Economists Learn Finance

One of the central tenets in Finance is the importance of market values and this is true when managing risks. When the recent financial crisis began in 2007, the models used by Federal Reserve economists were unable to explain the problems occurring in the economy. So, Finance came to the rescue. The Federal Reserve had always believed itself better informed than the market, but investors can provide important information about the risk a particular bank poses to the rest of the financial system. One of the new models being used by the Fed is the Marginal Expected Shortfall Approach, developed by professors at NYU's Stern School of Business.