Credit Crises, Risk Management Systems and Liquidity Modelling
Frank Milne (Queens University)
This paper explores the theoretical structure and implementation of Risk Management systems in Financial Institutions. It uses the current credit crisis as a test of the model’s de…ciencies. The paper suggests possible modi…cations to these systems to allow for "liquidity" in asset trading. Also the paper links these modi…cations to the theory of banking and …nancial crises and suggests possible ways in which regulators and central banks may exploit or modify RM systems to test for systemic risks.