Finance shops are facing a Y2K moment, as the anniversary of Lehman's untimely death approaches.
The problem is that the huge plummet sparked by the collapse on Sept. 15, 2008 will pass out of many computer risk models, many of which only track data for 365 days. In essence, the computers won't "remember" how volatile the markets can get and will orchestrate deals as if the Lehman tornado never blew through Wall Street.
Consequently, risk-management teams are trading at a premium. The market for the security guards of finance will only improve in the next few months, as regulators worldwide write new rules requiring firms to stress-test their computer-trading models, specifically VAR, or value-at-risk assessments, which measure how much the firm could lose in a given time period based on past prices.
Apparently, it takes a human touch to imagine a worst-case scenario these days.
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