I liked Aug - Sep '98. Good times…
Did you even read my posts TwoSheds?
chrismaths: of course I did. That’s why I came to the conclusion you are a clown.
I quoted you saying correlations going to 1 in a crisis - and used it as an example as to why the accuracy to which many of the measures used for risk management chrismaths Wrote: ------------------------------------------------------- > Joey, I’m sure you and your mates do a wonderful > job, and manage risks in ways so clever I can’t > even begin to comprend them - and as you have > outlined you use far more sophisticated models > than simply a VaR. > > But the map vs territory problem remains, in spite > of the complexity of the models. Also, as the > complexity increases, the people who ultimately > using the risk information (the traders, CIOs etc) > understand the assumptions underlying the > measures, and therefore their limitations, less > and less. Then someone gets a bright idea to gear > up, etc etc. It’s the little bit of knowledge > being very dangerous. I specifically said I know RMs don’t use VaR in a vacuum. FourCastles Wrote: ------------------------------------------------------- > chrismaths, you are not giving RMs enough credit, > I am afraid 
(ehm, a euphemism for ‘you’re > talking out of your a$$, buddy’). > > Var is only one of (many) tools a risk manager > uses. It is naive to think RMs do nothing but > wait for their morning reports full of VaRs and > then run around screaming. Any RM who has been > through a single crisis realizes, of course, the > limitation of not only VaR measures, but also of > sensitivities and other tools. Errm… Cheers Sybil (specialist subject - stating the bleeding obvious). But still people overuse the measures without testing the assumptions (mistaking the map for the territory), and overgear on the assumptions. That is indisputable. CDO^2 anyone?
maratikus Wrote: ------------------------------------------------------- > DarienHacker, you are suggesting looks more like > stress testing. VaR, CVaR and stress testing > compliment each other. Each has its advantages > and disadvantages and each can be calculated using > multiple approaches. Well I was taking a deliberately extreme position to illustrate that VaR doesn’t necessarily require ‘normal’ evolution of risk factors (response to FourCastles). At my office we generally use VaR (or similar) any place one might use standard deviation, precisely because nothing interesting in finance is normally distributed. Also to illustrate that VaR for RM purposes is entirely dependent on your sampled history. It’s an easy way to lie with statistics.