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We need economic policies that are designed to “lean against the wind” rather than clean up, a closer dialogue between academics and practitioners and a clear distinction by policy makers between tranquil and turbulent times. These are some of the lessons drawn from the financial crisis by Dr Lucjan T. Orlowski, a professor of economics at the J.F. Welch College of Business, Sacred Heart University. Dr Orlowski spoke at a CFA conference in Luxembourg on the topic: “Extreme Risks in Financial Markets and the New EU Financial Regulatory Framework”.
LFF: Professor Orlowski, can you name effective means of identifying, measuring and controlling extreme market risks?
Let me begin from clarifying “extreme tail risks”. These are risks stemming from extreme outcomes...
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