There are challenges in terms of the measurement of VAR for what are known as nonlinear derivatives, where things like gamma and vega are important dimensions of the risk.
Sentiment: NEGATIVE
One important measurement issue concerns the fat tails problem that I mentioned earlier. VAR is concerned with extreme outcomes. If the tails of the probability distributions we are using are too thin, our VAR measures are likely to be too low.
I think VAR is a very healthy development within the industry.
The reality is, risk is variable. Those in the financial world know it.
Fragility is the quality of things that are vulnerable to volatility.
Never think that lack of variability is stability. Don't confuse lack of volatility with stability, ever.
The analysis of variance is not a mathematical theorem, but rather a convenient method of arranging the arithmetic.
Vulnerability is basically uncertainty, risk, and emotional exposure.
In the future, financial firms of any type whose failure would pose a systemic risk must accept especially close regulatory scrutiny of their risk-taking.
Different industries have different risks and growth rates and volatility.
While many technological measures can be taken to secure safety at nuclear power plants, such measures on their own cannot cover great risks.
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