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Principia Discordia

Principia Discordia => Think for Yourself, Schmuck! => Topic started by: Cain on January 26, 2009, 05:40:07 PM

Title: Black swans and financial risk management
Post by: Cain on 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. 
Title: Re: Black swans and financial risk management
Post by: Bebek Sincap Ratatosk on January 26, 2009, 05:47:02 PM
Taleb, Our Lady's Non-Prophet for the 21st Century
Title: Re: Black swans and financial risk management
Post by: LMNO on 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.
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