Banking

Risk management
During the 1990’s, Value-at-Risk computer programs based upon portfolio theory were widely adopted for measuring market risk in banking portfolios - despite objections by Barry du Toit and Avinash Persaud that they used data that had been contaminated by previous rescues, and that their use generated herding behaviour that itself contributed to instability. Some were sufficiently sophisticated to embody a recognition that probability distributions other than the familiar bell-shaped normal distribution. Many had been "stress-tested" - meaning that they had been successfully applied to past situations. However all were based upon data from the period of historically low economic volatility that started in the early 1980s and came to be known as the "great moderation" .