News:

PD.com: "the lot of you are some of the most vicious, name calling, vile examples of humanity I've had the misfortune of attempting to communicate with.  Even attempting to mimic the general mood of the place toward people who think differently leaves a slimy feel on my skin.  Reptilian, even."

Main Menu

Black swans and financial risk management

Started by Cain, January 26, 2009, 05:40:07 PM

Previous topic - Next topic
Print
Go Down Pages1
User actions

Cain

January 26, 2009, 05:40:07 PM
http://www.nytimes.com/2009/01/04/magazine/04risk-t.html

The problem, basically, is asymmetrical payoff.  99% of the time, the payoff was big, and worth the risk.  1% of the time, it caused a catastropic meltdown. 

Bebek Sincap Ratatosk

#1
January 26, 2009, 05:47:02 PM
Taleb, Our Lady's Non-Prophet for the 21st Century
- I don't see race. I just see cars going around in a circle.

"Back in my day, crazy meant something. Now everyone is crazy" - Charlie Manson

LMNO

#2
January 26, 2009, 05:59:45 PM
Not to besmirch NT, but there seems to have been a few other problems at hand; GIGO, insufficient data, and the map/territory thing.

After all Goldman Sachs used VaR, but they noticed something weird was happening; so they went conservative, shored up their accounts, and missed the worst of it.

In short, it wasn't completely the VaR in itself, it was also that it was used improperly.
Print
Go Up Pages1
User actions