# kaal:claim:3405660-007

**Claim.** Conventional risk models understated LTCM's losses because the models were estimated during more stable periods and therefore did not describe behavior under stress.

**Type.** failure  **Support.** evidenced

**Holds when.**

- models calibrated on data from stable market periods
- subsequent stress conditions

**Source quote.**

> markets greatly exceeded what conventional risk models suggested were probable, but these were estimated during more stable periods.

**From.** Kaal, *Indirect Regulation of Hedge Funds* (2019), II. The Need for Hedge Fund Regulation, page 7

**Cite as.** Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660

**Verify.** sha256 of source PDF `cf507b1833071765bc13a5605f38c2591582eca85f40869e38b6ff075c04d29d` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202019%20-%20Indirect%20Regulation%20of%20Hedge%20Funds.pdf

**Failure mode.** risk model calibration failure  (family: measurement-and-metric-failure)

**Topics.** risk-and-incentives

**Keywords.** risk-models, ltcm, model-calibration, tail-risk

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.