LTCM’s own modelers tempered their risk model with judgment-based safety factors.

Evidence

LTCM’s traders had often themselves developed the models they used: no one was more aware than they of the models’ likely deficiencies. The way in which the standard deviations and correlations in the most important model of all LTCM’s overall risk model were increased by explicitly judgmentbased “safety factors” is indicative of that. — Donald MacKenzie, An Engine, Not a Camera, 1018

Categorization

• XREF: connects to: LTCM’s risk model deliberately used conservative estimates above observed values. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 998