An Analytic Environment for Systemic Risk: Risk Modeling Support for Financial Policy Makers

January 2012
Topics: Decision Support Systems, Intelligence Analysis, Risk Management
Dr. Charles A. Worrell, The MITRE Corporation
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Systemic risk in the U.S. financial system has drawn the attention of leaders in government and business alike. The abundance of systemic risk measures and risk models has added to the complex task of understanding, discussing, and acting on the implications of that risk. Tools that assist decision makers to interpret risk measures, and recognize their underlying assumptions may lead to deeper understanding and more effective discussion. This paper describes some initial considerations for building an integrated modeling and analysis environment to aid in assessing complex financial data. The modeling environment is engineered to support execution of quantitative models including agent based and network models against equivalent scenarios of economic conditions. The environment provides tools to compare and visualize model outputs, and to allow decision makers to maintain traceability from model outputs back to their underlying assumptions. This capability may facilitate the operation of a modeling forum where disparate teams of analysts can collaborate to provide insights into the nation's exposure to systemic financial risk.

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