What the Swiss FX shock says about risk models

Read Jon Danielsson's opinion piece in VoxEU on the Swiss National Bank's shock decision on scrapping its minimum exchange rate against euro.

He argues that the fallout from the decision demonstrates the inherent weaknesses of the regulator-approved standard risk models used in financial institutions. These models under-forecast risk before the announcement and over-forecast risk after the announcement, getting it wrong in all states of the world.