Page 403 - 2019 6th AFIS & ASMMA

» Panelist | Tyler T. Yang
There is a difference between how it should be priced theoretically
and how it can be priced in reality. Because when the model becomes
too complicated, the lender or the government has problem of telling the
society why it's priced this way. So they have to make the complex model
to get the result and then find a simple way to explain it, as if they were
derived that way.

» Panelist | Jun Han Kim
When it comes to the modeling, actually central bankers are very
good at it, because they devised a very complicated and sophisticated
model called DSGE(Dynamic Stochastic General Equilibrium) model.
But unfortunately that model deals with the business cycle, which means
there's quite less than 15 years for sure. So we know a little bit about the Session III
business cycle horizon dynamics, but beyond that, we have no idea.

» Moderator | Richard K. Green
Given how well Korea got through the financial crisis, the Bank of
Korea is clearly much wiser about modeling strategy than other central
banks. But the thing about DSGE models is that they can't explain about
productivity shocks, and that's not all that helpful if you're trying to
figure out what to do with the product. That could hang around for 40
years. So on that not particularly optimistic note, I see we're running
out of time, and you never want to be a panel that keeps people late
to dinner. So thank you very much for your kind attention to our
concluding panel of the afternoon. Let's give them a round of applause.

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