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Monte Carlo
’Chasing the fat tail
Alternate title: Building a better Monte Carlo model.
Risk managers and investors will, of course, be familiar with Monte Carlo simulations — which are used in finance to value potential loan losses and things like portfolio risk or derivatives.
Gambling on Monte Carlo simulations
A mathematical model developed by physicists working on the atomic bomb in the 1940s and named after a gambling hub, is probably a fitting one for the US government to adopt in its banking stress tests.