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AI market round up: Risk models too simple

According to Olivier LeMarois, CEO of Riskdata, equity market neutral funds’ reliance on one risk model for both trading and risk management exacerbated their losses in the summer.

"Many were exposed to the same specific risk because their risk models were too simplified. They were using some 50-plus independent factors in their model, which might work for trading, but for risk management this is not a sufficient number of factors. With an independent assessment of the risk, the probability of catching a flaw in the strategy is enhanced. "The feedback we got from clients was that the equity guys using more sophisticated models were not losers."

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