Ruodu Wang, Department of Statistics and Actuarial Science, University of Waterloo
"Mathematics of the Financial Crisis: Aggregation, Measurement, and Optimization of Risks with Model Uncertainty"
In this talk, we discuss some mathematical issues related to the 2007 - 09 financial crisis, and in particular, we shall see that model uncertainty (model risk) became a crucial factor in the aggregation, measurement, and optimization of risks. In the post-financial crisis era, various new mathematical concepts and tools are introduced and developed to reflect this issue, with the hope to prevent another financial crisis from happening. I will introduce three active streams of mathematical research I mainly worked on in the past few years: risk measures, risk aggregation, and optimization, in particular in the presence of model uncertainty. Some results help to explain the financial crisis and give insights for banking regulation. As a summarizing message, mathematics did not cause the financial crisis (as some people criticize); the lack of good mathematics does.