Insurers grapple with model complexity pressures

lego model

The failure of hedge fund Long-Term Capital Management (LTCM) in the late 1990s is perhaps the best-known example of the limitations of financial models. Some of the keenest mathematical minds were brought in to create a highly-leveraged hedge fund that invested billions around the world. But when the Asian financial crisis of 1997 struck, followed by the default of Russia a year later, the losses at LTCM were such that it had to be bailed out by US taxpayers, and all the clever financial modell

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