This issue of Words from the Wise features an interview with Robert Engle, Nobel prize winner and father of Risk Modeling.
In the interview, we discuss with Dr. Engle his breakthrough research on analyzing economic time series with time-varying volatility. We learn about
His concept of autoregressive conditional heteroskedasticity (ARCH) and its generalizations;
How these tools have become indispensable tools for both researchers and investors in the statistical modeling of time-varying volatility; and
The underlying drivers of risk and the interesting inverse relationship between risk and returns.
We also discuss how volatility estimation has important applications to risk management and options pricing and how the Volatility Laboratory, or V-Lab, has become a highly sophisticated systemic risk measurement and monitoring tool for the global economy.
We further hear from Dr. Engle how receiving the Nobel Prize changed his life and how he maintains a healthy work-life balance.
We then conclude by learning about his biggest regret and his mentors and heroes.