It is to my horror that after poring through the notes on what is VaR. It finally dawned upon me that the entire financial industry has embarked down the path of no return. In the academic world, Beta is dead and thus by inference so is VaR. I thought the industry practitioners might be better when it comes to this kind of stuffs so perhaps they might have something more advanced.
Seems like I was dead wrong, allow me to correct myself, they are even more out of touch than the academicians. Financial markets are like the real world, it is much more chaotic than what can be captured by some complex formulation and parameters. The all to familiar gaussian bell curve appeared on the 3rd page to my disgust.
Just how do you model human behaviour? Applying mediocristan laws in a world of extremistan is bound to get you into trouble. The natural tendency of human beings to swing towards extremes. Right down here we still have an entire industry worshipping something that is incorrect and I have a career that is based on bullshit.
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