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Risk Management Lessons from Bear Stearns

Geoff,
A very interesting article, and I always read what you have to say. But, I'm skeptical.

Like reader 51324 above, I would think that the 1% tail risk would misidentify volatility as risk and give false positives (stocks such as BRK that may go into a period of higher volatility due to big one time event--such as the need to payout for reinsurance, such as when a hurricane hits--but it would be under no real risk of defaulting on credit.)

Microsoft, or Altria might be other examples of higher volatility for big one time event, but no real probability of defaults or credit risk.

Might QPP 1% tail risk algorithm also produce false negatives? Incorrectly identifying those with limited risk due to low volatility, and then a sudden collapse? Does Fannie Mae fit here?

I don't know, but I'm very curious. Thanks for the research and the writing.
Eric from Alaska
Apr 02 14:24 pm |Rating: 0 0 |Link to Comment |View article

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E.D. Hart

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Risk Management Lessons from Bear Stearns

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