

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