Before this year, what % of professional investors (at banks, pensions, hedge funds, etc) spent more than an hour in total seriously considering how a global pandemic might affect the economy?
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You cannot model something that has a random chance of occurring, particularly when you have scant data on the rate of global pandemics. This could’ve just as easily happened 10 or 25 years from now as this year.
Risk modeling, by definition, involves modeling things that have a random chance of occurring. The question is, what chance, with what degree of uncertainty, and with what likely effects?
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Risk modelling is largely about removing unsystematic and independent risks from your portfolio. It’s impossible to remove systematic risk if you do any investment. You also can’t model a Poisson process with an unknown lambda, eg mean years between global pandemics.
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