What’s wrong with traditional analytical models?
The obsolete data points on which they are based. Even if you look at the most negative cases of sensitivity analysis performed on banks prior to mid-2008, rarely will you find predictions of the unique rate-liquidity changes and deterioration in assets that are commonplace on balance sheets today. “Normal” models did not predict them because they were not constructed to do so. Because of the dramatic paradigm shift in today’s banking environment, as macro predictors, regression-based modeling systems are for the most part obsolete.
