objective measures based in some way on historical data. But if the data pertain to just one event, then that is a scenario analysis, and there is no statistical reliability with respect to its assessment. That is a major problem we face when we use sophisticated empirical techniques with very limited data to model the system fully. When we try to extend this thinking beyond the Fedwire system, with its good data, to the broader financial system, we run out of the data that would be needed if the models are to make useful predictions. Litzenberger compared the situation with that of econometric models of the U.S. economy that he studied in graduate school. They were impressive, but in truth they never predicted very well, and many researchers eventually became disillusioned with some of those models. To arrive at a better understanding of systemic risk and to improve risk management tools and policies, the discussion pointed to the immense potential value from developing rich data sets of financial information, financial asset prices, and institutions’ risks and earnings.


Levin, S. A. 1992. “The Problem of Pattern and Scale in Ecology.” Ecology 73, no. 6 (December): 1943-67.

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