Understanding Procyclicality
« The major mistake made in 2010 was imposing austerity at the worst moment ». Gilles Moëc (Chief Economist at AXA), Le Monde, January 21st, 2020 Procyclicality (i.e.the tendency of risk measurements to overestimate future risk in times of crisis, while underestimating it in normal times) is a major problem that all financial institutions must manage: insurance companies, banks, regulatory bodies… As a result, they are required to provide substantial capital in the aftermath
